Performance Related Pay System: How Does It Affect the Performance of the Employees?

Abstract

Performance-based pay system acknowledges employee dedication and nurtures a high- performance culture which is important for both short-term and long-term organizational success (Allen, Whittaker, & Sutton, 2017). In the past, the government had a great say in employee salary and remuneration. Wages were negotiated and influenced by government regulation (Hegewisch & Filella, 2017). In those days, productivity and profit played no significant role in influencing pay increase. However, things have changed and productivity significantly influences pay increase and job promotion. This study was conducted on two dominating Saudi Arabian companies: Saudi Telecom Company (STC) and Saudi Electric Company (SEC), to investigate the impact of PRP on the performance of the employees in the two industries. The research was conducted on 141 employees in both companies (n=141). The sample was comprised of 131 departmental employees and 10 supervisors. The investigation used a mixed methodology approach where both interviews and questionnaires were applied in the collection of data and SPSS was used to test the main hypothesis. Additionally, various credible sources were used in collecting information on studies conducted previously on PRP by other researchers. The results collected during this study proved that PRP has minimal impact on the performance of the employees, but it works effectively as an employee control system; the system acts as a motivational system but issues like favoritism, lack of team work and clear definition of performance standards prevent the system from being effective. The main limitation of the study, was the time constraint that prevented more respondents from being interviewed. Hence, the interpretation of the results should not be over generalized.

Keywords: Pay related performance, compensation, motivation, incentives, benefits, culture

DOI: 10.7176/EJBM/12-3-14

Publication date: January 31^st 2020