Informative Essay on Market based pay and Competency based pay

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Market based pay and Competency based pay
A market based pay refers to the kind of pay that is offered by the companies to their employees on the basis of the pay that is being offered by their competitors in the market to their employees for the same post and designation. This kind of pay is very useful when you have a steady firm with predetermined tasks that are being allotted to the employees (Wolski, Plank, Brevik, & Bryan, 2001). On the other hand, there is another kind of pay termed as competency based pay which refers to the pay that is offered on the basis of the skills, knowledge and expertise of an individual. This kid of pay is established in dynamic organizations where the pay is related solely to the ingenuity of the employees to develop new things and results for the firm (Cira & Benjamin, 1998).
For example: If a company is producing art or music then their salary structure would be more competency based depending on the skills and talents of their employees to develop something for the company like in the International Music Company or Whistling woods acting institute, the pay of the employees would be according to the work that has been developed by the members or employees of the company. In supply chain and food chain Company like Walmart and McDonald’s, the pay of the employee would be on the basis of the pay that is generally paid in the market for the same kind of work by their competitors (Shimko, 2000).
Hence, on the basis of this, it can be stated that the competency based pay is more suitable for dynamic, impulsive and creative organizations as it provides a wide range of opportunities to the nurturing talent and there can be partiality and feeling of insecurity in terms of payment among the individuals in the organization (Cira & Benjamin, 1998).. This could be easily obtained through market based pay which offers a security to the employees regarding the amount that they are paid is as per the standards that are satisfying the conditions in the market. Developing an appropriate reward system helps in the development of a satisfactory and successful pay structure.
References
Cira, D. J., & Benjamin, E. R. (1998). Competency-based pay: A concept in evolution. . Compensation & Benefits Review, 21-28.
Shimko, D. W. (2000). Choosing a Pay Structure That Works for Your Practice. Family Practice Management, 30-34.
Wolski, R., Plank, J. S., Brevik, J., & Bryan, T. (2001). Analyzing market-based resource allocation strategies for the computational grid. . International Journal of High Performance Computing Applications, 258-281.

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March 9, 2018

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