How Can I Create a Fair Competency-Based Salary System for Diverse Job Roles?

Dear All,

My boss asked me to prepare a Competency-Based Salary System for our employees. We've already conducted a Competency Assessment (CA) for our employees. In this CA, we have five levels (1 - 5 points, where 1 is the lowest point indicating no competence, and 5 points is the highest indicating excellence).

Our current salary structure for employees is not consistent; it is based solely on subjective evaluations.

I kindly request assistance with the following:

1. How to establish job banding for the following positions: Construction Engineers, Mechanical Engineers, Electrical Engineers, Site Supervisors, Legal Department, Marketing Department, IT, HR, and Accounting Department.
2. How to implement a Competency-Based Salary System aligned with the current salary range, which varies from $300 USD to $3,000 USD per month.

Thank you in advance for your input.

Chuc Huong

Hi!

A competency-based salary system uses broad banding, and the rates for each band or job family are based on prevailing market rates. The ranges adopted for each band are so wide and can range from the 20th percentile up to the 75th percentile of the current market data, versus the traditional JE method of using the median or 50th percentile.

To be able to set up a structure and maintain it, you have to complete the setup of your job families. You must also have regular access to compensation surveys.

Best wishes and good luck!

Ed Llarena, Jr. Riyadh, KSA

One easy way to incorporate competency as part of the compensation is to include competency evaluation in performance evaluations and allocate a percentage of bonuses and increments based on the rating, which should also reflect competency assessment. However, it can still be challenging to establish competency frameworks for job families. I would recommend implementing competencies tailored to different types of roles, such as middle management, senior management, etc., and utilizing them for competency evaluations.