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The degeneration or decay of a payment system occurs when earnings cease to be based on a formal measure of work. The degeneration of a time-based payment system (in which pay is based on time spent at work) would be manifest in workers taking longer breaks or finishing shifts before the set time, so that the link between payment and time spent working becomes attenuated. Degeneration can also occur in incentive-based payment systems. This occurs if bonuses and other performance payments are made to employees regardless of output or where, over a period of time, employees receive increasing earnings for the same level of output. Degeneration can arise because of slack systems of management control or because employees possess bargaining power, due to their position in the system of production, or due to their skills being in short supply. According to some commentators, the degeneration of payment by results is an inevitable feature of all schemes and requires the periodic overhaul and replacement of payment systems.

Subjects: Human Resource Management.

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