Person-Based Pay Structures essay

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Person-based pay structures are simply payment systems whereby the employee is rewarded based on the person that he is at work and not the job that he does. In short therefore, the salaries or the wages that are paid to the employee is determined to getting the best aspect of an individual that he or she can offer to the company. Person-based pay structures generally aim at ensuring that payment is done for the knowledge that the employee has (Berger, pg. 51, 2008). It is due to this fact that the system of payment is more accurately categorized mainly into competency-based pay systems and skill-based pay systems.

Employees who are working under the person based pay system of reward tend to have a higher level of motivation towards working hard (Berger, pg. 43. 2008). They tend to work hard as compared to the employees serving under the job based pay systems due to the fact that the efforts they out in the work they do is directly correlated to the reward package that they receive at the end of the day. It is due to this fact that more ambitious people are found in these types of jobs.

In analyzing the benefits and liabilities that are involved in having the employees being rewarded under the person based pay system, this paper divides into the two previously mentioned sub divisions of person based pay system. Each of the two categories which are: skill-based structures and competencies based structure has its own benefits and liabilities that are derived from putting the employees under such a reward system.

Skill-Based Structures

In this type of pay system, the employee is subjected to a pay scale that is clearly determined by the depth or the level of skills, knowledge and abilities that the person has acquired that would be relevant to the work that is in question. In the environment where the skill based structure is used, the employee is paid salary based on all the skills and knowledge that they have been certified and can be proven. This fact is very much regardless of whether the job they are doing is has the requirement of all the certificates in question or not. In simple terms, it is the efforts that the employee has put in acquiring the knowledge and skills that are being recognized to the fullest.

It is clear that this is a contrast of job-based reward systems due to the fact that job based salary systems determines that the payment of the employees is clearly determined by the job that they are assigned and this is very much regardless of the level of skills that the employee has (Jenkins, pg. 73. 2006).

The main reasons as to why an organization may opt to using the skill based structure is due to the fact that the company aims at being optimally fair to the employees. Another main reason is that the organization may be in an attempt to ensure that the work flow of the organization is supported by the employment of skilled employees. Finally, the third reason as to why an organization may opt to using the skill based structure is to ensure that the behavior of the employees is directed towards achieving the goals of the organization. By employing people who have strategic knowledge and skills into the company may come as a source of huge relief for the company since it can clearly manipulate the work force so as to have people with the specific skills that are strategic in the realization of the objectives of the organization.

Skill Plans

In skill based structures, there are mainly two types of skill plans which are named as specialist and generalist which is also referred to as the multi-skill based. In brief and clear terms, while a specialist is known for having in depth knowledge in an area, a generalist has aptitude, knowledge or even skill in a variety of areas (Murray, 2003). The generalist has knowledge in different fields of study and is therefore recognized for having breadth in knowledge and not in depth like the specialist.

A company is well positioned when having both a specialist and a generalist in a given department. A specialist is a very integral component of the company given the fact that he can be used in areas that need in depth knowledge in a particular field. On the other hand, a generalist is honored by the company as being very useful in helping the firm cover a wide area of knowledge hence become resourceful in different areas.

Both extremes are helpful to an organization and are all appreciated in terms of the salary and all rewards offered based on the amount of skills that they have acquired and have been certified for. A specialist is gets recognition in reward scale due to the fact that he or she is has spent time in deeply gaining knowledge in a particular area while a generalist on the other hand is recognized for being able to accumulate knowledge in different areas of study.

Skill Analysis

This is a very systematic procedure that is used in identifying and collecting information that regard the main skills that are needed in performing certain work in an organization. In order to come up with the skills that are need to specifically carry out a certain job, the following procedure is followed in an organization. The first step is getting answers to the basic decisions in the organization (Boyett, pg. 67. 2004). This is mainly answering questions that are left hanging by the conditions at the place of work. Some of the strategic questions may be as follows: finding out the main objective that is involved in the plan, finding out the main pieces of information that ought to be collected, finding out the main methods that can be used to determine and ensure that the skills chosen are certified and the main people that should be involved and finally, the importance or the value that the firm gets for the reasons of pay.

