Meaning of Pay for Performance

Meaning of Pay for Performance

Pay for performance, also known as P4P is a term used to describe a health-care-system which offers financial rewards to individuals who improve, achieve and exceed their performance on a specified quality, cost and other benchmarks. Most of the available approaches usually adjust aggregate payments to physicians and hospitals based on their performance and different measures. These payments can be made at different levels such as at an individual, institutional or group level. Relative comparisons or benchmarks are used to make comparisons which measure performance. Performance measures on the other hand can either be a structure, process or an outcome.

An employees pay and job performance are normally tied together by the pay-for-performance whereby the proponents of the pay for performance programs are believed to attract and retain better employees while offering motivational and rewarding incentives which contributes to improving performance. Uniform employee salary schedules are viewed as ineffective when attracting and attaining sufficient numbers of effective employees and as out of touch with compensation practices in other industries that ties employee's salary to their performance. A pay for performance teachers is considered an example whereby the percentage of an employee's salary us calculated under the basis of their performance which may vary greatly. Evaluation methods which are accurate as well as fair are important to a successful pay-for-performance program.

Lastly, pay for performance can also be referred to as an incentive pay which involves giving specific results of an individual's performance rather than the time worked whereby incentives are not considered as the solution or answer to all the personnel challenges, they can do much to increase a workers performance

Other Approaches

Negotiation approach also referred to as performance appraisal, is an approach which an employee has at her disposal. Negotiated performance appraisal approach has the capability of promoting a two-way communication between an employer and the employee being appraised and later contributes to performance improvement of the employee. This form of appraisal contradicts the traditional form of appraisal whereby the supervisor acts more as an employee's performance judge that as a coach and in so doing, focus is more emphasized on blame rather than on assisting an employee assume responsibility of improving his or her performance.

However, performance appraisals should not be tied on decisions of ensuring pay raises since when it is done, employees normally become more defensive and less open to change. Performance appraisal approach is considered a driver to validating and refining the actions of an organization such as training and selection. Additionally, the approach provides feedback