Payrolling services are often faced with challenges in linking pay with performance. It can be difficult to adequately compensate an employee as performance reviews may occur months after work has been completed. However, a new study found employers continue to find ways to align pay with performance.

Meridian Compensation Partners recently released the 2013 Trends and Developments in Executive Compensation Survey. The study polled approximately 140 companies about their pay-for-performance behavior. Sixty-one percent reported their payouts for 2012 performance were above target.

Aligning pay with performance often lies in how well employees achieve set goals and how much of the total budget goes to salaries. The U.S. Chamber of Commerce recommends employers first review each employee's performance appraisal to understand if the entire team is on target. By examining the entire workforce's performance, employers are able to see which workers should receive raises and if so, how much. The department suggests rank workers based on previously set criteria and to divide up the money available for bonuses accordingly.

There can be disadvantages to taking this strategy, so companies should consider what motivates employees to decide if linking pay with performance is a good idea.

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