3 P Compensation

1. The 3-P Compensation Concept
Dr. G C Mohanta, BE(Mech), MSc(Engg), MBA, PhD(Mgt)
Professor

2. Pay for Position
• Develop an
equitable grading
structure
• Create a reference
salary structure
• Leverage
compensation costs
with market survey
information

3. Pay for Position
• Employee compensation is set in broadband based
on qualifications, education, training & experience.
• Through broad banding, narrowly structured pay
grades determined through job evaluation, are
replaced by fewer and wider bands.
• Employees progress up through broad band if
their performance ratings are good, rather than
through steps based on time in the grade.
• It reduces different compensation categories to
broad compensation bands, grouping jobs together
by common characteristic.

4. Pay for Person
• Determine
competency
requirements and
employee capabilities
• Pay individuals based
on their competency
match with position
• Identify and pay
market premium for
competencies in short
supply in the market.

5. Pay for Person
• Pay for person takes into account a
person’s capabilities and experience in
setting a pay level that is both equitable
and competitive.
• It considers the market demand of a
person’s unique skills and experience.
• Pay for person is associated with
competency based pay.
• It also incorporates market based pay
approach.

6. Pay for Performance
• Design annual bonus
and incentives plans
that motivate staff
• Shift from merit
salary increases to
variable pay
• Create long-term
reward plans -
stock options,
deferred
compensation and
phantom

7. Pay for Performance
• An individual’s performance is
managed through a performance
contract, comprising role
clarification, objectives setting and
review of performance.
• As an outcome a measure of
performance at corporate, unit and
individual level becomes the basis for
setting the performance pay.

8. Thank you