Most organisations who use performance related pay, either for their base pay, or for bonuses, have traditionally based their decisions on ratings taken from their annual appraisals. But if you remove the annual performance appraisal and replace it with ongoing discussions and feedback throughout the year, how do you make your performance related pay decisions?
The short answer
The answer is surprisingly simple. When it’s time to make decisions about pay, you simply ask your managers to tell you how each of their team members has performed over the period in question, and use that data to inform your performance related pay. This of course brings up further questions such as how should your managers measure their team members performance and how do you ensure fairness and objectivity? I’ll be answering these questions over the course of this guide.