Contract wages

Trying to motivate employees to perform better by paying a bonus is always risky. If the employee realizes, sometimes at a very early stage, that the required performance targets cannot be achieved and thus also not the bonus, the desired effect can also turn into its opposite: the employee is demotivated. Even more difficult: As a rule, the employee will hardly report the reasons for his decreasing efforts to the line manager, which also jeopardizes the CIP . Even if the premium targets are achievable, there is a risk that the employee will understand the award as an expression of the employer's mistrust in his willingness to perform and that this will jeopardize a previous relationship of trusting cooperation.

One possible solution to this dilemma is the contract wage , usually implemented as a program wage. With this variant of a performance fee, the employer and employee conclude their own contract on the particular service to be provided. What is special compared to a reward is that the additional payments are made immediately, even if the promised additional service has not yet been provided. The following advantages are seen in this variant:

• the character of mistrust as with the premium is removed,
• the agreed special performance targets can generally be achieved more realistically than with normal bonuses,
• the employee will also participate in a CIP in order to achieve the goals.

Example: A raw material processing company wants to increase the raw material yield and promises each employee a special payment of € 5,000 as a savings bonus if they manage to increase the yield from 75% to 90% within three months. The employees consider this goal to be achievable at first, but then have to experience that procurement , which works independently from the company and does not even know the agreement, buys from another supplier whose raw materials are cheaper but also worse. The desired yield can no longer be achieved with these new raw materials. The reaction of the employees is easy to imagine and their further motivation in the future as well. They do not even tell the management that the quality of the raw materials has deteriorated, as they assume that they knew that of course.

This is different with the design as a program wage: Here, the company pays a part for the expected service from the first month. Because that is the case, the employees tend to assume that the management does not know anything about the poor quality of the purchased raw material itself and are accordingly proactive with the situation.

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1. ↑ A basic work on demotivation is: Sprenger, Reinhard K .: Myth Motivation: Ways out of a dead end. Frankfurt a. M .: Campus, 1997.