Analyse the possible disadvantages to a business of using performance related pay to motivate its employees.

Mark scheme

Marking points from the official mark scheme (May/June 2018). The mark or mark type is shown in brackets.

1. [Definition/Context] A payment scheme to reward employees for above average performance.
2. [Context/Challenge] Often used for employees whose output is not measurable in quantitative terms, e.g. management, supervisor, clerical posts.
3. [Disadvantage] Does performance-related pay actually motivate staff?
4. [Disadvantage] Can cause divisions within a group of staff-does not encourage team-work.
5. [Disadvantage] How do you measure 'above average' performance?
6. [Disadvantage] How can you ensure equity?
7. [Disadvantage] Can put power in the hands of senior managers which can lead to favouritism and/or discrimination.
8. [Disadvantage] It can be a time-consuming process agreeing targets and criteria.
9. [Disadvantage] Requires detailed information about each employee and their tasks.
10. [Disadvantage] Employees can be demotivated if the goals are set too high.
11. [Disadvantage] Too much focus on monetary reward rather than on development needs.
12. [Disadvantage] Employees may expect an additional reward every year.
13. [Definition] HRM function is to recruit and manage workforce so that business objectives are achieved
14. [Definition] HRM function includes a whole range of activities, including recruitment, training, contracts of employment, and staff morale and welfare.
15. [Definition] Morale is the emotions, attitudes, satisfaction and overall outlook of employees in the workplace environment.
16. [Definition] Welfare is said to be anything that makes the workplace more congenial and healthy and helps keep the motivation and morale of staff high.
17. [Importance] Low staff morale and welfare can result in low productivity, poor standards of work, high levels of absenteeism, labour turnover.
18. [HRM Contribution] HRM can specifically contribute to staff morale and welfare through the following: Monitor levels of motivation in the business. Take action where appropriate. Give support and advice to staff at risk (personal problems). Help and encourage staff to have a sensible work-life balance. Ensure that policies on equality and diversity are in place and are working.
19. [Connection] HRM is involved with staff morale and welfare with virtually all that it does.
20. [Connection] HRM needs to build and strengthen staff morale and welfare as well as maintain it.
21. [Evaluation] Evaluative comments may well consider that it depends on where the organisation is and on the current demands made on the organisation, as well as on the quality of HRM as to where priorities may lie.