stments in individual pay levels are based to a great extent on how well people do their jobs, as reflected in a performance appraisal. Companies now realize that productivity increases are necessary to sustain higher earnings and at the same time there cannot be any long-term productivity growth without an increase in real wages. Employers now have to negotiate pay systems which;
             „« are flexible in that their variable component could absorb downturns in business and reduce labor costs;
             „« are oriented towards better performance in terms of productivity, quality, profit;
             „« are capable of enhancing workers¡ earnings through improved performance;
             „« are able to attract competent staff.
             The following are traditional types of performance pay.
             A common method which has long been in existence is pay increases - in the form of increments, for example, for individual performance. Approximately 90% of U.S. employers use it. Its workability and effectiveness depend on the existence of a suitable performance appraisal system. Here are some reasons why the plan does not work.
             - The incentive value of the reward offered is too low. Give someone a $5,000 raise and she keeps $250 a month after taxes. The ¡§stakes,¡ after taxes, are nominal.
             - Union contracts influence pay-for-performance decisions within and between organizations. Failure to match union wages over a 3 - or 4-year period (especially during periods of high inflation) invites dissension and turnover a month nonunion employees. (Cascio, 2003)
             Lump sum payments (such as sales commissions) are another traditional method. It is not added to base pay. Usually the formula and the relationship between performance and the payment of the lump sum are known beforehand.
             Another traditional method of rewarding performance is piece rates. Unless related to a reasonable time frame within which the production should be...