Does Value-Based Compensation Increase Productivity?

Within the model of value-based compensation, you are rewarded strictly for results. The amount of hours spent or the degree of effort is irrelevant; you are paid only for tangible, measurable value produced, regardless of the duration or difficulty of the work.

For those used to a predictable hourly wage, value-based compensation may sound risky. Work impediments like sudden sickness or family emergencies can show up later as missing money on your paycheck. Most feel that the employer should handle the ups and downs of the business and provide workers with a steadier form of payment.

But if your payment is stabilized with a steady hourly wage, you’ll miss out on the booms as well as the busts. You may be saved from a slow week, but you can also miss the payout of an amazingly productive week. Plus, while hourly pay may tempt you to work slowly, value-based compensation provides strong motivation to improve your skills and your efficiency.

Businesses would love to pay strictly for results. Workers would love immediate rewards for working harder, faster and more effectively. Value-based compensation seems like a win-win for both parties, yet it’s not the most commonly-used compensation model.

Clearly, value-based pay compels you to work harder and faster. But, do the benefits of value-based compensation outweigh the risks? Would it truly make you more productive and consequently earn you more money – or is money even the biggest driving factor?

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