PAY SYSTEM plays a crucial role when managers are looking for ways to retain and motivate employees. Higher employee turnover rate can have a demoralizing impact on company's performance and is usually connected with an unfair pay system whereby some employees' feel that their hard work is not being rewarded adequately and thus choose to leave the firm for better opportunities. Management literature and some actual examples reveal that the best pay system is the one that is based on employee performance. When pay system is tied to performance, we call it 'paying for performance'. This system ensures that effort, dedication and commitment of each and every employee is properly rewarded and that hard work doesn't go unnoticed. For this reason, it is important to develop a proper system of performance measurement, which helps in designing a better and performance-based pay system.

Measurement of performance and paying for...

This concept of performance appraisal, the measurement and payment of continuous diligent effort in terms of monetary gains has gained rapid momentum lately. With the world transmuting into a global village, the leaders as well as the managers of the corporate village today face greater challenges in terms of retaining trained workforce and hard working employees. Keeping the spirits high and raising morale of the company's employees is another challenge faced by the supervisors. Therefore, the concept of paying for performance and frequently utilizing the performance appraisal methods to gauge the ability and worth of an employee is expected to sour high. Moreover,…