The 3-P Compensation ConceptDr. G C Mohanta, BE(Mech), MSc(Engg), MBA, PhD(Mgt) Professor
Pay for Position• Develop an equitable grading structure• Create a reference salary structure• Leverage compensation costs with market survey information
Pay for Position• Employee compensation is set in broadband based on qualifications, education, training & experience.• Through broad banding, narrowly structured pay grades determined through job evaluation, are replaced by fewer and wider bands.• Employees progress up through broad band if their performance ratings are good, rather than through steps based on time in the grade.• It reduces different compensation categories to broad compensation bands, grouping jobs together by common characteristic.
Pay for Person• Determine competency requirements and employee capabilities• Pay individuals based on their competency match with position• Identify and pay market premium for competencies in short supply in the market.
Pay for Person• Pay for person takes into account a person’s capabilities and experience in setting a pay level that is both equitable and competitive.• It considers the market demand of a person’s unique skills and experience.• Pay for person is associated with competency based pay.• It also incorporates market based pay approach.
Pay for Performance• Design annual bonus and incentives plans that motivate staff• Shift from merit salary increases to variable pay• Create long-term reward plans - stock options, deferred compensation and phantom
Pay for Performance• An individual’s performance is managed through a performance contract, comprising role clarification, objectives setting and review of performance.• As an outcome a measure of performance at corporate, unit and individual level becomes the basis for setting the performance pay.