Individual performance related pay (IPRP) is an employee performance based payment

scheme. IPRP supports for motivate, attract and retain the organization’s best fit employees. To
retain best fit employees in company, management has to provide rewards including payments.
IPRP enhances the productivity, efficiency and morale of the employees. According to Cadsby,
Song & Tapon, (2007), Individual performance related pay has become spreading trend in the
last two decades in many workplaces. Armstrong (2011) highlights that lots of companies
compensate their employees by the individual performances of the employees. Georgantize, et
al, (2017) points out that individual performance related pay help to enhance the employee
performances and at the same time it will lead to improve the company performances
drastically. Van de voorde (2012) points out that Individual performance related pay is the term
which describe that an employee obtain financial rewards as per employee’s efficiency, skills
and talent. This essay is about individual performance related pay and it is merits and demerits
in an organization at the same time essay will analysis the different contextual issues plus the
examples with regards to the IPRP.

Individual performance related pay is a remuneration method that focuses on pay progression
based on employee individual performance. Bonuses and increments are awarded to employee
those who are able to achieve or surpass objectives or targets that are pre- agreed. Every tools
and frameworks have merits and demerits. Therefore it is apply for the IPRP also. Piekkola
(2005, pp.619-635) highlights that Employees are like to increase their productivity in order to
earn more and more rewards like salary increments, allowances, bonuses...Etc. As a result,
employees identify their weaknesses and try to convert in their weaknesses into strengths in
order to improve their productivity and finally enhance the company competiveness regarding
high productivity and efficiency. Dorantes and Mach (2003, pp. 673-698) point out that IPRP
supports for reduce the labor turnover and absenteeism. Low labor turnover provide favorable
outcomes for the company like reduce the cost associated with the employee replacing those
who are leaving the work station, low labor turnover rate is able to retain best fit employees in
the organization. According to Armstrong (2008, p. 78) Due to limited number of higher level
positions make hard to award promotions to those who are perform well in the company but
using IPRP, company can provide appropriate payments those who are achieve and surpass
their given tasks and it helps to retain the best employees in the workplace. Shelley (1999, pp.
439-454) describe that using IPRP, company can maintain better customer satisfaction because
if employee provide good service for the customer then employee receives the financial benefits
for offering the better service to customer. Finally it will lead the company more competitive than
the other players in the market. Stan.el al, (2018) points out that IPRP support to create strong
positive employee relationship with the work place. Company provides rewards for those who
are achieved or surpass the given tasks. Then employees believe that their effort bring more
profit and value to the company. As a result employees try to be more productive and loyalty to
the company. Finally more productive and loyalty employees bring more and more profits to the
organization.
 Nevertheless, IPRP is sometimes provides demerits for the organization. As Marsden (2002,
pp. 305-316) due to poor financial performance some companies might not be able to provide
financial rewards including bonuses and commissions. Bonuses and commissions are relatively
cheaper than the salary incentive but most of the time it is hard to determine the percentage of
bonuses and commissions need to pay to the employees. When bonuses and commission are
high, employees’ moral will increase therefore low rate of bonuses and commissions make
employees disatisficated. Randle (1997, pp. 187-200) points out that measuring performances
are very difficult due to low availability of reliable appraisals. As result employees cannot identify
the correct measuring criteria and mangers also cannot evaluate the performance correctly
using the appraisal. Employees’ morale and productivity will reduce due to issues of the
measuring their performances. Therefore it will lead low productivity and commitment to the
given work. As Marsden (2002, pp. 305-316) Team spirit will decrease due to IPRP because
company pay for the individual performance only and not for the team performances. As result
employees pay only for the individual given task and neglected the team tasks. Team work is
also important to achieving organization goals and objectives. Finally it will lead to low
productivity and conflict among the members in the workplace and outcome will be low profit to
the company. According to Marsden (2002) introducing new appraisal system to the company is
more expensive and the consuming and at the same time it can incur the high cost on
conducting researchers for discover on the best appraisal system to adopt.