The immediate next step after providing the answers to the basic questions that had been presented in the previous part is developing the skill category. At this point, the human resource is mainly delegated with the duty of ensuring that the skill blocks that are related are grouped. The next step is the skill block where skills, behaviors and activities are grouped together (Jenkins, pg. 86. 2006). Finally, the last step is to determine the skill that determines the specific phrase of what someone in a position does. It is at this level that the skill is determined.

Differences between Skill Based Pay System and Job Based Pay System

In the skills based pay system, the reward is attracted by skills that have been accumulated by an individual rather than the job done as is the case in a job based system of employee reward. It is therefore very realistic that an individual with more expertise and knowledge base that has been certified is paid heavily while on the other hand, an individual that is bearing more jobs is paid more under the job based system of payment. Another striking difference is the fact that the skills that have been acquired and mastered by an individual is measured and certified accordingly under the skill based system (Jenkins, pg. 99. 2006). It is more likely that any pay changes that are experienced by an individual under the skill based pay system are not necessarily accompanied by changes in the job. This is simply because the individual may have added more skills under his knowledge base hence demanding more pay.

Benefits of Skill-Based Pay Structures

As has already been highlighted in the paper above, the skill based system of payment is a strategy that is of huge benefit not only to the employees but also the employer who utilizes it. At this point of the paper a critical analysis is done on the main benefits that may be accrued by either an employer or the employees for being under the system of payment that is based on skill of the employees.

A higher rate of productivity is derived from the employees that are employed under the system of skill based employment. The fact that an organization organizes the reward system to pay the staff according to the extent or depth of knowledge and skills that they have goes a very lengthy way in ensuring that the staff is equipped with the right professionals. Having to reward the employees solely based on the level of certified qualification that they have means that the recruitment process is also strict in determining the qualification standards. In the long run therefore, a company realizes that it is composed of individuals that are fully qualified and certified for certain jobs. Consequentially, the staff that is heavily equipped with the right knowledge ends up being with the right brains to perfectly or optimally produce at work (Boyett, pg. 38. 2004). It is in this respect that organizations using skill based reward systems end up having high rates of productivity form the employees.

Another advantage that is derived from using the skill based system of employee reward is the fact that lower costs are incurred by the employer in terms of salaries and wages while at the same time getting higher quality of output from the employees. When employees are under the skill based system of payment, it means that they are not remunerated in terms of the work that they do but in terms of the skills and qualifications that they have been certified for. This therefore means that the division of work at the work place do not necessarily equate to the labor costs that would be incurred. In stead, the skills that are possessed by the employees determine the amount of labor paid (Murray, pg. 50. 2003). Less people are therefore used to carry out tasks that could have been done by more people were the case that the system of reward used is job based. The production of work that us obtained form the employees is of higher quality mainly due to the fact that certified employees in different fields of knowledge are used to perform different works and the company therefore has professionals handling different areas. The division of labor based on the professionalism of an individual ensures that in the long run, the company enjoys optimal job satisfaction due to the highly qualified persons delegated to perform.

Finally, the skill based compensation system ensures that the employees are having a lower turnover and the relations that the organization has with the labor unions are consequently improved for the god of the organization. The fact that the employees are paid in terms of the professionalism and the qualification levels that they have been certified for means that the rate at which the employs are paid is by all means at their hands or in their own control. It is due to this factor that the employees on the other hand may be in a state of optimal satisfaction since the salary that is given to them is directly determined by them as a result of the professional qualifications that they merit. Since the employees are satisfied internally, they are intrinsically motivated to work for the particular organization and hence it is guaranteed that under such environment, the employees may have a very low turnover (Murray, pg. 19. 2003). The employer is more than satisfactory hence no need to run to other employers. On the other hand, the employer is bound to have very strong and positive relations with the labor union in the region since the employs are satisfied around their place of employment. The fact that the employs are duly paid as a result of their qualifications and the rate of turnover attracted by the firm is low indicates that the employer in this case is in line with the general expectations that the labor union has of the employers.

Liabilities of Skill-Based Pay Structures

It is very much obvious that the average pay that the employees receive under such a program is more likely to be higher when compared to the job based reward system. The fact that employees are paid based on the qualifications that they posses regardless of whether the qualifications they have are relevant or not to the position in which they are means that the company in this case absorbs the costs of irrelevance of professional development by some employees (Boyett, pg. 67. 2004). This means that employees are paid based on the depth of the level of knowledge that they posses hence a company may run a risk of paying for knowledge that may not even be relevant to a position.

