These link pay to a measure of individual, group or organisational performance. There are a wide variety of methods used including gain sharing, profit-related pay and straightforward bonuses, but all schemes assume the promise of pay will provide an incentive to greater performance.
Salary can be set on the basis of employee performance evaluation. A performance related bonus can be given as an alternative to, or as well as, an annual bonus. The targets can vary depending on the type and level of work that the individual employee does.
Performance-related pay can be a useful means for improving employee engagement.