Paying by Results, Not Time: Good Idea?

Should people be paid according to the results of their work or the time they put into it? That's a good question to ask. The team at Salariesinmalta has tried to understand what is best for the business and the employee. Let us dive in and discuss this topic in detail.

Commission-based Sales Staff

Performance-related pay or pay for performance, not to be confused with a performance-related pay rise, is a salary or wages paid system based on positioning the individual, or team, on their pay band according to the performance. Car salesmen or production line workers, for example, may be paid in this way, or through commission. Many employers use this standards-based system for evaluating employees and for setting salaries.

Standards-based methods have been in de facto use for centuries among commission-based sales staff: they get a higher salary because they sell more, and low performers do not earn enough to make it worthwhile to keep the job, even if they manage to keep it. In fact, the salary would be adjusted up or down at regular intervals (usually annually) based on the individual or team's performance. The reward is the salary: with the expectation of being at the top of the salary scale for good performance and at the bottom of the scale for poor performance.

In comparison, the reward would be a pay rise under the performance-related pay rise system. The better the performance of the individual or team, the more significant the increase, whereas if the performance is poor, the increase would be minimal, if any. The reward is the salary increase: a high salary increase is expected for good performance, and a low increase or no increase for poor performance. Most times, employees get paid for their time, while business owners get paid based on results. Here’s why you might want to choose the latter.

Quantifying the Results

The problem I have with this is quantifying the results. We can do this (maybe) on an assembly line. You make 10 parts and they all pass quality control. But we still have to consider time (especially labour laws). Is it okay to keep you if you make your 10 parts but it takes you 14 hours to make them, while everyone else makes their quota in an 8-hour day? The answer now would be yes, but we would have to be prepared to give you OT every day while your much more efficient colleagues get nothing for the same production. The more we move away from hands-on jobs in Malta, the harder it becomes to quantify results. Take software development ... bug-free code may be a goal, but probably no significant amount of code will ever be 100% bug-free. You may have to code, but if marketing and finance have a hand in it, does it matter that marketing just promised something nearly impossible while finance cut your budget for developers and tools? Can you still be held accountable for the results if you have no decisive control over what those results should be?

Challenges Faced When Paying for Results, not Time

The short answer is that in the real world, some jobs are done without knowing the full cost upfront, and you can only know the cost when you do the job. Paying only for results shifts all the risk to the person doing the work and removes it entirely from the person paying for the work to be done. For example:

• If I try to replace your kitchen tap, there may be reasons why it does not work that have nothing to do with my work. It may be that you have provided me with a defective product to install or that your plumbing is in such poor condition that the installation can only be completed with a lot of extra work.

• Or you ask me to tackle a building project for which no known solution exists. I then have to improvise and try different methods until I find something that works. That's your risk, not mine. Or, as often happens, the scope of a project is known once it is underway. (Many construction defects cannot be completely identified until the sheetrock or siding has been removed) This is not the risk of the person hired to do the work.  

   

So, Paying for Results Worth Trying?

No, it is a bad idea. We would starve to death long before the results appear.

In any process, we must take the time to do the work to achieve the results - even if there are intermediate results. But before even intermediate results can be achieved, time must be spent on the work. We are left with unpaid work if we are not paid for the work but for the results.

Now, it could be argued that we could arrange things in such a way that the 'remuneration for results' includes, after the event, what would have been paid for work done. That sounds all well and good, but if you could do that, you could also pay for work done while it is being done. There is a good reason why wages are wages and performance or results bonuses being bonuses. No. It makes no sense; no one would take on a risk-based job. The owner of the task defines it. If the task is not successful, something is learned from it, and the owner of the task has to pay the person who did it.

Thomas Edison ran a technology company and employed dozens of engineers. Many worked to find a solution that would reliably produce a light bulb. When he had paid people to produce more than 10,000 failures, Edison was asked how he felt about it. He said: "I did not fail. I just found 10,000 ways that did not work." Of course, one of those engineers eventually discovered the light bulb, but all those engineers were paid for their work on discovering the non-bulb.

Our Final Thoughts

So my final answer is: if we can reasonably define "outcomes" and achieve those outcomes reasonably within your control, then pay by results. But if we have a fuzzy definition or one imposed from the outside without you knowing (or caring) what it takes to do your job, then no.