by Lua Leggett

Competency-related pay

In this structure, people receive financial rewards in the shape of increases in their base pay, related to the level of competency they demonstrate in carrying out their roles. This is a method of paying people for their ability to perform now and in the future. It is heavily weighted to behaviour and innate or generic competence.

As in the case of performance-related pay, scope is provided for consolidated pay progression within pay brackets attached to grades or levels, in a narrow-graded or career/family structure, or zones, in a broad-banded structure.

Agreed competency requirements Competency level definitions Evidence of competency level achieved Rating or assessment Methodology or formula Competency Pay

The rate and limits of progression through the pay brackets can be based on ratings of competence, expressed in some form of performance-related pay matrix, but they may be governed by more general assessments of competence development.

Competency-related pay is attractive, in theory, because it can be part of an integrated competency-based approach to human resource management. It fits with the concept of human capital management, which emphasises the skills and competencies people bring with them to the workplace. Paying for competence focuses the organisation forwards, not backwards. This means that the line manager needs to spend less time looking at what has happened in the past (although evidence-based learning remains very valuable), but rather on the future, and the standards and expectations you have of your individual team members. There is less emphasis on quantitative targets, which is more appealing, because it rewards people for what they are capable of doing rather than results over which they often have little control.

Competence, like truth, beauty, and contact lenses, is in the eye of the beholder.

Laurence J Peter

However, competency-related pay does raise questions. What are we paying for? Are we paying for behavioural competence or technical competence and how do we measure this? Before long it starts to look suspiciously like performance-related pay and is often charged with being a smoke-and-mirrors version of performance-related pay. Generic competencies are hard to measure and they are not necessarily related to successful task performance. There may be a case for rewarding the possession of competency, but there is an even stronger one for linking the reward to outcomes (performance) as well as inputs (competence).

The manager’s role

If you are faced with managing and implementing competency-related pay, then ensure you have a strong grasp of the guidelines, understand the mechanics for defining technical excellence and are able to articulate the behavioural standards, such as competent behaviour (positive), negative (or unacceptable) behaviour and excellent behaviour.

You will need to be gathering evidence throughout the course of the review period so that you are able to provide strong evidence-based feedback. This feedback should hopefully be given at the time an instance is observed as well as being collated over time and fed back at review point, to consolidate your reasoning.