The functions of performance and traditional remuneration

 The functions of performance and traditional remuneration


From the employer's standpoint, it is indisputable that they must achieve overarching objectives by effectively utilizing their workers. Hence, employers have recognized that performance-based compensation is much more reliable and effective compared to the fixed salary method.

In terms of performance-based salary, when an employee knows that their salary is directly aligned with their performance, they tend to perform well and work harder. Performance-based compensation enables organizations to attract high-performing individuals and facilitates the recruitment and retention of top employee (Joseph J,Martochhio 2015)

In addition, when performance-based remuneration is implemented effectively and transparently, it assists in achieving the overall objective of the organization.

Furthermore, from an employee perspective, adequate compensation ensures they can meet their financial obligations and develop their skills.

In contrast, a conventional-based job ensures job security regardless of performance and ensures a fixed salary. Moreover, jobs are created and promoted based on most probably seniority (Nawarathne NNJ, 2013, vol 4, no 1) . Furthermore, income and job security are unaffected by external factors, regardless of economic crises or recessions.

Even if performance-based pay is increasing, some occupations, such as law enforcement, emergency response, medicine, and science, need stability more than performance-based pay.

In addition, sales personnel are often measured and compensated based on their performance, which enables them to meet financial obligations without any hesitation.

Nevertheless, there are key challenges in performance-based methods as follows.( Mackenzie L, wehner J, Correll J, 2019)

·         difficult to establish clear measurable performance indicators

·         Employees tend to prioritize short-term goals to earn bonuses and will negatively impact other important aspects of the organization.

·         Some state-owned enterprises (like CPC CEB) ( adaderana e news 2024) have demanded overpaying bonuses despite recorded losses.

In the Sri Lankan context, the government (Abeyrathne D, 2024) has planned to enhance the efficiency and effectiveness of the public sector service by introducing a performance-based system with an annual salary increment and other benefits. It is an unprecedented move towards economic development.

In a global context, giant tech companies like Microsoft (The economic times, 2025)  and Amazon (The times of India,2025)  have recently offered their employees to leave the job if they cannot perform based on their set targets. However, including China, Singapore, the UK, and India are rapidly shifting towards performance-based salary metrics emphasizing productivity efficiency and measurable contribution.

In conclusion, compensating employees based on their performance can be a powerful tool for motivating and engaging the workforce. But it is required to have a clear set of metrics to ensure fairness and transparency. In contrast, conventional jobs need to be secured in terms of doctors, law enforcement, and disaster responders in order to provide better service.

References

Theeconomic times, (2025)

Thetimes of India, (2025) 

Abeyrathne D, (2024) Govt sector salary increase between 24% to 50 % in 2025, daily news

MacauslandW D, Pouliakas K, Theodossiou I, (2005) Some are punished and some arerewarded: A study of the impact of performance pay on job satisfaction

TheSunday times, (2009)

WeerathungaV, (2023), Unveiling mysteries of employee engagement: Sri Lanka’s unique path,  Dail mirror e news

adaderana e news (2024) CEB employees demand bonus by December 

posted by    K M N R Wickramasinghe -   (E276762)

Comments

  1. HRM Blogs - (MN7234ES) - Batch 12July 25, 2025 at 8:24 AM

    performance-based pay can motivate employees to perform at their best and align their goals with the company's objectives.

    ReplyDelete
  2. Rukshani De SilvaJuly 25, 2025 at 8:59 AM

    It's important to have clear and fair metrics. For essential roles like doctors and emergency responders, job security is crucial to ensure quality service.

    ReplyDelete
  3. Hasitha AmarasekaraJuly 27, 2025 at 10:18 AM

    This is a balanced and thoughtful explanation of performance-based compensation. It clearly highlights how aligning pay with performance can boost motivation and attract top talent, while also recognizing the importance of stability in certain essential roles.

    ReplyDelete
  4. Ravindu Pathiraja E246111July 28, 2025 at 8:49 AM

    Employees can be motivated by giving the salary based on the performance. This result boosting organizational efficiency, but it requires clear metrics and transparency.

    ReplyDelete
  5. G. MalaravanJuly 29, 2025 at 11:31 PM

    It's inspiring to see the global and local acknowledgment of performance-based compensation as a powerful driver for organizational success! The increasing adoption by tech giants and the Sri Lankan government's forward-thinking initiative in the public sector truly highlight a worldwide shift towards valuing and rewarding productivity. This dynamic approach, when coupled with clear metrics and a focus on fairness, promises to foster a highly motivated and engaged workforce, propelling organizations towards their objectives with unprecedented efficiency. It's an exciting evolution in human resource management that benefits both employers and dedicated employees!

    ReplyDelete
  6. Bhagya-E215944July 31, 2025 at 10:08 AM

    Performance-based remuneration rewards employees based on achievements and results, while traditional remuneration offers fixed pay regardless of output, focusing more on job role and tenure.

    ReplyDelete
  7. Manoj RukshanAugust 1, 2025 at 7:52 AM

    A hybrid approach combining performance-based and traditional remuneration is optimal—aligning incentives with productivity while ensuring stability for critical roles. Clear metrics, transparency, and adaptability to sector-specific needs are essential to balance motivation, fairness, and organizational resilience.

    ReplyDelete
  8. PavithranAugust 1, 2025 at 9:41 AM

    This article highlights how performance-based pay can boost motivation. In Sri Lanka, the government’s plan to link public sector salaries to performance is a good step. But for essential roles like doctors and police, fixed pay ensures stability. A balanced approach works best.





    ReplyDelete

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