Competency Based Pay

In: Business and Management

Submitted By devilhr
Words 10995
Pages 44
Overview: This chapter looks at pay based on competencies, the knowledge, skills, and abilities that make employees valuable to an organization.
The distinguished Management educator, Ed Lawler, in an article looking back at the dot-com era and its implications for the future of Compensation Administration concludes that this era "accelerated an inevitable move from focusing on paying individuals for the job they do to paying individuals for the skills knowledge and competencies they have."1 This is not the only article that states that paying for the person would replace paying for the job in the future. There was a whole rash of articles in the late 1980's to the mid 1990's that carried the same theme. It is significant that since then there has not been more attention paid to this idea.
Competency pay is a fancy term given to the idea of paying for the person rather than the job. In fact, very few compensation plans pay for only one thing. As discussed in the first chapter of this text, pay can be based upon the job, the person or their performance, and most systems are combinations of all three. The real questions are which one will be the base platform for the other two and what weight will each have in the decision of how much to pay the individual. The past chapter focused upon a compensation system based upon the job. In the chapters that follow this one, we will examine how factors relating to the person and to his or her performance help determine the pay rate of the individual employee. In this chapter we will examine competency pay as the factor that is the base platform for the establishment of the pay rate.
Paying the person rather than the job is not entirely a new idea. There are compensation plans, such as maturity curves, that have been around for many years. In addition there are other societies,…...

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