Compensation management is one of the most important functions in any organization and compensation has been an etremely important issue for both! employer and employee" #his is because money is directly or indirectly related to relate to ful$llment of all human needs"
Compensation directly in%uences &ey outcomes li&e 'ob satisfaction! talent attraction! retention! performance! s&ill ac(uisition! co)operation etc" #hus best compensation system is re(uired to align employee performance with organizational ob'ecti*es"
Competency based compensation system is one which can satisfy the current scenario of performance lin&ed pay in which employees are paid on the basis of actual performance"
Introduction
 
+ competency is an underlying characteristic of a person,organization which enables to deli*er performance in a gi*en 'ob! role or a situation"  #hus the performance of an organization or an indi*idual will depend on the rele*ant competencies they possess and higher the le*el of competencies! superior will be the performance"
Meaning of competencies
 
Organizational competencies are uni(ue factors that ma&e an organization competiti*e" -rganizations need to focus their e.orts in the area of their competencies and strengthen them and outsource the other acti*ities" Some of the eamples for organizational competencies include Phillips)optical media! /onda)engines! and 0ntel)microchip"
Classication of competencies
 
 Job related competencies are those competencies which are re(uired for performing a speci$c 'ob" #hese are the competencies someone must demonstrate to be e.ecti*e in his 'ob,role! tas& or duty" #hus these competencies are 'ob or role speci$c and *ary from 'ob to 'ob"
 
Based Compensation
 
 #he basic need for a competency based compensation management is a competency model" + competency model is one which identi$es the *arious competencies re(uired for performing a 'ob and describing these competencies in the form of indicators! which can be (uanti$ed" 1ach competency can be (uanti$ed on a scale on the basis of its relati*e importance with respect to each 'ob
" + structured (uestionnaire was designed for the employee and his immediate superior" #he same (uestionnaire is administered to both for getting the rating" 2" #he employee whose competency is to be mapped is as&ed to rate his,her own competency le*el in the (uestionnaire" 3" #he immediate superiors ratings of the employee are also collected in the same way" 4" + weighted a*erage of the ratings is computed to get the $nal score"
Developing a Competency model
 
 #he net step in the competency based compensation model is
to lin& the compensation to competency mapping ratings of the employee" #his is done so by computing the Compensation actor which is de$ned as the weighted a*erage of the competency ratings an employee has obtained" #his compensation factor can then be used to design compensation
strategies according to the organization8s compensation policy
in!ing Competencies to Compensating factors
   #he compensation models *ary across organizations" #wo typical cases are *ery fre(uent" irst is the case where the organization ma&es changes to the 9asic salary component of the employee" et is the case where the organization does not change the basic fre(uently! but has an 0ncenti*e component to reward performances of employees which are highly satisfactory" 0t must be noted that while the competency mapping data is li*e! se*eral assumptions and ad'ustments ha*e been made to the compensation data! to &eep the on);isclosure +greement sacred"
Designing compensation on t#e basis of actual competencies
 
$o Seniority %actor Incentive to &c#ieve Culture of Improvement Sub'ectivity %avoritism (elations#ip of Competencies to
Performance
Comparison bet+een M$C,s and Domestic Companies
 
 
Competency mapping is *ery important nowadays because competition is increasing day by day and e*erybody wants to ha*e a competiti*e edge o*er others "/uman resources are the most important for the company so to attract !retain and moti*ate them compensation pac&age should be good enough and competency based compensation is *ery good in these terms "0t helps in increasing producti*ity for both employees and organization and gi*e scope for impro*ements
Conclusion