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Traditional Bases For Pay Practices

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Traditional bases for pay refers to longevity, seniority pay practices, performance appraisal methods, merit pay, and performance appraisal methods. Organizations award their employees raises based on their job performance or their seniority. Many companies only award their employees raises based on their job performance and not their seniority. IBM was one of those organizations that awarded its employees raises solely based on job performance. At some point, the IBM employees expected increases in their regardless of their performance. Seniority pay, as well as longevity pay systems, are about rewarding employees an increase in pay based on the time that they have served with a company. This type of pay plan system is in place, for some…show more content…
56). Merit Pay Merit pay programs determine employees pay based on differences in job performance. Merit increases are a percentage of an employee’s hourly wage and a nonexempt employees merit pay is based on the percentage of an employee’s annual salary. Merit pay is the most common used method in the United States (Martocchio, 2004, p. 57). Merit pay programs normally occur in “for-profit” organizations (Martocchio, 2004, p. 57). Merit pay is given to employees based on their meeting quotas in production, which can lead to pay increases/raises. Skills come into play for the merit pay, for without the skills the employee or employees would have a hard time reaching the goals needed for this type of increase in pay. Merit pay increases should represent previous job performances as well as motivate the employees to work towards “exemplary performance” (Martocchio, 2004, p. 58). Incentive Pay Companies utilize incentive pay to reward their employees for partially or completely achieving a predetermined work objective. This type of pay is defined as compensation. Incentive pay systems are based on the performance of groups and individuals, relative performance, and how much the employee or employees contribute to the company (Martocchio, 2004, p. 77). The approach to incentive pay is similar to merit and seniority pay, in that incentive pay increases the employee 's base pay. Companies usually set up incentive pay programs to motivate their employees or to control
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