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2.0 Question 2: Evaluation of Individual and Team/Company-wide Contingency Pay Scheme
2.1 Introduction
The contingency-based pay scheme is identified as being linked to measures of people, groups or organisation performance. According to Chong and Duan (2022) contingency pay scheme is applied as an approach used to incentivise employees and promote shared interests in higher output, performance, clients satisfaction and different indicators of organisation success. To support this definition, CIPD (2022a) identify the rewards as an approach where the management remunerate their employees through an alignment of pay progression to assessing employees performance. It is normally measured contrary to pre-agreed objectives. The rationale of contingency pay scheme to the individual and teams is identified by CIPD (2022b) that financial incentives positively impact on employees motivation and eventual performance. However, most research works have failed in including the non-consolidated financial rewards including incentives. For effectiveness of contingency pay scheme in a modern organisation, it would need to be classified into performance-related pay, competence-related pay, contribution-related pay and skill-based pay.
2.2 Individual Scheme- Commission
This is a type of contingency-based pay scheme for an individual. According to Murray and Gillibrand (2022) commission or an hour-based pay is offered for their different provided services. For the contractors, commissions are provided through an agreed-upon payment on a specified schedule often provided by staffing agency. This means that a contractor could be working in a temporary and permanent arrangement receiving benefits based on organisation policies. Further, as evidenced in Indeed.com (2023), employees could be earning a commission making a portion of their overall sales in income. Further, this is provided in a monthly basis, quarterly and annually (Sockin & Sockin, 2019). Nevertheless, for Saudi Aramco, the employees are required to have worked in a specific timeline with the organisation for qualifying to receive the commission.
Strengths– Considering the strengths of the commission as an individual scheme, it end up encouraging employees hard work. According to Ravenelle (2019), in the organisations offering commission-based pay, they work hard in order to receive the commission pay on top of their normal remuneration. This means that the higher the sales or ability to attracting potential customers, the commissions are increased for individual gains. This is not the case for the lowly performing employees.
Another strength is assisting in management of payroll expenses. According to Spinthiropoulos et al. (2021) offering commission to employees offer them with an opportunity for managing payroll expenses. Considering the amount offered through the commission, the employers are similarly in a position of managing the entire payroll expenses. The outcome of this is the employers reducing the costs of maintaining the employees. This is specifically an instrumental approach used for the purpose of developing a workforce which is proactive and motivated.
Weaknesses
The employees tend to over-emphasise on commissions and ignore other areas of performance. It is not clear to have organisations products and services identified. For instance, in Saudi Aramco organisation, operating in oil and gas industry in Saudi Arabia, it is not clear how employees would be provided to the employees based on the number of new customers engaged, performance scope and retaining the returning customers. Therefore, through the commissions, the identified factors in Saudi Aramco (employer) are prioritised hence driving an increase in products and services provision. This is while affecting the team dynamics (employees) by negative emotions existing for the employees with low performance pitting high performers.
2.3 Team/Company Scheme- Gain Sharing
Gain sharing represent a contingency pay where pay including salary progress is linked to assessment of individual employees performance. The relationship of employees input and pay-out could usefully be made explicit through their inclusion in analysis of outcomes and noting improvement areas. Also identified as merit-based pay, CIPD (2022a) identify pay related to organisation performance as being evaluated in line with pre-agreed objectives. The increase in employees pay is aligned to organisation performance scope and consolidated effectively to basic pay. Nevertheless, oftentimes, they pursue payment of non-consolidated cash lump sums. Through performance reviews and appraisals, CIPD (2022c)……..
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