Having considered the main options and processes associated with base pay and benefits, we can now turn to consider the remaining major area of reward practice, namely performance-related rewards. Also known as ‘incentive plans’, these are rewards that are contingent or ‘at risk’ in some way, rather than being ‘fixed’ or ‘guaranteed’, as is the case with more traditional forms of base pay. For this reason, such rewards are also commonly referred to as ‘contingent’ or ‘variable’ pay plans. Moreover, while many such rewards are financial in nature (i.e. performance pay or cash incentives), performance related-rewards may also take a non-financial form.

The seven chapters in part 4 offer a detailed coverage of the main types of individual and collective performance-related rewards and of key themes and debates associated with such rewards. Chapter 14 outlines the main types of performance-related reward, considers some of the general motives for adopting performance-contingent rewards, and overviews the main arguments and supporting evidence for and against such plans. Chapters 15 to 19 examine specific types of performance-related reward plans that are commonly applied to line employees and managers, with particular emphasis on plan usage, strengths and weaknesses. Plans covered include individual merit pay (chapter 15); recognition awards (chapter 16); results-based individual incentives (chapter 17); collective short-term incentives (chapter 18); and collective long-term incentive plans in the form of broadly based employee share plans (chapter 19).