by Lua Leggett

Other forms of pay

There are certain other forms of pay which are more specific to some organisations than others.

Skill-based pay

A steady salary is an invitation to mediocrity.


Skill-based pay provides employees with a direct link between their pay progression and the skills they have acquired and can use effectively.

It focuses on what skills the business wants to pay for. It is people based rather than job based. Rewards are related to the employee’s ability to apply a wider range or a higher level of skills to different jobs or tasks. This has traditionally been used for manufacturing and technicians or retail workers. In the professional arena, this would be broadly the same as the competence-related pay.

Service-related pay

Service-related pay provides fixed increments that are usually paid annually to people on the basis of continued service, either in a job or a grade in a pay spine structure. Increments can be withheld for unacceptable or poor performance (although this is rare in practice). With age discrimination legislation and hiking costs of employment, this is largely disappearing from the workplace.

Choice of approach

The first choice is whether or not to have contingent pay, related to performance, competence, contribution or skill. As a line manager, you are unlikely to be the one to decide this, but you may well be asked for your views and you will certainly be responsible for its delivery, implementation and management! Most enlightened employers will want to involve line managers in their overall decisions, if only to obtain their views. They need to be perceived as fair by all concerned and the question will always arise ‘is it fair for a poor performer to be paid more than a good performer simply for being there’?

The alternative to fixed increments is spot rates or some form of contingent pay. Spot rate systems, in their purest form, are generally only used for senior managers or shop floor, retail workers in smaller organisations and new businesses, where formal practices are not yet recognised.