Bases For Pay
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Bases For Pay

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Bases For Pay Bases For Pay Presentation Transcript

  • Bases For PayBases For Pay
  • Traditional Bases for PayTraditional Bases for Pay Seniority & Longevity PaySeniority & Longevity Pay Seniority PaySeniority Pay Seniority-based pay systems are those in which the primarySeniority-based pay systems are those in which the primary basis for pay increases is the employee’sbasis for pay increases is the employee’s tenuretenure. It should be. It should be noted that seniority-based pay systems can take into accountnoted that seniority-based pay systems can take into account performance, but the main factor is tenureperformance, but the main factor is tenure Longevity PayLongevity Pay Longevity pay is a contractual agreement to pay an employeeLongevity pay is a contractual agreement to pay an employee based on thebased on the lengthlength of their employment with the sameof their employment with the same company. Longevity pay is often used when an employee hascompany. Longevity pay is often used when an employee has reached the maximum amount at which the pay for theirreached the maximum amount at which the pay for their position can goposition can go
  • Traditional Bases for PayTraditional Bases for Pay Seniority & Longevity PaySeniority & Longevity Pay AdvantagesAdvantages • Guaranteed Promotions and Benefits • Job Security • A Perception of a fair treat by the employees • Facilitate the administration of the pay program • Avoids perception of favoritism • It suits some cultures which don’t accept a younger person in power
  • DisadvantagesDisadvantages • Not rewarding performance • Slow career growth • Motivation at its lowest • Innovation is reduced • Can’t fit with a competitive strategy Traditional Bases for PayTraditional Bases for Pay Seniority & Longevity PaySeniority & Longevity Pay
  • Factors affecting the policyFactors affecting the policy • Cost of living • Base pay or salary • Years of service & positions • Individual performance Traditional Bases for PayTraditional Bases for Pay Seniority & Longevity PaySeniority & Longevity Pay
  • Merit PayMerit Pay Merit-Based Pay is theMerit-Based Pay is the performance-relatedperformance-related pay. It provides bonuses forpay. It provides bonuses for workers who perform their jobs effectively, according to measurable criteriaworkers who perform their jobs effectively, according to measurable criteria Modern Bases for PayModern Bases for Pay Merit Pay / Performance-related payMerit Pay / Performance-related pay
  • Modern Bases for PayModern Bases for Pay Merit Pay / Performance-related payMerit Pay / Performance-related pay AdvantagesAdvantages • Clarifies Company Expectations, goals & strategy • Attract and retain highly skilled employees • Improves motivation & works well with the competitive strategy • Promotes creativity & the quality of the outcomes DisadvantagesDisadvantages • Difficult to Evaluate Performance Objectively • Focuses on Individual Performance and ignore of Team Spirit • Depends highly on the performance appraisal system • Complexity of the payroll system
  • Modern Bases for PayModern Bases for Pay Merit Pay / Performance-related payMerit Pay / Performance-related pay • Failure to differentiate among performers • Supervisors’ biased rating • Lack of open communication between management and employees • Undesirable competition Possible Limitations of Merit PayPossible Limitations of Merit Pay • Based on objective & subjective indicators of job performance • Periodic performance reviews • Realistic & attainable standards • Pay increases reflect performance Elements (Elements (FeaturesFeatures) of Merit Pay) of Merit Pay
  • Performance AppraisalPerformance Appraisal • Trait systems (evaluate traits such as quality of work, quantity of work, appearance, dependability, cooperation, leadership, creativity) • Comparison systems (evaluate an employee’s performance against the performance of other employees) • Behavioral systems (evaluate behaviors) • Goal - oriented systems (determine objectives that the employee is supposed to meet) PlansPlans
  • Performance AppraisalPerformance Appraisal • It should fit the culture of the organization • The reward should be clearly linked to the effort • Employees should be clear about targets and performance standards • Fair & Transparency should be existed EssentialsEssentials Strengthening the Pay-for-Performance LinkStrengthening the Pay-for-Performance Link • Link performance appraisal to business goals • Conduct a job analysis • Establish a open communication system • Differentiate among performers
  • Other Bases for PayOther Bases for Pay additional pay, a higher wage, or a bonus paid to promote the productivity of an employee Incentive PayIncentive Pay Pay is based on job analysis and the requirements of a given position Job-Based PayJob-Based Pay Pay is tied to skills, abilities, & knowledge that a worker has Knowledge-Based PayKnowledge-Based Pay