traditional bases for pay

SENIORITY AND MERIT

TRADITIONAL BASES FOR PAY

OVERVIEW

SENIORITY & LONGEVITY

PAY

THESE SYSTEMS REWARD EMPLOYEES WITH PERIODIC ADDITIONS TO BASE PAY ACCORDING TO EMPLOYEES’ LENGTH OF SERVICE IN PERFORMING THEIR JOBS.

SENORITY PAYSENORITY PAY LONGEVITY PAYLONGEVITY PAY

TO REWARD JOB TENURE OR EMPLOYEES’ TIME AS MEMBERS OF A COMPANY EXPLICITLY THROUGH PERMANENT INCREASES TO BASE PAY.

TO REWARD EMPLOYEES WHO HAVE REACHED PAY GRADE MAXIMUMS AND WHO ARE NOT LIKELY TO MOVE INTO HIGHER GRADES.

THE DESIGN OF SENIORITY PAY AND LONGEVITY PAY PLANS

TO EMPLOYEESTO EMPLOYEES TO EMPLOYERSTO EMPLOYERS

PERCEIVE THEY ARE TREATED FAIRLY BECAUSE THEY EARN PAY INCREASES ACCORDING TO SENIORITY, WHICH IS AN OBJECTIVE STANDARD.

IT FACILITATES THE ADMINISTRATION OF PAY PROGRAMS.

EMPLOYERS ARE LESS LIKELY TO OFFEND SOME EMPLOYEES BY SHOWING FAVORITISM TO OTHERS.

ADVANTAGES OF SENIORITY PAY

FITTING SENIORITY PAY WITH COMPETITIVE STRATEGIES

SENIORITY PAY DOES NOT FIT WELL WITH THE IMPERATIVES OF COMPETITIVE STRATEGIES BECAUSE EMPLOYEES CAN COUNT ON RECEIVING THE SAME PAY RAISES FOR AVERAGE AND EXEMPLARY PERFORMANCE.

MERIT PAY

THESE PROGRAMS ASSUME THAT EMPLOYEES’ COMPENSATION OVER TIME SHOULD BE DETERMINED, AT LEAST IN PART, BY DIFFERENCES IN JOB PERFORMANCE.

WHO PARTICIPATES?

MERIT PAY PROGRAMS OCCUR MOST OFTEN IN THE PRIVATE SECTOR “FOR PROFIT” OF THE ECONOMY RATHER THAN IN SUCH PUBLIC SECTOR ORGANIZATIONS AS LOCAL AND STATE GOVERNMENTS.

ELEMENTS OF MERIT PAY

Managers rely on objective as well as subjective performance indicators to determine whether an employee will receive a merit increase and the amount of increase warranted.

ELEMENTS OF MERIT PAY

Employees must know that their efforts in meeting production quotas or quality standards will lead to pay raises.

ELEMENTS OF MERIT PAY

Companies that use merit programs must ensure that the funds needed to fulfill these promises to compensate employees are available.

ELEMENTS OF MERIT PAY

Organizations should make adjustments to base pay according to changes in the cost of living or inflation before awarding merit pay raises.

PERFORMANCE APPRAISAL

Effective performance appraisals drive effective merit pay programs.

TYPES OF PERFORMANCE APPRAISAL PLANS

TRAIT SYSTEMSCOMPARISON SYSTEMSBEHAVIORAL SYSTEMSGOAL-ORIENTED SYSTEMS

TRAIT SYSTEMS

THIS SYSTEM ASKS RATERS TO EVALUATE EACH EMPLOYEE’S TRAITS OR CHARACTERISTICS.

Quality of workQuantity of work AppearanceDependabilityCooperation InitiativeJudgementLeadership responsibilityDecision-making abilityCreativity

COMPARISON SYSTEMS

THIS SYSTEM EVALUATE A GIVEN EMPLOYEE’S PERFORMANCE AGAINST THAT OF OTHER EMPLOYEES.

AN ALTERNATIVE APPROACH TO THE COMPARISON SYSTEMS

FORCED DISTRIBUTION PERFORMANCE APPRAISAL, ASSIGNS EMPLOYEES TO GROUPS THAT REPRESENT THE ENTIRE RANGE OF PERFORMANCE.

BEHAVIORAL SYSTEMS

THIS SYSTEM RATES EMPLOYEES ON THE EXTENT TO WHICH THEY DISPLAY SUCCESSFUL JOB PERFORMANCE BEHAVIORS.

TYPES OF BEHAVIORAL SYSTEMS

1. THE CRITICAL INCIDENT TECHNIQUE (CIT)

2. BEHAVIORALLY ANCHORED RATING SCALES (BARS)

3. GOAL-ORIENTED SYSTEMS

FOUR ACTIVITIES TO PROMOTE NONDISCRIMINATORY PERFORMANCE APPRAISAL

PRACTICES

1. CONDUCT JOB ANALYSES TO ASCERTAIN CHARACTERISTICS NECESSARY FOR SUCCESSFUL JOB PERFORMANCE.

2. INCORPORATE THESE CHARACTERISTICS INTO A RATING INSTRUMENT.

3. TRAIN SUPERVISORS TO USE THE RATING INSTRUMENT PROPERLY.

4. SEVERAL CASES DEMONSTRATE THAT FORMAL APPEAL MECHANISMS AND REVIEW OF RATINGS BY UPPER-LEVEL PERSONNEL HELP MAKE PERFORMANCE APPRAISAL PROCESSES MORE ACCURATE AND EFFECTIVE.

SOURCES OF PERFORMANCE APPRAISAL INFORMATION

1. EMPLOYEE2. EMPLOYEE’S SUPERVISOR3. EMPLOYEE’S COWORKERS4. EMPLOYEE’S SUPERVISEES5. EMPLOYEE’S CUSTOMERS OR CLIENTS

ERRORS IN THE PERFORMANCE APPRAISAL PROCESS

BIAS ERRORSCONTRAST ERRORSERRORS OF CENTRAL TENDENCYERRORS OF LENIENCY OR STRICTNESS

STRENGTHENING THE PAY-FOR-PERFORMANCE LINK

Linking performance appraisals to business goals

Analyze jobsCommunicateEstablish effective appraisalsEmpower employeesDifferentiate among performers

POSSIBLE LIMITATIONS OF MERIT PAY PROGRAMS

Failure to differentiate among performersPoor performance measuresSupervisor’s biased ratings of employee job

performanceLack of open communication between

management and employeesUndesirable social structuresFactors other than meritUndesirable competitionLittle motivational value