Nothing better aligns an employee with a company's goals than pay for performance. They can see in their paychecks how their direct actions can lead to positive financial outcomes for themselves.
Fremont, CA: Pay for Performance (PFP) is a very effective way to foster a productive culture in any organization. In this post, we will continue the discussion by going over the numerous advantages of a PFP program.
Here are some key benefits of a well- designed pay for performance program:
Employee Engagement
Nothing better aligns an employee with a company's goals than pay for performance. They can see in their paychecks how their direct actions can lead to positive financial outcomes for themselves.
Employee Compensation
A well-designed PFP program can significantly increase employee wages, resulting in the other benefits listed below. Prior to implementing PFP, employees in one of our operations were paid the state minimum wage of $7.75 per hour in 2004. After a year, the average hourly wage was $13.50.
Lower Unit Prices
Despite the fact that one is paying more per hour with bonuses, unit production costs decrease as productivity improves. Employees share in the value created by their productivity in a well-designed PFP program, which is self-funded. We get excited about large bonus payouts because we know that every dollar in bonuses paid results in an additional $1-$2 in net labor savings for the company.
Improved Hiring
For warehouse and production workers, $1 more per hour given elsewhere will put a company's recruiting efforts to the test. With PFP, good performers can earn above-market wages while lowering one's per-unit production costs because of increased productivity.
