by A job-based compensation structure typically contrasts a skill-based structure in that you are paid based on the responsibilities of a position rather than your personal skills. While you might prefer the opportunity to optimize your earnings to match your abilities, job-based pay does offer some benefits that are especially important to women.
In a job-based pay structure, you essentially get paid for the value of the work you perform for the company. This gives your compensation a more tangible quality than a skill-based structure where a supervisor must assess the value of the skills and qualities you bring to the table. Employers typically have pay grades or schedules indicating the salary or wage for each particular job, and this enables you to see the relative pay to the duties assigned.
Though not 100 percent certain, job-based pay can reduce the likelihood of gender discrimination in pay. Since the focus is on the job itself, pay theoretically shouldn’t vary based on personal qualities you present. In fact, some employers use job-based structures primarily to protect against discrimination claims. While the glass ceiling, or wage gap, still exists between men and women, job-based pay should ensure that men and women earn equal pay for the same position.
The process of earning more money are generally clear in a job-based structure. Typically, you must gain promotion to a new position to see a significant boost in pay. You can normally look at the job description of a position you want to see what skills and qualities you must possess to gain a promotion. In a skill-based structure, the path to a raise is usually more informal and grounded in the development of new skills and abilities.
Pay comparisons
Though not necessarily your employer’s intent, a job-based structure allows you to more easily compare your salary to those offered by other employers. This is especially true if most companies in an industry use a job-pay structure. A side benefit is that employers using this compensation structure are often more cognizant to compare their salaries to those offered by competitors, which may mean your earning potential is higher or more representative of current market value for your work.
A job based pay structure is a structure of salary payments that is built on compensable factors determined by the job. In other words the salary for a job is determined by its responsibilities, and sometimes its work conditions.
The advantages are:
- It is based on a hierarchical organizational structure, which is the organizational structure for most organizations.
- It is simpler than a person based system as more work is required to define knowledge, skills and competencies required for a person based pay structure.
- Most companies’ pay structures are job based pay structures. This means comparison is possible between companies.
- The hierarchical order of the job structure created the illusion that there are some career paths and possibilities for promotions.
The disadvantages are:
- It reinforces hierarchy and bureaucracy. It is less compatible with team based structures and incentives.
- The hierarchical organizational structure that it is based on has fundamental weakness.
- The job holder may not be competent in the job.
- The job at the top is over paid and the job at the bottom is too paid low. It increases the overall business operating costs.
- It encourages compromise of honesty in job descriptions and job valuations.
- It does not reward employees directly for their knowledge, abilities and individual strengths.
- It does not encourage development of a flexible organizational structure in terms of flatter structure; T-shaped employees and job rotation.
- Some job evaluation systems take short cuts by using a generic set of compensable factors or develop the pay structure by using job classification.
Skill based Compensation Tools
developing a person based pay structure also requires an understanding of the tasks and responsibilities of jobs in a business. Similarly the development of the structure requires job analysis and job descriptions. The difference is that it compensates the job incumbent (person) in terms of his knowledge, competencies and skills. These are called competency-based pay structure, skills-based pay structure or knowledge based pay structure.
A study made by Murray and Gerhart (1998) found that in a person based pay structure, although hourly wages increased, however product quality (scrap percentage), productivity (labour hours per part) improved and overall labor costs decreased (The Oxford Handbook of Human Resource Management By Peter F. Boxall, John Purcell, Patrick M. Wright).
Advantages and Disadvantages of Skills-Based Pay Structures
There are very few person based pay structures, so information on it is mostly academic information. Below are the academic rather than market place explanations.Skills-based pay has the following advantages and potential disadvantages.
Job-based pay has traditionally been the main structure companies have used in determining how much to pay workers. Employers that use this structure pay workers according to the employee’s position and job duties. An employer may also consider the employee’s work experience and seniority as part of the job evaluation. The implicit message to employers who use the job-based pay structure conduct performance appraisals to measure the employee’s contributions to the company.
Some business owners are finding that job-based pay structures do not suit their organizational strategies. They are seeking pay structures that align with their work environments. As companies have changed their work environments, they are basing salaries on other structures that are more useful. For example, as more emphasis is placed on working as a team, companies are basing salaries of the effort’s workers make as a member of a team.
Job-based pay structures can increase a company’s operating costs, which is another disadvantage. For example, the company may have to hire a consulting firm to conduct compensation audits. The business may also have to revise its pay grades every year, which requires more administrative staff.
If job-based pay does not reward the best employees for their work, this can affect how employees are evaluated. When evaluating employee performance, employers that have job-based pay structures are limited in giving pay raises that take the worker’s skills and experience into account. The fact that an employee’s performance may be superb carries less weight in such structures.
Employees who are not rewarded for their job performance may quit because they feel that their contributions are not valuable to the company. For example, an employee whose contributions result in an increase in earnings or new clients will want to be rewarded. Employees can be rewarded with pay raises or bonuses. If the employee receives neither, he may seek employment with other companies.
Job Based Pay Structures
A job-based pay structure is a structure of salary payments that is built on compensable factors determined by the job. In other words, the salary for a job is determined by its responsibilities, and sometimes its work conditions.
The advantages are:
- It is based on a hierarchical organizational structure, which is the organizational structure for most organizations.
- It is simpler than a person-based system as more work is required to define knowledge, skills and competencies required for a person-based pay structure.
- Most companies’ pay structures are job-based pay structures. This means comparison is possible between companies.
- The hierarchical order of the job structure created the illusion that there are some career paths and possibilities for promotions.
The disadvantages are:
- It reinforces hierarchy and bureaucracy. It is less compatible with team based structures and incentives.
- The hierarchical organizational structure that it is based on has fundamental weakness.
- The job holder may not be competent in the job.
- The job at the top is over paid and the job at the bottom is too paid low. It increases the overall business operating costs.
- It encourages compromise of honesty in job descriptions and job valuations.
- It does not reward employees directly for their knowledge, abilities and individual strengths.
- It does not encourage development of a flexible organizational structure in terms of flatter structure; T-shaped employees and job rotation.
- Some job evaluation systems take short cuts by using a generic set of compensable factors or develop the pay structure by using job classification.
