Compare & Contrast Compensation Strategies

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10/11/2011



What is Compensation The purpose of Compensation How compensation is linked to overall HR Strategy This research objectives









Types of Compensation Strategies
◦ ◦ ◦ ◦ ◦ ◦ ◦ Pay for Performance Incentive based pay Broad banding Team based pay Competency based pay Hybrid System Condition based pay



Pay for Performance
◦ Strength

◦ You got what you actually deserves
 Foster individual performance  Creates competitive environment

◦ Weaknesses

 Quality of work might be ignored



Incentive Based Pay
◦ Strength

◦ Encourage employee to go an extra mile
 Not applicable to all kind of jobs

◦ Weaknesses

 Quality of work might be sacrificed



Broad banding
◦ Strength

◦ Creates different bands of jobs
 Foster individual performance  Creates competitive environment

◦ Weaknesses

 Quality of work might be ignored



Team Based Pay

◦ Pay of individual employee is dependent upon the performance of his team ◦ Strength  Reinforcing group performance through the Recognition of successful teamwork

◦ Weaknesses

 Promotes free-rider tendency



Competency based pay
◦ Strength

◦ Rewarding employees based on his competencies
 Promotes Productivity  Differentiate between performer and non-performer

◦ Weaknesses

 Difficulty to measure competencies



Other Compensation Strategy
◦ Condition Based pay
 Keep employees motivated to work under difficult working conditions  Exploitive in nature

◦ Hybrid system

 A mixture of pay for performance and competency based pay



Which Strategy is best

◦ Organizational vision and mission needs to be considered ◦ Functional level goals are identified ◦ Appropriate compensation strategy selected ◦ Multi-layer compensation system is appropriate here  Pay for Performance-Resource level  Competency based-Management level

◦ Its not an easy task to determine competitive compensation ◦ This...
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