Performance pay as a concept is increasingly gaining importance in emerging markets like India and China, but linking compensation to unquantifiable corporate goals is where the model flounders, experts say.
According to a Towers Watson Research, companies in India are not differentiating performance pay as compared to their Asian or Global Counterparts.
Moreover, in terms of payouts, top performers get less than their regional and global counterparts, understandably as there are more people eligible for differentiated and higher rewards.
Pay per performance as a concept has become very popular in developed economies like the US and UK, and especially in sectors like healthcare and product sales.
In India this model is gaining popularity in emerging sectors like insurance, hospitality and with a few services organisations where the fixed salary is lower and incentive programs have higher weightage.
According to Towers Watson India director - Talent and Rewards Subeer Bakshi "while performance pay is today an important component of an employee's salary, there is a greater need for differentiation".
However, as per Bhawana Pandey, HR Head, Protiviti Consulting "this model will not only impact engagement levels of existing employees owing to its impersonal nature, it will also prove to be a deterrent in attracting fresh talent as people may shy away from a job which is perceived to be too target driven and lacking stability."
Like all other HR concepts, this one also does not resonate with a one-size-fits-all approach and its validity in the future will depend not on the size of an organisation but the nature of its business, Pandey added.
Echoing similar sentiments, HR solutions provider IRIS Corporate Solutions Director and CEO Sanjay Kapoor said, linking compensation to quality of work or attainment of an unquantifiable corporate goals is where the model flounders.
Proving oneself at his/her job is an important aspect and this pay per performance model is very relevant in revenue -based businesses, but in other fields the tracking mechanism is often prone to inaccuracies.
"This model is successful in scenarios where there are clear measurable goals and results are easily quantifiable. But the fact remains that most Indian wage-earners are more concerned about job security and the emphasis continues to be on receiving a minimum fixed salary," e-commerce firm ShopClues.com CEO and Co-Founder Sanjay Sethi said.