There are disadvantages/limitations of person focused pay systems. First, employers feel that the main drawback of person focused pay systems is that hourly labor costs, training costs, and overhead cost can all increase. Second, person focused pay systems may not mesh well with existing incentive pay systems. When both person focused and incentive pay systems are in operation, employees may not want to learn new skills when the pay increase associated with learning a new skill is less than an incentive award employees could earn based on skills they already possess Employees often place greater emphasis on maximizing rewards in the short term rather than preparing themselves to maximize the level of rewards over time, which can be facilitated…
Although skill-based pay is an increasingly popular pay choice among employers, it is a relatively new pay program with little exposure among white-collar jobs and service organizations. In a pilot study it was found that understanding of skill-based pay systems was the lowest of the pay policies examined in the present study. Furthermore, it is not likely that job seekers would have worked under a skill-based pay system in the past, although they probably have had considerable experience with job-based pay. Skill-based pay, then, is likely to represent a more uncertain situation to most job seekers. Ambiguity, like risk, is generally avoided because it adds to the total uncertainty of the situation. Also, as described above, skill-based pay plans demand greater employee commitment and energy. Employees who are successful in the position into which they were hired may not receive additional rewards because they are expected to learn new skills. The conditions of a less certain but more demanding environment are expected to be undesirable to most job seekers (Cable,…
