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Introduction
Employee motivation has been given considerable importance in contemporary organizations in order to keep high productivity. Employees remuneration package affects the employee motivation and subsequently job satisfaction. Job designing determines the mechanism of the flow of tasks in consideration of employee skills and ability. Specialized jobs require extensive research in the evaluation of work importance to keep the organizations operations effective.
Employees are more directed to work with enthusiasm in consideration of its return either in the form of tangible rewards or intangible rewards along with the monetary return. Job return expectation is based on the category level of work being performed and the organization level. Organization policies flexibility in affiliation of the work setting affects the rationality of decisions taken by employees with respect to autonomy (Morgeson et al., 2001). This remarks the goal-oriented behavior inside employees that support the organizational functionality. Highlighting the need for motivation in employees human resource management is required to carefully undermine the informal channel that prevails inside the organization. Employee motivation level is dependant on several factors that affects motivation in simultaneous environments. These factors can either be intrinsic or extrinsic, each one serving a different type of employee need (Robbins, 2009). Management role is characterized to address the objectives to be achieved with the involvement of employees in assessing the motivational factors impact in each situation.
Employee Pay Plans
On the basis of work setting and organization type, the company sets different types of employee remuneration plans based on the requirement and its impact on employee performance. Employees work demands and special requirements are valuable which make management opt for either of the two policies for payment plans. These two forms of payment plans include a pay-for-performance plan and a skill-based pay plan (Bratton, 2001). Each one of the before-stated plans differs in its effectiveness in respect to its implication. An organization may use either of the two or both types of payment plans at different levels of organization for the appropriate tangible reward for the employees. Skill-based pay focuses on setting employee worth for the uniqueness of his specialty and skill use to perform a qualitative activity (Silva, 1998). Such a plan emphasizes the skill values of an employee and therefore is solely based on the work requirement and uniqueness of skill being used to perform the activity. Employees behavior needs to be formalized in the coordination of organization objective achievement approach that differs for the tasks to be accomplished while an employee shows goal-oriented behavior. However, skill-based pay is appropriate to use by management in rationalizing the value and time of the skills required to achieve the objectives.
Management can also go for the pay-for-performance plan in scenarios where its main objective is to increase productivity at the operational level of the organization. This form of payment plan suggests the employee remuneration calculation on the basis of the activity being performed. However, base grade setting is solely dependant upon the discretion of management that sets a standard for the performance required; so as to control the productivity of the organization. As an organization keeps setting and controls its standards in order to avoid workflow deviation to achieve maximum results; thus resultant employee performance valuation determines the emphasis placed by the management on the motivational factors that are essential to monitoring in the form of rewards for employees. Employees day-to-day basis performance is reluctant to any short-term change in the management structure planning; whereas overall organization goals are clear and employees have been given autonomy as part of their task decision under specific limitations. Such factors impact that determines the pay plan effectiveness is explained below.
Motivation Factors and Pay Plans Responsiveness
Motivation factors range in various dimensions based on the employees personality and behavioral change that have an effect on performance. Intrinsic and extrinsic rewards have a substantial impact on employee performance based on the type of activity being performed (Milkovich & Wigdor, 1991). Intrinsic rewards include employee recognition, need for achievement, need for power, inherent social satisfaction, honor and internal cognitive ability to perform something (Bratton, 2001). If a person enjoys the work or activity he performs, more effort will be dedicated to the accomplishment of the task. So as to address these internal needs management should carefully appraise the employee performance and the achievement of the standard level. Extrinsic rewards include tangible rewards either in monetary terms (salary, bonuses, etc.) or any other fixed form such as gifts, medals, certificates, etc. These extrinsic rewards ultimately support an internal need of an employee that results in job satisfaction and increase commitment to the organization (Vandenberghe & Tremblay, 2008). Employees performance is a direct proportional impact in relation to such rewards; whereas the intensity of reward and its value for the employee depends totally on his skill and the type of task being performed at the organization level (Eriksson & Villeval, 2008).
Although it has been noticed that employees care for financial rewards in work but monetary rewards are only effective if they are satisfying an internal need that influences the employee as an intrinsic reward. Pay for performance reports are a significant issue in such cases where employees performance appraisal system is used as a sole basis to determine the employee performance and recognition of his tasks performed (Milkovich & Wigdor, 1991). Supporting the motivation level increase on the basis of money as the extrinsic reward will support the organizational purpose when it is determined by negotiation with the employee or else offering equal monetary rewards for employees working at the same level. Pay for performance can easily be used for employees working at the operational level of the organization as their activity is being monitored in quantitative terms (such as no. of units manufactured, no. of hours worked, etc.) in many industries, particularly with mass production concern. Lets consider an example of textile industry operational level; employees performance is determined in the terms of the number of units processed by him to the next department such as after cutting to the sewing department, and for an employee in sewing department performance is determined on the basis of units of cloth sewed by him.
