Human capital theory has been advanced as a rationale underlying seniority pay. Merit pay plans appear to be the most common form of compensation in the United States. Although widely used, these systems are not suitable for all kinds of jobs. Pay-for-knowledge pay is becoming more prevalent in organizations today. However, pay-for knowledge pay programs are not always an appropriate basis for compensation. Discuss the conditions under which, and provide examples for, ideal positions for each base of pay. Provide examples of positions which would not be a good fit for each base of pay as well. Be sure to provide rational reasons.
Types of Pay Bases
There are different types of pay structures organizations across the world use to hire and retain employees. Pay base refers to pay scale for specific types of jobs. For decades, organizations were used to traditional pay structure where employees automatically earned salary increases based on their education and years of service ("Pay for performance...", n.d). It equalized salaries and was the motivation for many employees. Then a part of service sector moved to seniority based pay. Now with increasing complexities of global market place, there is more pressure on employees for delivering results. As a result different pay scales are adopted to get desired outcome. Some of the different types of pay grades are:
Merit Pay Plan
Merit based pay increases the base pay in accordance with performance. Every year performance ...
This is a comparison of different pay bases and identification of situations where these are appropriate.