Performance based pay

What is performance-based pay?

Performance based pay is much as it sounds as it refers to a contract, system, or agreement by which an employee is based according to the pre-agreed results of their work. As such, the individual will not receive pay linked with time served but rather per their contribution to the company’s performance.

The most common example of this system is commission pay, often utilized by salespeople, who receive a percentage per achieved sale that they close. Other companies may use a profit-share scheme where their employees receive a percentage of the organization’s total profit for that year.

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