Prp- Performance Related Pay

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Performance related pay (PRP) is a financial reward system for employees where some or all of their monetary compensation is related to how their performance is assessed relative to stated criteria. Performance related pay can be used in a business context for how an individual, a team or the entire company performs during a given time frame. Any system that relates the rewards of an individual employee to the performance of the organization that he or she works for is called performance-related pay. Such systems are designed to motivate employees and to align their effort more closely with the aims of the organization. The pay is often financial, but it can also be non-financial. PRP is a common term used to describe the reward or compensation given to a worker based on performance instead of a fixed amount of bonus or annual increment. It is generally given in addition to the basic pay. PRP can be in the form of profit sharing, stock ownership or employee's stock option scheme, team profit-sharing, gain sharing, team incentives, group bonuses, individual incentive schemes, sales incentives and productivity-linked wage schemes (O'Donnell 1998). He further elaborated that PRP is to be based on an underlying motivation principle where employee's performance is improved through a specific linkage between effort and reward using a formalized and measurable criteria. Performance related pay schemes became increasingly popular in the 1980s and 1990s. One study found that in 1989 44% of American companies had performance related pay plans in place for employees other than senior management. By 1991 the figure had increased to 51%. A 1998 survey by the UK's Institute of Personnel and Development found that some 40% of a sample of British companies had performance related pay systems in operation at the time. Today, half of all British companies have performance related
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