Today, competition between the organizations is extremely high thus organizations need to find the ways to be competitive. Organizations prepare best market strategy to improve the company performance and the ways to keep their employees motivation on the highest level to perform well within the competition. At that time, several incentive pay programs play important role for every organization to perform well within the competition.
Creating and Implementing of incentive pay system supports to resolve organizational problems for to align the preferences of organization and employees. In addition, the system serves as an organizing mechanism to identify and attract the most capable employees since organizations need to deliver the product or service within certain timeframe.
Since organization success depends on both customers’ satisfaction (outsource) and increase employees’ productivity and commitment (inside source), today organizations attempt to attract improve employees’ performance by using several flexible incentive pay programs.
Incentive Pay and Purpose of Incentive Pay System
Incentive pay is a form of direct compensation where employers pay for performance beyond normal expectations to motivate employees to perform at higher levels. (www.uslegal.com, 2001-2014).
Employers are practicing the incentive pay systems to promote employees particular behavior and performance to get more involved in the organizational development and which is essential for the organization’s success. So employers use incentive pay program as an effective tool for employees to achieve their goals and improve performance.
Purpose of all incentive plans is to encourage employees to achieve specific organizational goals such as increasing productivity, increasing profits, lowering costs, improving product quality or customer service quality and so on.
Relationship between Incentive Pay and Employee Work Performance
An incentive pay program can reward employees who continue to produce superior work or encourage employees who already produce good work to best.
Use incentive system when employees are lack of enthusiasm of getting down to work and improving things. If everyone in the same job classification gets the same pay, there is no real incentive to do an outstanding job (French, 1990).
Various incentive plans used to motivate all employees such as production personnel, sales personnel, administrative personnel and managerial and professional employees on an individual basis. To be improved employee work performance, the incentive pays program need to be fairly matched with the employee expectation. Properly designed and maintained incentive pay program has the potential to increase employee productivity and work performance. To be successful incentive plans, the plans must fit with the organization strategies and culture, use realistic performance measures, identify variable pay separate from basic pay, practice appropriate reward systems,...