Compensation and Benefit focuses on ensuring compensation and benefits, fairness and consistency. Traditionally, organizations design pay systems by evaluating jobs. The characteristics of a particular job are determined, and pay is made comparable to what other organizations pay for jobs with similar characteristics. This job evaluating method tends to result in pay systems with high external and internal equity. However, it fails to reward employees for all of the skills that they have, discourages people from learning new skills and results in a view of pay as an entitlement.
Some organizations, have designed pay systems according to people's skills and abilities. By focusing on the individual, rather than the job, skill-based pay systems reward learning and growth. Typically, employees are paid according to the number of different jobs that they can perform. Skill-based pay systems have a number of benefits. They contribute to organizational effectiveness by providing a more flexible workforce and by giving employees a broad perspective on how the entire plant operates. This flexibility can result in leaner staffing and fewer problems with absenteeism, turnover, and work disruptions. Skill-based pay can lead to durable employee satisfaction by reinforcing individual development and by producing an equitable wage rate.
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