Competency Based Pay Analysis

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The Advantages and Disadvantages of competency Based Pay As Organizations grows and staff numbers increases it is very important to have a compensation plan tat best suits the company. One compensation option is competency based. A competency based plan rewards individuals based on how well they perform in relation to general attributes, such as ability to multitask, as opposed to the more traditional method of compensation which is based on a predetermined pay grade or salary structure. Additionally, there are several disadvantages and advantages of competency based pay. The first advantage is no seniority factor. Employees that have little experience benefit from this type of competency based pay since the level of seniority has little bearing on compensation. Instead, employees are paid based on how well they perform. Performance is based on leadership skills or attention to details. Furthermore, the no seniority factor …show more content…

Culture improvement places a large emphasis on self-development (Joseph, 2014). This can result in a pervasive cultural attitude and shows employees that the better they perform the bigger the reward will be. The fourth is subjectivity and is a disadvantage since competency based pay rates employees on general criteria instead of specific accomplishments. This drawback introduces subjectivity into the evaluation process and employees are rated on concepts such as leadership and the ability to multitask that are left to open interpretations (Joseph, 2014). This results in employees receiving inaccurate job ratings. The fifth competency based pay is favoritism. Favoritism is also a disadvantage in the work environment as it can cause employees to perceive themselves as being more valuable than the next person but then they discover that another employee received a larger pay increase (Joseph, 2014). This can give the impression of unfair treatment causing dissension to creep into the

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