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Alternatives to Traditional Pay Structures. Skill-based Pay Broadbanding Alternative Structures are more flexible than traditional pay structures and encourage employees to assume different roles without triggering compensation increases or decreases. Skill-based Pay.

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alternatives to traditional pay structures
Alternatives to Traditional Pay Structures
  • Skill-based Pay
  • Broadbanding
  • Alternative Structures are more flexible than traditional pay structures and encourage employees to assume different roles without triggering compensation increases or decreases

MGMT 4030 - Managing Employee Reward Systems

skill based pay
Skill-based Pay

Definition: Pay is based on the mastery of a series of skill-blocks or competencies that makes the person more valuable to the employer.

Features of Skill-based Pay

  • Different skill levels can be identified
  • Vertical skills or horizontal skills
  • Monetary pay differential associated with each skill level above base rate.
  • Certification of skill must be demonstrated by employee.

MGMT 4030 - Managing Employee Reward Systems

skill based pay3
Skill-based Pay

Features of Skill-based Pay (continued)

  • Fits well with self-managed team culture and organizations that emphasize learning skills.
  • Also fits with high employee involvement concept because pay rates are fully disclosed and can be influenced by employees’ willingness to learn new skills.

Challenges to using Skill-based Pay

  • Over time many employees reach the top of the pay scale. May be expensive.
  • Employee skills must be fully utilized - not always possible.

MGMT 4030 - Managing Employee Reward Systems

slide4

Skill-based Pay

$$

IV

III

II

I

Basic

Advanced

Skill level

MGMT 4030 - Managing Employee Reward Systems

broadbanding
Broadbanding

Definition: Collapse several pay grades into wide pay bands to give managers greater flexibility to move employees horizontally in their careers so as to broaden their skills and competencies.

  • Collapse narrow salary grades into wide bands.
    • 20 grades reduced to 4 to 5 bands.
    • 40-60% ranges increased to 100-250%
  • Facilitate Lateral career moves
    • Enhanced flexibility for transfers
    • Cross-functional teams with fluid duties
  • Increased emphasis on market pricing jobs.

MGMT 4030 - Managing Employee Reward Systems

broadbanding continued
Broadbanding (continued)
  • Decreased emphasis on job evaluation
  • Eliminates excessive job titles
  • More flexible pay decisions
    • Few control points such as midpoints or salary caps.
    • More pay opportunities based on skills

MGMT 4030 - Managing Employee Reward Systems

slide7

Technical Band

Broadbanding

160%

$85K

IV

40%

III

40%

Salary grades

for Engineers

40%

II

40%

I

$35K

MGMT 4030 - Managing Employee Reward Systems