ABSTRACT
Having explained the terms ‘competence’, ‘competency’ and ‘competency-based pay’, and the rationale of competency-based pay, the chapter deals with the prerequisites for competency-based pay and further moves on to ‘skill-based pay’ (SBP) and explains the concept, purpose of the SBP structure, main features and working of SBP, its application, types of SBP systems, establishing SBP and implementation of SBP. Then the chapter takes care of team-based pay (TBP). Having explained the purpose and benefits and acceptance of team-based rewards, demerits, different approaches, factors affecting TBP, the maturity and types of ‘Teams’, characteristics of an effective team and team reward processes, the team-based pay has been introduced, followed by highlighting the requirement for TBP. Then comes ‘Gainsharing’, the meaning and definition of which have been explained. The primary components of gainsharing as well as its history, goals, fundamental principles, formulas, developing a gainsharing formula, how to introduce and implement it and key elements in designing a gainsharing plan have been discussed in detail. The next in line, ‘Profit-sharing’ gets its due space and contains a discussion on its meaning, characteristics, objectives, benefits and types of profit-sharing plans. Then, next in line is ‘Profit-related pay and beyond’. Its meaning and definition, approaches, objectives, merits and demerits, etc. have been discussed in brief. Finally, the chapter contains a detailed discussion on ‘Other Cash Payments and Allowances’, which many companies pay to their employees. Such cash payments and allowances have been divided into two categories: (i) payments in response to market pressures, like golden hellos, golden handcuffs and large city allowances, and (ii) payments to reward for special circumstances, like voluntary retirement schemes (VRS), etc. Besides, ‘overtime payments’, ‘attendance bonuses’, ‘shift pay’, ‘clothing allowances’, ‘Christmas bonus’, ‘honoraria’, ‘payment for qualifications’, ‘pay for person‘, ‘pay for excellence’, ‘managerial compensation and rewards’, ‘sales force incentive programmes’, etc. have also been discussed. Thus, paying for competence and performance plays a significant role in making an organization a success. The chapter comes to an end after writing the chapter review, discussion questions, individual and group activities and case study.
