Managing Compensation Systems In today's business environment, there are many types of compensation programs from which employers can choose, as well as many combinations of these programs. Each plan is valid and valuable, but different companies, departments, and positions require different compensation plans. Whatever compensation program a company chooses, it must reconcile internal equity and market competitiveness. Before choosing a compensation program, a company should assess its culture and needs and conduct a SWOT analysis before designing a rollout program. After implementing a program, a company must ensure that it remains competitive and consistent. Types of Compensation Programs Compensation programs can be job-based or person-based. People-based compensation is determined by potential, while job-based compensation is determined by results. Within these two categories, there are many types of compensation plans, each with both positive and negative aspects. This includes merit increases, or performance-based pay, and incentive pay. The most commonly used compensation method in the United States is merit pay (Martocchio, 2013). It rewards individual employees for their skills and achievements by providing them with a financial incentive to excel at their jobs. Base pay and raises are based on the value of the work and how well employees perform it, and can be successful when performance standards are clearly communicated and employees are given a fair chance to succeed (Greene, 2010) . One of the main disadvantages of merit pay is the fact that raise decisions are based on performance middle of paper......just reward employees for achieving qualifications relevant to the position or company; companies don't need to pay higher salaries for unrelated certifications. People-based compensation is based on what a person is capable of doing, but paying higher salaries does not guarantee success. Employees may have knowledge or skills, but lack the wisdom that comes from experience. Companies that use people-based compensation must create compensation programs that reward knowledge, skills, abilities, and experience that align with the company's competitive advantage. Works CitedGreene, RJ (January 21, 2010). Effectively Managing Base Salary: Strategies for Success. SHRM. Retrieved from http://www.shrm.org/hrdisciplines/compensation/Articles/Pages/CMS_005592.aspxMartocchio, J.J. (2013). Strategic compensation: a human resources management approach (7th ed.). Boston: Pearson.