Competency and Compensation

Abhishek Soni Pallavi Gupta

 PAY A financial reward for doing a Job GRADING Perceived Value which a job adds to organization

Purpose of Pay Structure

Motivation Rewarding Performance Fairly Retention and Attraction Recognition of achievement

Purpose of Grading Structure

Setting Pay bands Assisting in management of pay budget Recognition of value/job worth Providing motivation for development Providing motivation for succession

Factors influencing pay policy

Individual Contribution Value of individual to the organization Scarcity of Potential Job-holders Time served in the company and/or job The cost of living Financial Position of Organization The frequency of pay review The success of organization Agreements with unions, staff association Legal restrictions

Factors influencing Grading Policy

The Contribution to the organization of work outputs The organizational structure The organizations size External benchmarking The job evaluation system/policy

Competency Based PAY

There is a direct link between competency ratings and the financial reward an individual receives.

Pay
Various components parts to pay include Basic Pay Commission Bonuses Profit sharing Allowances These are Linked to Length of service Grade or Role an individual holds Performance of an Individual Competency frameworks can contribute where pay is linked to performance

Advantages of using competency to set pay bands

Linking job performance to reward Make job value appear more open Job evaluation systems complex Job analysis mystery to most people in the organization Competency framework available for everyone to see Rewarding over-achievement Desirable when a pool of talent is being nurtured for succession planning or when a learning culture is being encouraged Balance to be achieved between encouraging people to improve to meet the objective of policy Danger of raising competency levels beyond required in the short or medium term

Other issues for consideration with pay and grading

Overpayment Team v Individual Pay Development v Reward

Overpayment
Competency based pay schemes increase basic pay

If not all of the competencies are being used??

Lead to unacceptable high salary bill

One way create incentive without rewarding with money

Ex. Career Progression linked to willingness to achieve competency over and

above required for the current job Restrict to those for whom career development is a motivator Bonus payments if monetory rewards considered important Reward achievement without increasing salary budget over the long term

Team v Individual Pay

Organizations putting more and more emphasis on teams

Issue arising how to reward people in those teams

Relevant in organizations using competency framework, which focuses on job competency requirements, to be fulfilled by one individual Third element added on how the team performs as a whole in relation to team goals Team members earn a bonus for team based contribution, individuals rewarded for their personal contributions to the team

Development v reward
Drawbacks tying performance with pay Causes distraction considering less than acceptable performance Also a distraction for manager
Not want to demotivate a staff member

Can be tackled by setting learning objectives Particularly relevant for trainees Learning objective will focus on the achievement of certain levels of competency or output within certain time-frames and with agreed support Another way- split discussion about achievement of objectives away from the discussion about development needs