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Contribution related pay

Contribution pay is a hybrid approach that determines pay based on both performance outcomes and competencies. Pay awards are governed by assessments of performance and competency levels according to a pay matrix. Base pay primarily rewards competency or what an employee is capable of, while cash bonuses reward achievement. Pay progression depends on achieving defined competence levels to reach a reference pay point for their grade. Exceptional performers can earn a re-earnable cash bonus that may be consolidated with sustained performance.

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 Provides basis for making pay decisions related to outcomes, inputs and personal competencies.  Seen as taking the best of performance-related pay and competency-related pay.
 Focuses on what the employee is there to do.  It’s a holistic approach.  Takes account of both past successes and future potential.
 Pay awards are governed by assessments of performance and competency; the amount is determined by a pay matrix and is somewhat mechanistic.
 Output is the only factor that governs cash bonuses, but competency is the major component in determining base pay, on the grounds that the latter is paid for what people are capable of doing while the former rewards them for what they achieve.
• The reference point is the maximum level of consolidated pay a high performer can expect to attain • A minimum level of pay for each grade is determined and progression to the reference point depends upon achieving defined levels of competence; there may be three or four levels • There is scope to reward those who perform exceptionally well with a re-earnable cash bonus, which could be consolidated if the level of exceptional performance is sustained over two to three years, up to a maximum level defined for the grade
 Performers can earn a mix of base pay increase and bonus, which varies according to their position in the pay range.
1. Is it believed that contribution pay will benefit the organisation in the sense of enhancing its ability to achieve strategic goals? 2. Are there valid and reliable means of measuring performance or contribution? 3. Is there a competency framework and are there methods of assessing levels of competence objectively (or could such a framework be readily developed)?
4. Are there effective performance management processes, which line managers believe in and carry out conscientiously? 5. Are line managers willing to assess contribution and are they capable of doing so? 6. Are line managers capable of making and communicating contribution pay decisions?
7. Is the HR function capable of providing advice and guidance to line managers in managing contribution pay? 8. Can procedures be developed to ensure fairness and consistency in assessments and pay decisions?
9. Are employees and trade unions willing to accept the scheme? 10. Do employees trust management to deliver the deal fairly and objectively?