Difference between job based pay structure and person based pay structure

Many countries, provinces, states or cities dictate a minimum wage. However once rudimentary cognitive skills are required it actually leads to poorer performance.

Compensation Chapter 8

Person Based Pay Structures Like a job based structure, developing a person based pay structure also requires an understanding of the tasks and responsibilities of jobs in a business.

I view the employer and employee as generally at odds concerning extrinsic reward — employees almost always want more and employers almost always want to pay as little as possible for talent. The obvious answer is commission, a form of variable pay by which staff earn a cut of the income they create for their employer.

If you start rolling out complicated measures of performance, they do not like it. Steve Watson, director at Rewardworks, says communication around any changes to pay structure is key. Despite its growing prominence in early 21st century workplaces, a team-based structure does have drawbacks relative to more traditional organizational structures.

But for many employers, having an engaged and motivated sales force is vital. It does not reward employees directly for their knowledge, abilities and individual strengths. It rewards employees by better compensation and benefits for the skills, knowledge and behaviors important for personal performance and organizational success and not just for the activities they perform.

Companies that succeed in a team-based setup typically offer the requisite training and support. The ratio of base salary to variable pay is referred to as the pay mix. When unemployment rates are high, there are many more people looking for work than there are jobs.

Some job evaluation systems take short cuts by using a generic set of compensable factors or develop the pay structure by using job classification.

For instance a telephone call center helpline may judge the quality of an employee based upon the average length of a call with a customer.

This is more complex and harder to judge, and requires better management. Subordinates can also earn more as compared to seniors based on their competency levels Disadvantages of competency based pay On the contrary to the benefits, there are certain cons for competency based pay.

Compensation: Outline and Definitions

Sometimes this type of plan is administered so the sales person never resets or falls down to a lower level. Total direct pay includes all the elements that may be negotiated by a job candidate, especially for senior executive positions where annual and long-term incentives are more substantial.

These findings have been specifically highlighted by Daniel H. Usually, these comparisons are done in external labor markets where the wages vary.

The Disadvantages of Team-Based Organizational Structure

Experts say the simplicity of commission suits the type of person working in sales. While a minority of companies compensate strictly based on the job basing where an external applicant or existing employee should fall in the pay range based strictly on job content most companies pay in some part based on what an 2.

Strategy Although employers generally try to keep their salary structures competitive, there are companies with salaries slightly lower or higher than the market rate.

This means comparison is possible between companies.

Pay Bands, Pay Scales and Other HR Jargon You Don’t Know But Should

Some benefits are mandatory which are regulated by the government while others are voluntarily offered to fulfill the need of a specific employee population. Since the employees get rewarded for something they feel they deserve, they become loyal to the company 3.

Variable pay[ edit ] Variable pay is a non-fixed monetary cash reward that is contingent on discretion, performance, or results achieved. A senior executive at the company I work for once lent me this book to read.

It is less compatible with team based structures and incentives. In this case, employers might lower their starting wages because they anticipate job seekers may settle for lower wages. Conversely, intrinsic reward is a place where both employer and employee stand to mutually benefit.

Successful managers and organizations know that in order to maximize profits, it's absolutely imperative to hire and keep the best employees possible. To do so is simply good succession planning. The difference is that it compensates the job incumbent person in terms of his knowledge, competencies and skills.

The hierarchical organizational structure that it is based on has fundamental weakness. The problem comes if, on balance, employees believe that the other attributes of the job are not commensurate with the low pay.

Business Structures

It does not encourage development of a flexible organizational structure in terms of flatter structure; T-shaped employees and job rotation. The most common forms of variable pay are bonuses and incentives. Total direct pay refers to total cash compensation plus equity compensation.

In other words, the bonus is creating an incentive to improve business performance as defined through the bonus plan. Delays While teams may develop better ideas, they often come from more investment of time in the decision-making process.Distinguish between the process used to design and administer a person-based and a job-based approach.

The top portion of Exhibit (Chapter 5) and Exhibits and provides the process, along with the essential components, for the job- and person-based approaches to designing an internal pay structure. Why I prefer commission pay vs hourly rates. of the commission based job you could end up making quite a bit more.

which when you first get a computer you don't know the difference between. Performance-based pay is a great way to encourage motivation among employees. The compensation variations come in many forms, and each form will present a variety of benefits and challenges, depending on the structure of your company.

In addition to performance-based pay, factors such as experience, industry of employment, and education level may also play a role in large wage differences for. Purpose of the Competency Based Structure Skill - Based Pay • Defined as pay structures that associate wages to the complexity or extensiveness of job related KSAOs acquired by an individual.

• Skill based pay plans are normally associated with blue-collar jobs. Why Pay Structure? o Clarifies the market and internal value for each job, and provides o Difference at the base vs top of structure.

o Bigger range spread at the top, o Annually based on.

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Difference between job based pay structure and person based pay structure
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