Skill based systems of employee compensation requires that major investment in training are done by the company. The fact that the employees are paid not in regard to the job specification that they are doing means that the quality of wok may b easily compromised if keen attention is paid on the level of efficiency of the employees. As a way of bettering this, training of the employees ought to be done more effectively so that the right attitude and right objective is built in every employee.

Competency -Based Structures

Competencies are simply the main characteristics of an individual which can be clearly demonstrated in terms of skills, knowledge and behaviors that the individual utilizes in order to optimally perform at work. In systems of employee reward where competencies are used, an organization values in the individual the specific competencies that he or she possesses. As a matter of fact, it is due to the competency that has been developed by the individual that he or she is paid (Berger, pg. 39. 2008). This is effectively determined by the employer through simply using the certificates of the employer and the price competencies that do exist in the external market. The rate at which an individual develops the competency level is therefore used to effectively equate the pay increases that the individual gets from the employer. The managers that work under employers who use such kind of a system in determining the level of pay for an employee offers competency developing opportunities to the employees. This is used to ensure that the employees remain relevant and optimally productive to the organization.


As has already been indicated in the part above, competencies are very much independent of the specifications of a job or the position that is held by an individual. It is due to this fact that the competencies can be transported form a single job to a different one. The most integral competencies that ought to be basic traits of virtually every employee under this set of reward system are composed of the five basic competencies. They are inclusive of: skills, knowledge, self concept, traits and motives. Skill is simply a demonstration of expertise by an employee and this is either learnt or even developed in the company by use of training facilities. The information that is accumulated by the employee forms knowledge while self concept is mainly composed of values, attitudes and the self image of the employee (James, pg. 42. 2004). The general disposition on how an individual ought to behave in an organization is mainly what is involved in the traits bit of competencies. Finally, motives are basically the thoughts that drive behavior in the organization and they account for a large proportion of the competencies that count in the organization.

Competency Analysis

Just as was the case with skill analysis, competency analysis is a process that mainly involves identifying the key indicators of competency. The process originates right from the core competency of the company or the organization. This core competency is taken from the mission statement of the company (Berger, pg. 38. 2008). For in stance, if at all the mission statement of the company is "awareness in business" then the core competency in the company is then formed by awareness of the individual employees. Competency sets on the other hand forms the next step that is used by the human resource sin developing the competency analysis. At this set, the main activity involves the grouping of factors that are used to indicate the core competency of the company into behavior that can be easily identified among the employees. The observable behaviors may for instance be the management of cost and understanding of business. Finally, competency indicators are brought into the picture. These are simply observable behaviors that are used to show the level of competency within a certain set of competency.

Benefits of Competency -Based Pay Structures

Competencies are strategically designed by the employers to convey and enhance the values at the work place hence enhance the work flow around the place. The main advantage is therefore that competencies are very effective in ensuring that work flow in the organization is as smooth as possible (James, pg. 111. 2004). It is important to note the fact tat the culture of the organization is very important in determining the rate at which the work flow in the organization runs.

Competencies are also very effective in ensuring that the employees are empowered to take full charge of their own development. It therefore means that the system of rewarding the employees ensures that subjectivity is enhanced in the organization hence fairness to the employee is enhanced.

Liabilities of Competency -Based Pay Structures

The only major problem that is attributed to the pay system that is attached to personal traits of an individual is the fact that the system may be subjective hence lack in objectivity (Brady, pg. 41. 2002). The fact that the employer rewards the individual employees based on the development of their own personal competencies may not be fairly judged. For in stance, it may be a personal trait within someone to be outspoken while it is not for someone else. If at all the job specification requires such a trait then it definitely means that one employee may be treated unfairly while favoring one. It is due to this reason that the system may end up being a very subjective one that lacks the objectivity that is needed in an organization. As a matter of fact, this is the main reason for the popularity of skill based system than is competency based system.


It is very evident that the advantages that are derived form basing an organization's compensation policy on person-based structures are far much fetching for an organization than the liabilities do hurt. The person-based pay systems are not only rewarding to the employees but also play a great role in ensuring that the employees are intrinsically motivated. On the other hand, the company ends up having a very professional staff that is qualified and with tailor-made traits for the company. It is therefore highly commendable from the analysis that a company uses the mode of payment.

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