ABSTRACT
The single most important objective of performance pay is ‘to improve performance by converting the pay bill from an indiscriminate machine to a more finely tuned mechanism, sensitive and responsive to the needs of a company and its employees’. The term performance pay is usually applied to arrangements where performance and financial rewards are directly linked—such as merit pay, individual incentives and group or organisational bonuses. The performance–rewards exchange is at the heart of the employment relationship. Organisations employ people to perform specified activities to an acceptable level or standard and, in return, employees receive rewards. The emphasis on pay for performance has put more focus on the link between performance reviews and remuneration decisions. Performance or incentive bonuses may be paid to individuals as lump sums and not absorbed into salary or remuneration. Team-based rewards are payments to members of a formally established team or other forms of non-financial reward which are linked with the performance of that team.
