Under what circumstances does it make sense for management to introduce an individual as opposed to
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With competitive advantages in business becoming harder and harder to find, payment systems are becoming an ever increasingly important subject for management. Whilst the growing conviction is that a specific pay system "can at best have no effect on performance" (Purcell 2000) of a company, the fact still remains that companies that do not have an effective payment system can expect decline in their competitiveness.
The companies concerns about pay systems stem from the assumptions of most economic theories that "people will be lazy and self-seeking unless there is a reward carrot" (Purcell 2000). This is "despite all the evidence that employees place much more value on non-financial satisfaction and the rewards of a job well done (Purcell 2000)".
"Pay systems are usually constructed around a base rate which constitutes the rate for the job or role and is determined by reference to internal relativities (job evaluation) and external relativities (market rates)additions can be made to this rate which are contingent on factors other than the rate for the job" (Armstrong, page 259). Armstrong claims there are four main groups of contingency factor. Service related pay (giving rewards to people on the basis of their continued service to the company), contingency pay for individuals, contingency pay for teams and organisational performance related pay. This essay looks at the advantages and disadvantages of contingency pay for individuals and the circumstances in which management should consider an individual payment system.
The overall idea of an individual payment system is that "those who perform well should gain greater benefits, and that allocating rewards this way is the fairest principle to follow" (ACAS 1997).
The two most common types of individual pay system are performance related pay, which links pay to an assessment of performance and payment-by-result for "an organisation wishing to create a culture where achievement is all important" (Hannagan, page 248)...