Pay for Performance Law and Legal Definition

Pay-for-performance ties an employee's pay to their performance on the job. Proponents of pay-for-performance programs believe they will attract and retain better employees and offer incentives to motivate and reward improved performance. They view uniform employee salary schedules as ineffective in attracting and retaining sufficient numbers of effective employees and as out of touch with compensation practices in other industries that tie salary to employee performance.

As a nexample, pay for performance programs are often implemented for teachers. The percentage of an employee's salary that is based on performance can vary greatly. Fair and accurae evaluation methods are crucial to a successful pay-for performance program.