Traditional Bases of Pay

Traditional bases of pay are seniority pay system and longevity pay systems. These two are very similar in retrospect with some distinctions. Seniority pay is used in the for-profit businesses and longevity pay is used within the government. The Seniority pay is added to your base pay and is dependant on your length of service to the current employer. This gives employees a guarantee of what their future wages will be. Using this pay system promotes equality and treated with fairness in the work place. This plan hasn't been proven to be effective to produce to produce quality work because it isn't dependant on performance but length of service. Longevity pay is given to employees that have met pay grade maximums that are not likely to advance into higher grades.(Martcoohio,55)

Compensation professionals may be leaning toward removing seniority pay out of the realm because of changes in the economy. Our economy is constantly changing with advances in technology and global competition forcing companies to change with it also. To keep a competitive advantage with these changes companies are seeking out more employees that have more knowledge and specific job related experience that are more productive.(Martocchio,54,)

Merit pay is a form of compensation added to the base pay dependant on job performance which could be output or customer feed back. The merit pay systems are the most commonly used but two considerations need to be looked at for them to be most useful-commitment from management and design of jobs.(Martocchio,55,58) Employee's performance appraisal is rated by one of four categories trait systems, comparison systems, behavioral systems, and goal-oriented systems.(Martocchio,60) Merit pay systems rates the employees performance in different ways either individually, or compared to job description, compared against the other employees in the same department, or by setting goals and achieving them.