Managing Employee Performance and Reward Concepts, Practices, Strategies

Any discussion of remuneration practice must consider what, for most employees, is the primary component of their total remuneration, namely base pay. This chapter begins with a discussion of the general nature and logic of base pay, before considering two broad alternative approaches to configuring base pay – pay for the position (or ‘job-based’ base pay), and pay for personal skills and personal competencies (or ‘person-based’ base pay). It then provides evidence on the comparative incidence of job-, skill- and competency-based pay in various countries, noting that while the two person-based approaches have assumed growing importance in base pay practice in recent decades, the take-up of person-based practices varies considerably from country to country, sector to sector, organisation to organisation and occupation to occupation.

Having considered the general differences between position-based and person-based base pay options, the chapter then turns to the more technical aspects of managing base pay systems. We briefly investigate options for structuring base pay. As we shall see, approaches based on the job, skills or competencies each have their own distinct structures and modes of pay progression. As well as coming to terms with these ways of structuring base pay, following the tenets of a strategic alignment approach to system design, we also seek to identify those organisational settings and management strategies for which each of these alternative structures might be most (and least) appropriate. Chapters 8 and 9 will then examine the steps involved in developing, implementing and maintaining position- and person-based systems.