Individual performance related pay impacted for various contextual issues. According to van
Wanrooy et al, (2013) Individual Performance related pay is still not widely used in public sector
in United Kingdom. 2011 workplace relation study highlights the 7% of public sector employees
in UK awarded IPRP scheme compared with 28% of private sector employees. IPRP is
providing more positive response for the private sector than the public sector employees.
Private sector employees are more competitive and focus on company’s objective better than
rivals. Private sectors employees are more like to consider the individual performance related
pay rather than abandon that and public sector employees more likely to abandon the system
rather than consider that. According to Cutler and Waine (2000) Individual performance related
pay has been implementing in public schools in England and wales since 2000. Subject
knowledge, teaching skills, assignments, and pupil progression are the areas that teachers
should cover perfectly to eligible for the IPRP and those who are eligible for the scheme will
awarded £ 2000 bonus yearly until the retirement age. This system helps to retain and attract
more qualified and talent teachers to the education field. Bajroet and Bevan (2015) highlights
that United Kingdom mostly applies Individual performance related pay for the white collar
management positions. Individual performance related pay is widely and commonly used for
senior managers and higher position employees and less commonly used for the white collar
employees and least commonly used for the blue collar employees. Apart from that Kangniemi
and Kauhanen (2013) says white collar and blue collar employees have separate ideal
motivating plans. It is hard to use piece rate for the white collar works because it is tough to
measure and quantify. If white collar employees use piece rates, it will create misshaped
incentives. Blue collar employees’ output can be measured and limited tasks apply that piece
rate and it does not give the misshape incentives for blue collar employees. According to
Claudia Goldin (2014), high wage companies have implemented pay setting practice those
unequal rewards for individual those who are work long hours. Those who are likely to work
excessive hours are eligible for high payments. Most of the men can work excessive hours but
women cannot work excessive hours due to household works. Therefore this system brings
more negative outcomes for the women. Based on Mitsuharu and Hiroatsu (2013), in United
States of America (USA) were been used this framework for their companies in long time.
Individual performance related pay is very new to Asian countries but compared to European
and USA countries they have been using that system a quite longer period. According to Allen
et al. (2004) United Status is culturally compatible with an individual culture and that makes
easy to work with individual performance related pay system in United Status employees. Boeri
et al., (2013) points out that many organizations have tried to enhance their performances by
changing typical fixed payment method in to variable payment methods. Companies make an
effort to motivated employees to be more efficient and productivity at the workplace. As a result
employee turnover and absenteeism will decrease. In Europe organizations with more than 200
employees nearly one in two workers is eligible for individual performance related pay and as a
result the companies’ productivity will increase. Suff et.al (2007) points out that line manager in
under pressure when it is comes to giving attention and measure the individual performance of
the employees. The crucial factor in applying an organization’s planning process are clear
objective and trainings in well communicated and performance management system. Apart from
that line managers might be seen behaving on the mutual trust in measuring the pay scale
based on the individual performances of the employees. As a result some time line managers
brought over estimate for the employees. There are no such strong evidences to prove that
individual performance related pay providing positive impact in the developed countries but
Puplampu (2018) finds that individual performance related pay is used to maintain high level of
performances of employees those who working for the private sector companies in developing
countries and apart from that IPRP is used in conjunction with employee pay reforms. Heywood
and Parent (2012) show that wider wage gap in the white color and black color employees in
United States. Due to discrimination by skin color in USA and some time it hard to provide
appropriate salaries to the employees on considering the individual performances of the
employee. According to Uddin et al, (2013) Environmental cultural factors support and develop
the employees’ individual performances and it has connection with the employees’ individual
performances. This research shows that employee need environmental cultural factors for
provide best performances to the company and at the same time company has to identify those
factors because those factors are slightly different from lots of aspects.

Conclusion
Individual performance related pay is a system that pays based on the employee’s individual
performances. Payment method basically relies on the measuring performance of the
employee. Individual performance related pay is more important aspect for the formation of the
workplace objectives and goals along increase the company performances and apart from that
enhances the employee participation. This method is highly related with the level of motivation
of the employees and as a result employees feel that employees treated well due to their better
performances. Therefore employees are enhancing their commitment, and productivity.
Individual performance related pay is a key component of reward methodologies in the work
place. This method provides financial benefits such as bonuses, commissions and salary
incentives to those who are achieved or surpass the performances. This method also has
advantages and the disadvantages also. IPRP supports to enhance the employee productivity
and the efficiency and at the same time it will lead to increase the company’s overall
performances. The individual performance related payment method support for retain and
attract best qualified employees to the organization. Even though there are some disadvantages
also in this system. Due to individual performances most of the time team spirit will slip from the
employees and at the same time it will create negative impact for the employee engagement in
the company. Measuring the individual performances also bit difficult so therefore it also creates
huge negative impact for the IPRP. Nevertheless individual performance related pay has so
many limitations also but it will allow more positive and favorable impacts to the company’s
future. This assessment further allow individual performance related pay in different contexts
such as blue collar and white collar employees, different job roles and female and male
employees.

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