Pay-for-Performance (P4P) is a compensation strategy where employees, contractors, or vendors are rewarded based on their performance outcomes rather than a fixed salary or hourly wage. This approach aligns financial incentives with the achievement of specific goals or targets, motivating individuals to enhance their productivity and effectiveness. For example, a company may offer a bonus to sales representatives based on the sales revenue they generate, encouraging them to surpass their sales targets.
This model can drive higher performance and efficiency, as individuals are directly motivated to achieve and exceed their goals. It is commonly used in various sectors, including sales, healthcare, and consulting, where measurable outcomes are crucial.
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