In the United States, it is usually said that the job-based pay system is being replaced by person-based pay plans. I would like to discuss the true trend of the U.S. pay system, because many Japanese companies are attempting to implement this pay system, but they have misunderstood it. Job-based wage plans used to be quite popular among U.S. companies, and "job" is the basis of not only the pay plan, but also the work system. A job-based pay plan is usually called a "traditional plan." However, in the late 1960s, non-traditional plans, such as skill-based pay, began to be utilized for production employees. Skill-based pay is well suited in team-based environments that require individuals to learn multiple skills. New pay plans became widespread under the hard economic circumstances after the oil crisis. New pay plans are called by many names, for example, skill-based pay, knowledge-based pay, variable pay, alternative reward programs, and so on. There are so many ways to describe this system, but sometimes there are no differences, other than the names. HRM consultants want to sell these new payment plans, so they contrive new names. Even though many articles in American journals often discuss non-traditional pay systems, they do not dominate the pay systems used by U.S. companies. I examined several pay system surveys. Skill- or knowledge-based pay was used by less than ten percent of companies. Group incentives, profit-sharing and gain-sharing are more popular than individual incentive plans. Non-traditional pay plans that reward individuals may destroy teamwork, therefore individual performance pay plans are avoided. Most articles in Japanese journals miss the true trend of U.S. company pay systems. Non-traditional pay plans do not entail individual performance pay, but rather group or company performance pay. Japanese companies must be careful to understand the true U.S. trends. The reason why non-traditional wage plans are not widespread among most companies is related to corporate strategy. Each company prefers their own strategy, and there must be some differences. For example, employees may become a company's variable resource, but it takes time to educate and train them. As a result, not all companies choose an employee-oriented strategy.
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