Competency-Based Pay

Neathey F, Reilly P | HR Network Paper MP25 | Institute for Employment Studies | Jul 2003

According to Brown (1998), competency frameworks have a role in main HR functions in as many as 70 per cent of organisations. However, competencies are used mainly in performance management, recruitment and selection, and training and development, according to the Competency and Emotional Intelligency Benchmarking Survey (2002). Only a minority of organisations have decided to make a link between pay and competency.

This paper describes the use of competencies in reward systems and highlights both the attractions of such an approach and the potential problems and pitfalls that may have contributed to its limited application.