3 Ps Compensation Concept

13/11/2020 1 By indiafreenotes
  • Pay for Position: Pay for position, Position based pay or Job-based pay, pays employees for the job to which they are assigned, regardless of the skills they possess. In other words, pay is centered on the job or position and not on the person. Pay for Position is a more traditional pay structure in which each position is assigned a pay range based on the job duties and pay is based on education and seniority. Employee compensation is set in broadband based on qualifications, education, training & experience Through broad banding, narrowly structured pay grades determined through job evaluation, are replaced by fewer and wider bands Employees progress up through broad band if their performance ratings are good, rather than through steps based on time in the grade It reduces different compensation categories to broad compensation bands, grouping jobs together by common characteristic. Develop an equitable grading structure. Create a reference salary structure. Leverage compensation costs with market survey information
  • Pay for Person: Pay for Person or Person focused pay or Skill-based pay or Knowledge-based pay or Competency-based pay structures link pay to the depth or breadth of the skills, abilities, competency and knowledge a person acquires and applies to the work. Structures based on skill, pay individuals for all the skills for which they have been certified regardless of whether the work they are doing requires all or just a few of those particular skills. The wage is attached to the person.

The pay increases are usually tied to three types of skills: horizontal skills, which involve a broadening of skills in terms of the range of tasks. Vertical skills, which involve acquiring skills of a higher level depth skills, which involve a high level of skills in specialised areas relating to the same job. Because skill-based pay encourages and rewards a broad range of skills, the employee becomes multi-skilled and more flexible and valuable; A job rotation is used to fill in temporary gaps in the workforce.

Pay for person takes into account the demonstrable characteristics of a person, including knowledge, skills, competency and behaviors, that enable performance. Take into consideration the person’s capabilities & experience in setting a pay level that is both equitable and competitive. It considers the market demand of a person’s unique skills and experience. It also incorporates market-based pay approach

Determine competency/skill requirements and employee capabilities. Pay individuals based on their competency/skill match with position. Identify and pay market premium for competencies/skill in short supply in the market.

  • Pay for Performance: Pay for Performance, Performance related pay, Performance-based pay is a financial reward system for employees where some or all of their monetary compensation is related to how their performance is assessed relative to stated criteria. The criteria for performance-related pay scheme may be based on individual, group or organizational performance, or on a mixture of them. Individual-based criteria would require, individual goal-setting, an appropriate performance appraisal system, individual training to increase job knowledge & skills and the individual should have a large measure of control over his/her own performance. Team based criteria are appropriate where individual performance is difficult to measure, or where there is a need for a corporate culture to promote team values and cooperation.

Design annual bonus and incentives plans that motivate staff Shift from merit salary increases to variable pay. Create long-term reward plans – stock options and deferred compensation.