Performance-based pay is a compensation method that pays employees based on work performed rather than salary or hourly wages. It provides financial rewards based on individual or group performance. There are various categories of pay systems including individual and group performance. Common performance measurement methods discussed in the document are graphic rating scales, management by objectives, and forced ranking. Both advantages and disadvantages of performance-based pay are outlined. The document also discusses the importance of performance-based pay in Nepal.

1. PERFORMANCE BASED PAY
SUNITA SHRESTHA
SHAILESH MAHARJAN

2. DEFINITION
Performance-based pay is a method of
compensation that involves paying employees
for the work they do instead of paying with a
salary or hourly wage. It provides financial
compensation based on either focus on
individual or group performance

3. WHY PERFORMANCE BASED PAY
• People join a firm because of Pay•
• People stay in a firm (or leave) because of Pay•
• Employees more readily agree to develop job skills
because of Pay•
• Employees perform better on their jobs because of
Pay

4. WHY PRACTICE PERFORMANCE BASED
PLAN?
Equity Theory by Adams (1963):
When employees are not compensated for work,
they will seek justice: •
Decrease inputs: •
slacking off •
Quitting •
slandering company •
sabotaging co-worker’s

5. CATEGORIES OF PAY SYSTEM
• Person
• Age
• Seniority?experience
• Qualifications
• Competence
• Behaviour/traits
• Attitudes
• Knowledge
• skills
•Performance(individual)
• Commission
• Piecework
• Individual performance-
related pay/ merit pay
• GROUP
• Profit sharing
• Gain sharing
• Team bonuses

6. PERFORMANCE MEASUREMENT METHOD
Graphic Rating Scales:
Management by Objectives
Forced Ranking

7. GRAPHIC RATING SCALES:
•platform for supervisors and managers to measure
employee performance.
•determine whether employees are meeting the
company's expectations
•varies according to the work environment, type of
business and, to some extent, the employee's
occupation.

8. MANAGEMENT BY OBJECTIVES
• useful for measuring the performance of employees in
supervisory or managerial positions
• start with identifying employee goals,
• list the resources necessary to achieve those goals,
• Sets the timelines for achieving each goal
• The employee's performance is measured by how many set
goals accomplished within the designated time frame.

9. FORCED RANKING
• to measure the performance of an employee against the
performance of his peers
• identify its best and worst performers
• nurture the highest achievers and improves or discards the
least-effective workers.
• leads to a very competitive work environment
• lack of collaboration and teamwork between staff
members.

10. THE PROS AND CONS OF PERFORMANCE
PAY ARGUMENTS FOR:
• Morale booster
• Promotes team work
• Motivational tool
• Employee retention

11. THE PROS AND CONS OF PERFORMANCE
PAY ARGUMENTS AGAINST:
•Pay is not a motivator.
•It demotivates staff who do not benefit.
• It ruptures relationships and team work.
•It discourages risk-taking.

12. RICHARD
BRANSON
Train people well enough so
they can leave them, treat
them well enough so they
don’t want to.

13. WHY PFP IS IMPORTANT IN NEPAL?
• According to the research done by trading economics,” GPD per
capita income on Nepal was last recorded at 682.20 US Dollars
in 2016.”
• Pay is the main factor most of the employee changes their
job/career.
• Lack of Performance for pay make people to be more money
minded and encourage for the corruption.
Https://tradingeconomics.Com/nepal/gdp-per-capita

14. ABROAD COUNTRIES FOR HIGHER EDUCATION
AND WORK THAT PAYS HIGH.
• Nearly 15,000 Nepalese students were studying in the US in
May 2017 – up 18% compared to the year before.
• https://thepienews.com/news/usa-international-students-1-18-million-sevis-by-the-numbers-
2017/

15. WHAT CAN BE INCLUDED WHEN IT COMES
TO PFP IN NEPAL
• Increase in salary according to performance and capability of
employee.
• Available of training for employees to boost their confidence.
• Labor Act, 2048 was prepared for provision for the rights
interests, facilities and safety of workers and employees
working in enterprises of various sectors.

16. MANAGEMENT BY OBJECTIVES
• Many CEO and people holding higher position are lacking vision
in Nepal.
• After certain periods of time, evaluation about the performance
can be done.
• New Employee can be hired for better performance.
• Helps in improving role clarity.

17. THANK
YOU