Performance‐related Pay: Pretexts and Pitfalls

Performance‐related pay (PRP) has grown in importance in the 1980s and is likely to continue growing. The reasons for this growth are examined: labour market factors, changes in organisational objectives, fairness in payment initiatives, weakening of collectivisation, and “fashion”. Problems associated with PRP are also explored. It is argued that PRP has a capacity to subvert the purposes for which it is intended by distorting pay structures, creating unfairness in reward systems and harming team spirit. PRP also detracts from the value of other performance appraisal objectives. Some of the problems inherent in measuring individual job performance are also considered.