Compare & Contrast Compensation Strategies
10/11/2011
What is Compensation The purpose of Compensation How compensation is linked to overall HR Strategy This research objectives
Types of Compensation Strategies
◦ ◦ ◦ ◦ ◦ ◦ ◦ Pay for Performance Incentive based pay Broad banding Team based pay Competency based pay Hybrid System Condition based pay
Pay for Performance
◦ Strength
◦ You got what you actually deserves
Foster individual performance Creates competitive environment
◦ Weaknesses
Quality of work might be ignored
Incentive Based Pay
◦ Strength
◦ Encourage employee to go an extra mile
Not applicable to all kind of jobs
◦ Weaknesses
Quality of work might be sacrificed
Broad banding
◦ Strength
◦ Creates different bands of jobs
Foster individual performance Creates competitive environment
◦ Weaknesses
Quality of work might be ignored
Team Based Pay
◦ Pay of individual employee is dependent upon the performance of his team ◦ Strength
Reinforcing group performance through the Recognition of successful teamwork
◦ Weaknesses
Promotes free-rider tendency
Competency based pay
◦ Strength
◦ Rewarding employees based on his competencies
Promotes Productivity Differentiate between performer and non-performer
◦ Weaknesses
Difficulty to measure competencies
Other Compensation Strategy
◦ Condition Based pay
Keep employees motivated to work under difficult working conditions Exploitive in nature
◦ Hybrid system
A mixture of pay for performance and competency based pay
Which Strategy is best
◦ Organizational vision and mission needs to be considered ◦ Functional level goals are identified ◦ Appropriate compensation strategy selected ◦ Multi-layer compensation system is appropriate here
Pay for Performance-Resource level Competency based-Management level
◦ Its not an easy task to determine competitive compensation ◦ This
What is Compensation The purpose of Compensation How compensation is linked to overall HR Strategy This research objectives
Types of Compensation Strategies
◦ ◦ ◦ ◦ ◦ ◦ ◦ Pay for Performance Incentive based pay Broad banding Team based pay Competency based pay Hybrid System Condition based pay
Pay for Performance
◦ Strength
◦ You got what you actually deserves
Foster individual performance Creates competitive environment
◦ Weaknesses
Quality of work might be ignored
Incentive Based Pay
◦ Strength
◦ Encourage employee to go an extra mile
Not applicable to all kind of jobs
◦ Weaknesses
Quality of work might be sacrificed
Broad banding
◦ Strength
◦ Creates different bands of jobs
Foster individual performance Creates competitive environment
◦ Weaknesses
Quality of work might be ignored
Team Based Pay
◦ Pay of individual employee is dependent upon the performance of his team ◦ Strength
Reinforcing group performance through the Recognition of successful teamwork
◦ Weaknesses
Promotes free-rider tendency
Competency based pay
◦ Strength
◦ Rewarding employees based on his competencies
Promotes Productivity Differentiate between performer and non-performer
◦ Weaknesses
Difficulty to measure competencies
Other Compensation Strategy
◦ Condition Based pay
Keep employees motivated to work under difficult working conditions Exploitive in nature
◦ Hybrid system
A mixture of pay for performance and competency based pay
Which Strategy is best
◦ Organizational vision and mission needs to be considered ◦ Functional level goals are identified ◦ Appropriate compensation strategy selected ◦ Multi-layer compensation system is appropriate here
Pay for Performance-Resource level Competency based-Management level
◦ Its not an easy task to determine competitive compensation ◦ This