Fair And Equitable Compensation Case Study

Fair and Equitable Compensation
Developing an effective employee compensation package to attract, retain, and motive staff around the world in today’s global competitive market has become a balancing act for many Human Resource Departments. Not only do companies now have to evaluate their programs against local but also foreign competitors when competing to acquire and retain top performers, especially when needing to fill niche positions with limited resources available. The problem is perspectives on what is fair and equitable compensation vary vastly between cultures, companies and employees. Trying to identify that right mix of pay and benefits is impossible an impossible task when two employees performing the same task, at the same company,

There is no incentive provided for marginal or nonperforming workers to improve, as this type of seniority-based pay systems does not take into account individual job performance. It primary looks only at tenure to be the deciding factor for pay increases, so it does not recognize the different value of individual contributions. In addition a study done in Personnel Psychology showed that this type of pay structure negatively impacted the recruiting and retention of high performers. The benefits provided were loyalty, retention, and stability, regardless of performance levels (Shaw and Gupta). In summary, the companies using this type of incentive pay system retain more staff, and have a lower turnover of marginal workers. This sums up my experience while working at a union shop. Workers had a sense of entitlement simply because they showed up and did their jobs. Most companies that I have worked for do not want an entire staff of marginal workers. Nor do I as an employee feel valued or inspired to work hard and contribute more, when others receive the same reward for just showing up. If we were to implement this type of reward system in college, it would be the equal to giving all students in your class the same grade, as long as they simply participate.
More evidence that this type of pay system does not work well is demonstrated by the decline of unions in this country.

The only consideration seniority plays in this organizational structure would be the knowledge and experience advantage to tenured employees in becoming a top performer. Performance-based pay systems challenge all employees to work hard and achieve maximum performance, and reward those that are successful. The downside to this environment is the completive nature, if only the top performers receive pay increases the average and lower performing employees will get discouraged causing a higher turn-over rate. ‘‘Our weaker performers are uncomfortable working in an environment that differentiates some rewards for high performances, so they are more likely to want to work somewhere else, which is good for us and bad for our competitors, which is great for us in the long run.” According to Ken Abosch, partner and leader of Aon Hewitt’s North American Broad-Based Compensation Practice (Abosch). One way offset the turnover and competitive environment would be to provide a smaller overall reward distributed to all employees, and to promote values such as team work. However, one of the challenges companies already face with providing this incentive type of system is making sure the distribute of pay for performance provides enough pay differential between the top, middle and lower performers. So providing any type of overall compensation, which might take away from keeping those top