Incentive schemes/Payment-By-Results (PBR)
‘Payment by Results’ or ‘PBR’ is a payment or remuneration method used to reward workers or employees in proportion with the amount of work done or deliverables achieved. In this method, a staff member or worker or even an external service provider, such as an agent or advertising agency or a consultant, is remunerated on the basis of achievement of objectives.
For a factory worker, it may be defined as wages based on the amount of factory units produced; for a service agent, the number of customers serviced satisfactorily. Similarly, a sales person may be compensated by sales commission on the basis of number of units sold. The underlying principle behind ‘variable pay’ in most organizations is mostly based on rewarding employees according to the amount of work done by them in terms of predefined deliverables.
The same evaluation, and hence, remuneration system may be used for compensating external service providers/ agencies/ consultants also, by linking their ‘pay’ with the requisite levels of desired ‘performance’. This kind of remuneration compensation method has increasingly gained popularity in social, health and public sectors, and attracted both positive and negative publicity.
Payment by Results (PbR) is a type of public policy instrument whereby payments are contingent on the independent verification of results. It is being actively promoted by a number of governments for more effective implementation of domestic policy.
There is also increasing interest in the field of international development, where PBR is often referred to either as ‘results-based aid’ (where the funding relationship is between a donor and a recipient country) or ‘results-based financing‘ (where the funding relationship is between a developing country government or a development agency, and public or private sector providers). There are also a number of other terms in use which can often lead to confusion and a lack of clarity.
PbR instruments have three key features:
- Payments for pre-agreed results
- Recipient discretion over how the results are achieved
- Independent verification as the trigger for disbursement