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Prepared by: Pravin V.Divraniya (41) Ankita Suthar (42) Bhoomika Thakkar(40)
Introduction
What is competency?
A competency is defined as a behavior or set of behaviors that describes excellent performance in a particular work context.
Competency-based pay can be defined as paying for the development and application of essential skills, behaviors and actions which support high levels of individual, team and organizational performance.
(Cont)
Armstrong and Baron, gives the following as some of the distinguishing features of competency-based pay: It is based on an agreed frame work of competencies. It is not based on the achievement of specific results, such as targets or projects completed. However, and it is concerned with the attainment of agreed standards of performance.
Benefits
Improves employee motivation Encourages better performance Providing greater objectivity in pay determination Competency-based pay also recognizes that how the job is done is as important as the end result Provides greater flexibility and responsiveness to changing business needs
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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.
(cont)
If competency is linked with other means of determining reward, the link with pay may be unclear, which will reduce any motivational impact of competency-based pay If not properly controlled, there is a risk of pay drift without performance improvement Competency-based pay systems make considerable demands on line managers, who require considerable training and support.
Conclusion
Competency-based pay has been found by some organizations to bring substantial benefits in changing organizational culture and in supporting broader HR strategies.
Employers may be wary of the potential pitfalls of competency-based pay, which include escalating costs, heavy demands on management time, and problems of assessment, employee resistance and equal opportunities considerations.