It is a requirement for employees to enjoy benefits of money and other acceptable materials, in exchange for their service to an individual, a business or any organization. Sometimes, a person may explicitly declare their intention to provide a service voluntarily, in which case there is no mandatory compensation for the work they do. This constitutes employee compensation, of which strict guidelines facilitate the process of acquisition of such benefits by the employer. This paper explores the different methods of employee compensation, systems of compensation, and the concept of comparable worth in ensuring employee satisfaction. The environment plays a role in determining the employee expectations in terms of the actual compensation and the method of compensation. Employee always has an impact on both employee satisfaction and productivity, and the organization’s ability to achieve its goals.
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One method of compensation is piece-rate. This means that the employee gets the compensation proportional to the amount of work. This is mainly appropriate in environments where the employee engages in actual production of goods. In this case, there is a method for determining the work that the employee in appropriate units. The merit of this method is that the employee determines the amount they earn. A lazy employee will always have less compensation than another hard working colleague. However, the limitation of this approach is that there is no guarantee of pay. A person can only work after working. It also gives employers a chance to exploit their workers by paying their employees jolly little pre unit of work, unless there is a standard way of compensation for every job (Lance & Berger 2008).
Secondly, there is the hourly method. In this method, one’s earnings depend on the time the person spends at work. Employees get their compensation for each hour they spend at the work. The more time one works, the more compensation they get. It encourages people to work for long periods so that they can get high compensation for their work. Its disadvantage is that an employee might spend idle time at work and still expect to receive compensation. This is a downside to the employer.
Thirdly, salary is another form of compensation. This process allows people to harbor hopes and expectations of earning exact amounts of money for the work they have done over a specified period. For instance, one gets compensation weekly, bi-weekly or monthly. In coming with salaries, the relevant people use a formula to calculate employee compensation on the basis of both time and amount of work. It combines the first two first methods to provide a more reliable way of compensating employees than any of them. It, therefore, minimizes the demerits of both the hourly and piece rate methods. However, it does not remove them altogether.
There are different compensation systems that an organization can implement. This can occur starting with adequate planning and design processes of the best ways to compensate the employees. In so doing, the organization adopts a compensation system that helps to realize its key economic objectives. One of the objectives is to implement the external equity pay policy of the organization so as to match, lag or lead the market. It also seeks to achieve its internal equity that ensures appropriation of pay discrepancies for jobs within the business entity. In addition, the pay system ought to aid the organization in achieving individual equity whereby difference among employees handling the same job get harmonization.
Two common compensation systems that exist in the business world are market-based pay systems. Alternative names to market-based compensation system are rank to market and market pricing. In market pricing compensation system, the organization conducts a survey on compensation data in the international, regional and local markets. It then sorts out the data from a relevant field of business and either adopts one from what already exists elsewhere, or adjusts it to suit its own working conditions. This system assumes that jobs in the same position, in different business entities, are identical. On the other hand, job evaluation compensation systems, an organization sets a hierarchy of jobs and pays employees according to their level in that hierarchy. The perceived value of jobs determines the compensation amount for each employee. For instance, an employee with high academic skills will earn more than another employee, holding the same position, but with low academic skills.
BusinessDictionary.com defines Comparable Worth as a concept that jobs that require comparable knowledge, abilities and skills ought to attract the same rate of pay regardless of the worker’s age, race, sex or any other difference. There are claims that the wage gap between men and women’s earnings is unbelievably huge. In 1988, there was a study that revealed that the hourly wage of women to men hit a whopping seventy percent. Comparable worth seeks to limit that and close the gap. This is not only a gender issue but also extends to color, race and age. As long as a worker performs a given task, they should receive what befits their work, and no one ought to earn more or less merely because of any other reason. Presently, concerns of discrimination because of gender, age and race have prompted governments and other authorities to stipulate strict laws to deal with the issue (Gerhart & Milkovitch. (1991)).
The issue of affirmative action in compensation is one of the hottest issues giving managers headaches in most organizations. Affirmative requires that the process of recruitment through to compensation ought to be fair and non-discriminatory. People should not be treated in work places differently because of their age, sexual orientation, gender or race. For organizations to survive the harsh penalties of the law, they implement affirmative action, though not fully.
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