The main issue that arises here is what factors have been considered in the determination of employee performance if the management is calculating pay on the basis of pay-for-performance and no other extrinsic reward is being given by it that may include training of employees at the operational level. Appraisal systems to measure performance shows weak reliability for pay-for-performance calculation. Management should consider the responsiveness of this payment plan in the evaluation of potential contrasting differences issues for performance measurement (Silva, 1998). In contrast to that skill-based pay, the system is an appropriate measurement of an employees ability and motivation factor (Jenkins, 1992). Management can implement a skill-based pay system at all levels of the organization from upper management to the operational level core. This pay plan is more appropriate compare to the pay-for-performance as such a system encourages more participation of workers in the organizational goals with increased productivity. The pay-for-performance plan aims at cost reduction strategies by compensating the additional cost of benefits in return as increased performance (Silva, 1998). This does not take into consideration organization commitment of employees; therefore management a skill-based pay plan is a reliable option as its main objective is more qualitative terms and hence as it values the work of individuals in the form of their skills uniqueness, and ability to perform based on motivation rather than the desired interest of extrinsic rewards. A skill-based pay system provides an opportunity to refurbish the behavior of an employee and mold his perspectives in relation to organizational need and demand (Jenkins, 1992); this shows the concern relying on intrinsic reward return towards the employee discussed above that derives the intention to perform and increase motivation level. Professional and specialized workers are therefore being paid by companies on the basis of their skill with goal-oriented behavior a specific inconsistent remuneration (such as remuneration of consultants for providing a particular service to any company); following it to the middle-level management and top management of the organization where remuneration packages are set in accordance with the experience and knowledge of participating employees (involved in decision making); which relies more on benefiting employees with intrinsic rewards by giving autonomy of decision, assigning the responsibility of any project (such as project leader), involvement in company policy structure, disclosing secured information of the company to get their advice and acquiring information pre-ceding.
Theoretical Approach to Pay Plans
Employee pay plans are solely based on the management objective to accomplish tasks. When management aims at cost reduction strategies particularly at operational level purpose, it should value pay-for-performance pay plan for employees (Silva, 1998). This type of pay plan offers more extrinsic monetary benefits to employees. Low-grade level employees working at the operational core of organizations are mostly less educated and have little knowledge about the management decisional role. Their main prominence is on repetition work activity; which can be synchronized in time required with continuous performing of same tasks. So, as to valuing their abilities restricted to specific function demanding need is placed more on extrinsic rewards for the activities performed. Such driven factors include the physiological and safety needs as explained by Maslows Hierarchy of needs (Eriksson & Villeval, 2008). These types of needs are quite instinctive in a person which requires immediate satisfaction and therefore act as an internally driven stimulus for an employee. Other needs fulfilled at a higher level in Maslows Hierarchy force a person to show more performance and hence this impacts the productivity level of an employee with concern to achieve and increased power.
Skill-based pay focuses on other motivators elaborated in Herzbergs theory that include recognition, responsibility, decision-making power, empowerment in skills and work (Bratton, 2001). In evaluating these needs-driven factors, internal motivators seem to be more active compare to extrinsic rewards. In light of Maslows theory need for self-esteem, belongingness, and self-actualization act as motivators for skilled workers such as professionals, consultants, directors, specialized department members such as marketing, finance. An effective pay plan in consideration of required performance on goal achievement purposes is, therefore, a skill-based pay plan when the decision is an under-taking specialization of tasks and employees.
Conclusion
Skill-based pay is more appropriate when intrinsic motivators are the main drivers of employee performance. In contrast, employees working at the operational level of an organization are motivated by extrinsic rewards. Quantitative workflow makes it easier to determine the performance of an employee based on activity contribution in numeric terms. Therefore, pay-for-performance is the best payment plan for such employees. A goal-oriented approach that requires extensive skill abilities to accomplish the objectives should reward employees based on their skills and abilities irrespective of work performed.
References
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Eriksson, Tor. Villeval, Marie. Claire. (2008). Performance-pay, sorting and social motivation. Journal of Economic Behavior & Organization, Vol. 68, pp. 411-414.
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Liu, Bangcheng. Tang, Ningyu. Zhu, Xiaomei. (2008). Public service motivation and job satisfaction in China; An investigation of generalisability and instrumentality. International Journal of Manpower. Vol. 29, pp. 682-686. Web.
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Robbins, S. P., & Judge, T. A. (2009) Organizational behavior Upper Saddle River, NJ: Prentice Hall.
Self Assessment Library. (2009). Motivation Insights. Web.
Silva, Sriyan. De. (1998). Performance Related And Skill Based Pay: An Introduction. 2009. Web.
Vandenberghe, Christian. Tremblay, Michel. (2008). The Role of Pay Satisfaction and Organizational Commitment in Turnover Intentions: A Two-Sample Study. Journal of Business and Psychology, Volume 22, pp. 275-286.
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