Competency based Rewards

• Selecting rewards is an important part of any organization's overall HR

strategy.
• The world of work is rapidly changing, and rewards must keep pace if an
organization intends to attract and retain exemplary performers who can
contribute to sustained competitive advantage.
• Most compensation systems—a key part of a larger total reward
system—have been focused on achieving fair pay.
• Rapid changes in the business environment have prompted many decision
makers to examine the effectiveness of their reward systems.
• Lawler (2000) suggested moving away from a one-size-fits-all philosophy and
using individualized systems, which enable organizations to offer incentives
in forms that appeal to employees.
• Competency based pay means the company pays for the employee’s
range, depth, and types of skills and knowledge, rather than for the
job responsibilities or title he/she holds.
• Aslo called, knowledge based pay or skill based pay
• Why pay employees based on skill levels they achieve rather based
on the jobs they are assigned?
• This is to encourage employees to get and to use skills required to
rotate among jobs.
• To learn and acquire skills/competencies required by the
organization, the business and the competition.
Reasons for using competency based pay
• To ensure employees are enthusiastic about kearning and moving to
other jobs.
• To enhance strategic plans by paying for skills that are critical to
those plans.
• Measurable skills, knowledge and competencies are important for
performance management processes.
• This approach is designed to motivate employees to become
aspirational build on existing skills, and apply those in their jobs.
Reasons for using competency based pay
• Serves as motivational tool
• Reinforces a culture of self improvement
• Improves staff retention
• Encourages corporate transparency
Components of competency based
compensation
• System that defines skills and processes.
• Training system
• Competency testing system
• Work design that allows employees to move among jobs.
Steps in developing competency based
compensation system
• Developing a competency model
• Competency mapping
• Linking competency to compensating factors
• Designing compensation on basis of actual competencies
 Limitations
(How many?) Pricing competencies

Competency based pay

Maintenance of Training
competencies
Differences between traditional and
competency based compensation
• Traditional – ties the worker’s pay to the worth of the job based on
job description and duties. Pay is job oriented
• Competency based pay – ties the worker’s pay to his/her
competencies. Pay is person (skill/competency) oriented.
Competency based systems - outcomes
Organizational related outcomes Employee related outcomes

Greater workforce flexibility Enhanced employee understanding of

organizational ‘big picture’
Increased effectiveness of work teams Greater employee self management capabilities

Fewer bottlenecks in workflow Improved employee satisfaction

Increased worker output per hour Greater employee commitment

More career enhancement opportunities

Competency based training & development
• Competency-based training is training and development that focuses
on specific competencies, or skills. What makes this style of training
unique is that the training programs are broken down into individual
courses, or modules.
• These modules focus on a single skill at a time, taking trainees
through a course based on their mastery of each of the individual
skills in the program.
Steps in competency based training &
development