What does the 'pay for performance' compensation strategy entail?

The 'pay for performance' compensation strategy is fundamentally about linking an employee's pay to their individual performance and productivity. This approach incentivizes employees to achieve specific goals, enhance their productivity, and contribute positively to the organization’s objectives. It is designed to reward high performers while providing motivation for others to improve their work outputs.

By connecting compensation directly to performance metrics, this strategy helps organizations drive results and create a culture of accountability. For instance, employees who meet or exceed their performance targets may qualify for raises, bonuses, or other financial incentives, distinguishing their contributions from those of lower-performing employees. This method fosters a competitive environment that seeks to enhance overall productivity and efficiency within the workforce.