Human resource management practice I also available by michael armstrong

Chapter 

26

  Reward Management – Strategy and Systems

365

internal and external relativities and usually 

provide for pay progression.

 

●

Contingent pay – planning and managing 

schemes that provide for pay progression 

related to performance, contribution, 

competence, skill or length of service.

Labour economists distinguish between the incentive 

effect of financial rewards (generating more engage-

ment  and  effort)  and  the  sorting  effect  (attracting 

better  quality  employees). The  fundamental  issue 

is the extent to which financial rewards provide an 

incentive effect. The sorting effect is important but 

creates less controversy, perhaps because it is more 

difficult to pin down.

The  case  for  and  against  financial  rewards  as 

incentives, and a description of the contingent pay 

schemes that provide such awards, are set out in the 

next chapter.