Topic 7 - Capability-Based Pay Flashcards
Do all employees in the same job receive the same pay?
No, not every employee in the same job is paid the same amount. Variability in pay can occur based on individual factors.
What paradigm is introduced when discussing variability in pay among employees?
The discussion shifts from a job-based pay paradigm to a skill or competency-based paradigm.
What is Capability-based Pay?
Capability-based Pay is a reward system that varies compensation based on the individual employee’s skills, competencies, and capabilities.
How does an Integrated Reward Structure account for pay variability?
An Integrated Reward Structure acknowledges that even within jobs and pay grades, individual employees can be paid differently based on their capabilities.
Capability-based pay is:
When a reward system explicitly attempts to vary rewards based upon the capabilities of the employee
When a reward system explicitly attempts to vary rewards based upon an employee’s ability to add value to the organization
When a reward system explicitly attempts to vary rewards based upon the market trends
When a reward system explicitly attempts to vary rewards based upon the capabilities of the organization
When a reward system explicitly attempts to vary rewards based upon the capabilities of the employee
True or False. The capability-based approach makes a surprisingly similar assumption to the job-based approach about how rewards should be determined.
False
How does the Capability-based Approach differ from the Job-based Approach?
The Capability-based Approach assumes that rewards should be based on the individual’s characteristics, such as knowledge, skills, experience, or competencies, rather than the job itself.
In an Individual-based system, how might employees in the same job be paid differently?
Employees with higher qualifications, like an MBA, may be paid more than less qualified employees, even if they perform the same work.
Why might an organization pay more to highly qualified employees in a Capability-based rewards system?
Paying more to qualified employees can increase retention, encourage others to gain skills, and ensure the company has experienced managers available when needed.
What is the core assumption behind a capability-based rewards system?
The assumption is that higher levels of skills and experience add value, and investing in highly qualified employees benefits the organization in terms of retention and growth.
What is one benefit of incorporating Individual-based pay into a Total Reward system?
It allows the organization to build its capacity by incentivizing employees to increase their skills.
How does Individual-based pay create a culture of learning?
It encourages employees to see themselves as capable of changing work roles and gives them a better understanding of their coworkers’ tasks.
How does Individual-based pay contribute to workforce flexibility?
Employees with varied skills can easily be reassigned to different jobs, ensuring that staffing needs are met across the organization.
What is one operational benefit of a more flexible workforce due to capability-based pay?
It allows employees to switch between tasks as needed, ensuring full engagement and efficient use of resources during busy or slow times.
What is a potential downside to capability-based pay?
Wages and salaries may rise, increasing per-employee labor costs.
Why might higher wages under capability-based pay not be entirely negative?
The increased wages are offset by higher employee performance and the potential for completing more work with fewer employees.
What should an organization consider when using capability-based pay?
The organization should evaluate if the productivity gains from higher-skilled employees outweigh the increased wage costs.
Which of the following is not a reason a corporation would want to incorporate individual-based pay into its Total Reward system?
Allows the organization to build its capacity
Demonstrates good faith in the employees
Builds a more flexible workforce
Creates a culture of learning
Demonstrates good faith in the employees
What is the most obvious downside to a capability-based pay?
Wages and salaries paid to employees will level off
There are no downsides
Wages and salaries paid to employees will rise
Wages and salaries paid to employees will decrease
Wages and salaries paid to employees will rise
True or False. An organization does not need to investigate if the increases in productivity offset the higher wage rates.
False
The assumption of the value of carrying and growing capacity lies at the heart of justifying a ______________________.
capability-based rewards system
performance-based rewards system
opportunity-based rewards system
none of the above
capability-based rewards system
True or False. In the individual-based pay system, a company would want to hire and retain a better qualified employee.
True
Within _______________ value is assumed to derive from the characteristics of the person holding the job, and therefore pay should be driven by the knowledge, skills, experience, or competencies of that individual.
Group-based systems
Market-based systems
Government systems
Individual-based systems
Individual-based systems
What is the goal of individual-based pay in organizations?
To reward employees based on characteristics that create value for the organization, predicting future performance based on proven capabilities.
What are the three broad types of capability-based pay approaches?
Skill-based pay, competency-based pay, and experience- or seniority-based pay.
How does skill-based pay work?
Employees are paid based on the number of job-related skills they possess, with those having more skills receiving higher pay.
Where is skill-based pay most commonly used?
In manufacturing industries or blue-collar work settings.
What does competency-based pay focus on?
It rewards employees based on their competencies, which are configurations of knowledge, skills, and traits that drive performance.
What types of jobs typically use competency-based pay?
Professional-level jobs.
What is the assumption behind experience or seniority-based pay?
The assumption is that the more experience or seniority an employee has, the higher their future performance will be.
How do organizations typically apply experience or seniority-based pay?
It is often used informally in salary negotiations, with more experienced employees receiving higher salaries.
In which industry is skill-based pay most often used?
Automotive industry
Education industry
Bio-Pharmaceutical industry
Manufacturing industry
Manufacturing industry
According to the reading, as recruited employees negotiate for higher salaries, they are more likely to receive such salaries if they have ______________________________.
Greater work experience
Higher age
More competencies
More education
Greater work experience
In a skill-based pay program:
Wage rates or salaries of are the same across all employees
The wage rate or salary received by the employee does not depend on the skills she possesses
The wage rate or salary received by the employer does not depend on the skills she possesses
The wage rate or salary received by the employee depends upon the skills she possesses
The wage rate or salary received by the employee depends upon the skills she possesses
Competencies are:
Unimportant
Configurations of knowledge, skills, and traits that enable government strategy
Configurations of knowledge, skills, and traits that enable employee performance
Configurations of knowledge, skills, and traits that enable market strategy
Configurations of knowledge, skills, and traits that enable employee performance
Why is strategic measurement important in capability-based pay systems?
Strategic measurement ensures that the criteria for pay differentiation are connected to employee performance, unit outcomes, and organizational goals.
