UK0,M<$b@mevgɦmJ8s =-bU#b5')byiDz)%2.&_NKpGtJ|QGdr:>Fj0rA ؞F&!| 4`,mz3[
Study notes

Performance-related pay

  • Levels: GCSE, AS
  • Exam boards: AQA, Edexcel, OCR, IB

Performance-related pay is a financial reward to employees whose work is considered to have reached a required standard, and/or above average.

Performance related pay is generally used where employee performance cannot be appropriately measured in terms of output produced or sales achieved.

Whilst the detail of real performance-related schemes varies from business to business, there are several common features:

  • Individual performance is reviewed regularly (usually once per year) against agreed objectives or performance standards. This is the performance appraisal
  • At the end of the appraisal, employees are categorised into performance groups – which determine what the reward will be
  • The method of reward will vary, but traditionally it involves a cash bonus and/or increase in wage rate or salary

Performance-related pay has grown widely in recent years – particularly in the public sector. This is part of a movement towards rewarding individual performance which reflects individual circumstances.

There are several problems with performance-related pay:

  • There may be disputes about how performance is measured and whether an employee has done enough to be rewarded
  • Rewarding employees individually does very little to encourage teamwork
There is doubt about whether performance-related pay actually does anything to motivate employees. This may be because the performance element is usually only a small percentage of total pay

Subscribe to email updates from tutor2u Business

Join 1000s of fellow Business teachers and students all getting the tutor2u Business team's latest resources and support delivered fresh in their inbox every morning.

You can also follow @tutor2uBusiness on Twitter, subscribe to our YouTube channel, or join our popular Facebook Groups.

Job board

Teacher of Business

Worksop College, Nottinghamshire


Teaching Vacancies


Advertise your vacancies with tutor2u

Much cheaper & more effective than TES or the Guardian. Reach the audience you really want to apply for your teaching vacancy by posting directly to our website and related social media audiences.

Find our more ›

Advertise your teaching jobs with tutor2u