What is Pay for Performance?

Pay for performance (P4P) is a payment structure that builds on an employee’s base pay when they meet or exceed measurable performance metrics. It is often seen as a fairer and more adaptive way to reward employees who put in great effort and get better results compared to the traditional salary system.

Pay for performance works best in roles where achivements are measurable numerically, like the number of boxes moved or assets created. To implement this system, employers require a clear, fair, and pre-determined method to measure performance and distribute rewards.  

A survey revealed that 81% of top-performing companies (compared to 74% of average companies) utilized some form of P4P practices. This suggests a correlation between the use of performance-based compensation strategies and organizational success.