Page 169 - DMGT406_HUMAN_RESOURCE_MANAGEMENT

Human Resource Management

Notes How to Introduce Competency based Pay Plan?

The following factors need to be fully integrated within an organisation before competency pay
plan can be introduced: an employee appraisal process must already exist; managers must
already have been trained to assess competencies; staff should be made aware of the competencies
required and how to demonstrate them when it comes to their appraisals; all employees must
give their full commitment; the system must be fair so that all employees are included.

Developing a Competency Framework for Employees

A competency framework defines the behaviour needed by an employee to achieve effective job
performance. The framework should enable employees to be clear about what is expected of
them in terms of their behaviour and specific job role. The following points need special attention:
(i) encourage co-operation, ownership and commitment of employees by involving them
throughout the process, (ii) ensure the framework is relevant to both individual and
organizational performance, (iii) include a planned analysis of relevant jobs to combine the
imminent changes which will affect the ways employees work, (iv) ensure that the necessary
data gathered is as objective as possible and is put into practice with discipline, (v) ensure that
the relationship between competencies and job performance is not taken for granted, (vi) make
sure that the language used within the framework relates to its users and is easy to comprehend.
It should also be tried and tested before it is implemented.
Assessing Competencies and Designing the Pay Plan

Competencies are assessed through a regular appraisal process to facilitate pay progression
within a grade. The best approach is probably to describe each job in terms of the competencies
needed to do it. These can be taken from a set of common or 'core' competencies. More complex
individual competencies will need to be added for more complex senior roles. There are two
established methods of competency based pay structures:
1. Broad banding, and
2. Job families.
Broad banding implies collapsing salary grades and ranges into just a few wide levels or bands
each of which allows a relatively wide range of jobs and salary levels. In short, it is a way of
combining many previously discrete job titles, ranks, and pay grades into much wider categories.
This system encourages lateral job movement by de-emphasizing progress through a myriad of
vertical job grades and by rewarding both performance excellence and in-band job changes.

Under Job families (groups of different jobs that need similar skills) different pay structures can
be established for different job families under occupational or functional groupings. As work
activities and basic skills are common within these groups it is possible to set out the different
levels of responsibility, skill and competence.

Benefits and Limitations

 Competency based pay encourages employees to give their best to live up to their potential
and deliver far superior results in order to stay ahead of competition and earn rewards.
 The tangible, measurable benefits of excellent performance compel them to remain relevant
and stay focused on what they can achieve.

 It is a people-focused plan that separates the outstanding employees from the ordinary
ones, separates the meritorious ones from the mediocre stuff.

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