Strengths and Weaknesses of the Three Financial Rewards

1.0 Individual Performance Related Pay

There is an increased popularity of PRP in Netherlands which contributes to the increase in production as well as productivity and efficiency. The use of the incentive in the aspect of work of the individuals is effective in bringing the productivity level higher (Gielen, Kerkhofs, and van Ours, 2006). The PRP used to refer the variety of systems the link in the performance. The variety depends on the applied performance by an individual employee, team or in organizational level (Landel, 2003).

Strengths

The strength of the performance related pay or PRP is to stimulate the labor productivity. It is best combined with unions and involvement of the staff. It also delivers clear communication with regards to the objectives and functions. The measurement of the performance can have a better position in meeting the goals and guided with feedbacks and proper allocation of rewards. Therefore, it creates high level of competency and room for promotion.

Weaknesses

There are several criticisms that considered weaknesses plaguing the system. If the performance falls, employees are still guaranteed to increase the pay which is a negative impact in the firm’s financial earnings. There is also an effect on the recruitment that might dilute the earnings. In addition, since the performance is equals to the profits, it is depends on the variety of factors that are beyond the control of the employees, therefore, it is not possible to link the performance for payment. Also it is difficult to measure the paying scheme for the team work or organizational output. And lastly, individual performance is also difficult to measure on the part that he or she might cause damage to the team (Silva, 1998).

2.0 Pay Systems on Grade and Length of Service

This is also called as the basic pay that is meant on compensating the armed forces or military forces for their service in the country. The basic pay can be determined through the grade and length of service which is paid on the regular basis. The periods of unauthorized absence, excess leave, and confinement after an enlistment has expired, are excluded in the scope of the basic pay (Lane, 2007).

Strengths

The military or the armed force might seek other opportunity in finding ways to retain in their job because the institution provides other incentives where they can use to help their families. This kind of action increases the loyalty in the armed forces and keeping the brotherhood of service.

Weaknesses

The weaknesses that can be only are that the basic pay is subject for changes. These changes might cause confusion and conflict. Besides, military forces are sent in different areas, states, or region where they can find difficulty in accessing their compensations.

3.0 Skills Based Pay

Skill based pay is sometimes accompanied with the knowledge. Therefore the two are linked in together in paying scheme and called as knowledge and skill based compensation. The payment is through the demonstrated skill of an individual particularly on the educators or teachers, banking and airlines industries. Improvements in the knowledge and skills educators are the key ingredients to implement this strategy successfully. The career development is also expected to be seen among the educators (Crawford, 2007). The skill based pay refers in promoting workforce flexibility by rewarding individuals based on the number, type and depth of skills acquired, mastered and applied (Silva, 1998).

Strengths

Skill based pay contributes to the job enlargement, enrichment and satisfaction in terms of breaking down the job classifications. There is an increased of flexibility through the encouragement of a performance in multi-tasking, job rotation, absenteeism or temporary filling of the vacancies. Another is skill based pay enhances the productivity and quality through the better use of human resources and facilitating the technological change. The continuous training and elimination of the unnecessary job are possible.

Weaknesses

The skill based pay can welcome the competencies and rivalries among the workforce because of the two objectives: skill-based pay is a self-development and it can provide employment security. This reduces the promotion which also reduces the employment morale of the workers and it can reduce the opportunities because most of the managers or leaders will prefer to abuse the ability of one or two persons that had mastered the job. There extra training costs and existence of the job being paid that are infrequently used. Last is the difficulty involved in the area of the employer that he might anticipate and miscalculated the job preferences.

References:

Crawford, D., 2007. Knowledge and Skills-Based Pay. [Online] Available at: http://www.k12.wa.us/legisgov/2007Documents/KnowledgeSkills-BasedPay2007-09.pdf. [Accessed 12 Jan 2010].

Gielen, A., Kerkhofs, M., & van Ours, J., 2006. Performance Related Pay and Labor Productivity. Institute for the Study of Labor. [Online] Available at: http://www.ftp.iza.org/dp2211.pdf. [Accessed 12 Jan 2010].

Landel, D., 2003. Performance-Related Pay of Government Employees: Assessing Reforms across OECD Member Countries. Working Party on Human Resources Management. [Online] Available at: www.oecd.org/dataoecd/51/53/33686769.doc. [Accessed 12 Jan 2010].

Lane, M., 2007. Military Compensation. [Online] Available at: http://www.rand.org/pubs/monograph_reports/MR755/MR755.chap9.pdf. [Accessed 12 Jan 2010].

Silva, S., 1998. Performance-Related and Skill-Based Pay: An Introduction. [Online] Available at: http://www.ilo.org/public/english/region/asro/bangkok/download/yr2002/employer/perform.pdf. [Accessed 12 Jan 2010].