Seniority & longevity pay systems reward employees for length of service with an organization. Seniority pay provides permanent increases to base pay based on tenure, while longevity pay is for employees who have reached the maximum pay grade. Both systems reward employees with additions to base pay according to length of service. While seniority pay can facilitate administration and be perceived as fair, it does not fit well with competitive strategies as all employees receive the same pay raises regardless of performance.

1. Seniority & Longevity Pay
Dr. G C Mohanta, BE, MSc(Engg), MBA, PhD(Mgt)
Professor
Al-Qurmoshi Institute of Business Management
Hyderabad

2. Seniority & Longevity Pay
 Salary or wages based on seniority or length of service
with an organization
 The greater the length of service, the greater the
longevity pay
 It may also be used as a bonus for remaining on a job
beyond a certain period
 These systems reward employees with periodic
additions to base pay according to employees’ length
of service in performing their jobs
2

3. Design of Seniority Pay and Longevity Pay
Plans
Seniority Pay Longevity Pay
 To reward job tenure or
employees’ time as
members of a company
explicitly through
permanent increases to
base pay
 To reward employees who
have reached pay grade
maximum and who are not
likely to move into higher
grades
3

4. Advantages of Seniority Pay
To Employees To Employers
 Perceive they are treated
fairly because they earn
pay increases according to
seniority, which is an
objective standard
 It facilitates the
administration of pay
programs
 Employers are less likely to
offend employees by
showing favouritism to
others
4

5. Fitting Seniority Pay with Competitive Strategy
 Seniority pay does not fit well with the imperatives of
competitive strategies because employees can count on
receiving same pay raises for average and exemplary
performance
5