Answered: Describe competency-based pay. 14.…

Understanding Business

12th Edition

ISBN:9781259929434

Author:William Nickels

Publisher:William Nickels

Chapter1: Taking Risks And Making Profits Within The Dynamic Business Environment

Section: Chapter Questions

Problem 1CE

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Question

13. Describe competency-based pay.

14. Explain how team-based compensation should be determined.

Expert Solution

INTRODUCTION

The competency-based pay plan is a plan which encourages employees of an organization to reach the pay rate by taking charge of improving their knowledge and skill.

EXPLANATION

Competency-based pay refers to a pay structure that compensates according to the knowledge, skill of an employee rather than his position or job title in the organization. It focuses to increase the potential of the employees. It creates self-motivation, increased transparency, reduced turnover, etc.
Team-based compensation refers to the compensation provided by an organization as a reward to a group of members or a department for the successful completion of a task or project. The compensation recognizes the team as a whole and divides the reward equally among the team members.

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