Editor's message: Many organisations link either all or part of the pay awards made to individuals to an assessment of their performance - measurements of performance can include competencies, skills and knowledge as well as results and achievement of objectives. Organisations often find that performance-related pay (also called merit pay) is one of the best ways of both recognising and raising employee performance.
However, a performance-related pay scheme has to be carefully designed to ensure that it fits with the organisational culture and values and has the confidence of employees. You must be confident that you have a robust method of assessing employee performance, to ensure that a fair and consistent approach is applied.
Sheila Attwood, managing editor, pay and HR practice
Using employee performance to determine pay increases remains popular among some industries in the private sector.
Our survey looks at the practicalities of running a performance-related pay scheme and the effect that this method of reward actually has on employee performance.
Practical guidance on introducing a performance-related pay rise scheme.
Definition from the XpertHR glossary.
In May Gurney Ltd v Adshead and others EAT/0150/06 the Employment Appeal Tribunal holds that the remuneration of employees entitled to a perfomance bonus "does vary with the amount of work done". Accordingly the amount of a week's pay for the purpose of calculating holiday pay will be determined by taking the employees' average pay over the 12 weeks preceding their holiday.
An assessment process for performance-related pay purposes, which led to a woman being paid £780 a year less than men on like work, suffered from confusion, double counting and an absence of transparency, rules a Norwich industrial tribunal (Chair: D R Crome) in Latham v Eastern Counties Newspapers Ltd.
HR and legal information and guidance relating to performance-related pay awards.