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COMPETANCY BASED PAY
Fiona Neathey and Peter Reilly,IES
Presented By
ABHISHEK.S.KULKARNI (753)
http://www.employment-studies.co.uk/pdflibrary/mp25.pdf
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What is competency?
A competency is defined as a behavior or
set of behaviors that describes excellentperformance in a particular work context
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What is competency-based pay?
Competency-based pay can be defined as paying for the development and applicationof essential skills, behaviours and actionswhich support high levels of individual, teamand organisational performance.
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continued...
Armstrong and Baron, gives the following as someof the distinguishing features of competency-based
pay: It is based on an agreed framework of
competencies
It is not based on the achievement of specific
results, such as targets or projects completed.However, it is concerned with the attainment ofagreed standards of performance.
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How are reward and competency linked?
Brown and Armstrong (1999) summarise two
main ways of linking competency and reward:
1)Job-focussed process
- which uses competencies wholly or
partly as a way to evaluate jobs
2) People-focussed process
- links individual pay to level of
competence
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Introducing competency-based pay
3 Steps :
1. Establishing a competency framework
2. Assessment of competencies for rewardpurposes
3. Introducing the competency-based rewardsystem
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Benefits Improves employee motivation
Encourages better performance
Providing greater objectivity in pay determination
Competency-based pay also recognises that howthe job is done is as important as the end result
Provides greater flexibility and responsiveness tochanging business needs
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When is it appropriate to introduce
competency-based pay?
A well-established competency framework
already in use for development and recruitment Established criteria for measurement/assessment
of competencies
The organisation has a specific objective of
increasing the level of competence amongst itsworkforce
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The organisation plans to move to a broad-banded pay structure or already has such a
structure in place The organisation wants to move to a flatter
structure.
continued..
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How effective is competency-based pay?
CBP can
Promote need for greater competence Facilitate lateral career development
Help to integrate role and generic competenceswith organisational competences.
Boost co-operation and teamwork
Provide a framework for salary progressionwhere promotion opportunities are limited
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Increase employee satisfaction through the
provision of development opportunities Provide a link between reward strategy and
overall corporate objectives.
Lead to a focus on the totality of the job rather
than just what is achieved
continued..
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Potential problems and pitfalls The likely impact of competency-based pay on
other competency initiatives
Fears concerning employees reactions Doubts in general about linking competencies to
pay
They can be time-consuming and expensive to
implement
The objective measurement of competencies isdifficult to achieve.
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continued..
If competency is linked with other means ofdetermining reward, the link with pay may be
unclear, which will reduce any motivationalimpact of competency-based pay
If not properly controlled, there is a risk of paydrift without performance improvement
Competency-based pay systems makeconsiderable demands on line managers, whorequire considerable training and support.
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Conclusion Competency-basedpayhasbeenfoundbysome
organisationstobringsubstantialbenefitsin
changingorganisational
culture
and
in
supporting
broaderHRstrategies.
Employersmaybewaryofthepotentialpitfallsof
competency-basedpay,whichincludeescalating
costs,heavydemandsonmanagementtime,problemsofassessment,employeeresistanceand
equalopportunitiesconsiderations.
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