Who is Motivated by Performance-Related Pay in Retail?

gold shop pos

Gold shop pos

Last year’s payroll records indicated that the average performance-related pay from the whole income constitutes 10% and among shop assistance it is even less – remaining around 8%. This is the average that includes also the wages of those employees who do not receive performance-related pay.

In retail it is difficult for an employee to influence sales and thereby receivable performance-related pay. In retail business the client generally makes the purchase decision by itself. The decision is influenced by the prices, by the way goods have been displayed, by the interior design of the shop and by other factors that are not connected to sales. The shop keep can increase sales only by pleasant and smooth customer service. So in a situation like this a question arises, which party should really be more motivated by the performance-related pay?

Performance-Related Pay in Employer’s Vision

Making of a schema according to which performance-related pay should be paid is a difficult task. You have to take into account common market customs and organisation’s culture and business model as well. It is possible to receive good results by working only for basic salary or by establishing an aggressive performance-related pay schema. The employers sometimes diversify risks by creating lower basic wages and by providing an opportunity to earn performance-related pay. But at the same time performance-related pay should be received after additional efforts not by performing routine everyday tasks.

There are employers who hand out performance-related pay according to an equation which depends on company’s monthly sales. This solution gives the employees at any given time an opportunity to calculate how much bonuses they will receive. Performance-related pay makes up around one-third of the money received monthly, but at the same time there is no upper limit and it is always possible to earn more. This system is employee friendly because workers get a certain percentage of the total income of the company even when the business year has not been that successful. Those who are not satisfied with a system like this can always notify the management or move on to a job that offers basic salary.

Employees Viewpoint

Employees point out the bottlenecks in the performance-related pay system. For example, if the sales targets are set too high and only a few employees can reach them. Then there is a seeming opportunity to earn additional money, but in reality you cannot count on it.

The solution could be that the worker can choose if he or she wants to receive performance-related pay or not. In most cases the store managers are either too convinced that the performance-related pay system is the only successful way or believe that this system is too complicated and therefore also useless. But employees should be evaluated on individual basis. For example, when you offer a basic salary of 300 Euros and 1000 Euros or even more performance-related pay then some of the workers see only an income worth 300 Euros, but the others interpret it as a challenge and are motivated to accept it.

Based on an article from EPL (“Analüütik: põhiline on põhipalk” 30.01.2013)