Contribution Pay

Paper Summary:

This paper explains that contribution pay, which is a relatively new concept, combines elements of both performance and competency based pay schemes by recognizing employee achievements and competencies: (1) Employees are paid based on not only their individual job performance but also on their knowledge, skills and attitude, (2) pay is based on an employee's contribution and not just the set goals at hand and (3) employees can be judged on their merits rather than judged solely by a manager's personal discretion. The author points out that, aside from contribution pay, non-monetary incentive schemes also are effective ways of motivating employees because they might not tend to spend money on those rewards, such as travel and parking places, out of their own pockets. The paper relates that contribution pay, non-monetary rewards and a higher general pay are based on natural motivators such as recognition, peer pressure and obligation to work hard; however, ultimately, motivating employees comes down to good management and fair treatment because employees often reflect their environments.

From the Paper:

"Being hired at a higher salary motivates employee performance in the sense that an employee knows that they will lose a secure position if they are not productive contributors. There is no added pressure of having to meet certain output or sales goals to achieve more money. The financial rewards are already there. All one has to do is meet managerial expectations to maintain their already high status. When an employee exceeds expectation, they are usually rewarded with an annual raise. Furthermore, an employee whose only concern is their salaries based on "units sold" or "numbers met," cannot focus on bigger issues. Those paid the higher salaries can focus on developmental issues, customer service and look at the overall goals of their company as a whole."

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