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Setting the Stage for Strategic Compensation and Bases for Pay

Setting the Stage for Strategic Compensation and Bases for Pay

Setting the Stage for Strategic Compensation and Bases for Pay HR Practices January 30, 2011 Describe the three main goals of compensation departments The three main goals of the compensation departments are internal consistency, market competitiveness and recognizing individual contributions. When companies set the pay for jobs they want to be consistent with pay grade in regards to the job description. Higher pay is given to jobs that have greater responsibilities and greater qualifications than jobs that have lower expectations and responsibilities.

Doing evaluations and analysis of jobs you can attain consistency internally, and establish the correct pay amount for each job. There are many qualified individuals for jobs and companies have to be competitive in compensation to attract the most talented employees in the field. To achieve this market and compensation surveys are conducted to determine the rate of pay for a certain field. Many indicators are used to determine pay competitiveness such as competitors, marketability and long term growth prospects and the company’s strength in their field.

Recognizing individual contributions helps determine pay structures. Every employee is different and employees don’t do the same job alike. One may have more knowledge or more experience and because of such disparity that is why HR professionals assign pay grades or assign pay grades within pay structures for a job. Companies understand this want to compensate the employee for what they contribute to the job. Pay grades are in ranges that allow for the minimum qualifications to the highest and also allows for incentives when dealing with a prospective employee and their qualifications.

Describe the contextual influence that you believe will pose the greatest challenge and the contextual influence that will pose the least challenge to companies’ competitiveness and explain why. Labor unions will pose the least challenge to companies’ competitiveness because unions are losing their power and influence amongst its members and that union memberships are declining steadily. Unions once were so powerful that they would fight and get higher wages for their members than nonmember received.

But as companies started laying off the workforce for lower paid non-union workers and less skilled workers in other countries, the stronghold that unions once had was no longer there. There bargaining powers were cut in half and they soon started making concessions with companies that were less favorable for their unions than they had done in the past. Because membership in unions are declining and more companies are becoming non-union companies, their threat to the survival of companies have waned and continue to do so.

Market influences will pose the greatest challenge to companies’ competitiveness because as the labor markets become more competitive, companies will offer more lucrative packages to attract the best people for the jobs. Not only to attract them but to retain them. Also as more companies continue to out-source jobs to other countries to individuals that accept lower wages, the impact it will have in the US on compensation is significant.

The better qualified workers will want substantial pay, but individual in other countries who were trained in US schools will do the work for lower pay in those countries that the people in the US won’t do for the same pay. Companies will have to become more creative in compensation when they are in certain markets and they want to have the best and the brightest people. Describe when subjective performance evaluations might be better (or more feasible) than objective ratings.

Subjective performance evaluations might be better when you want to determine the type of employee you have. By type I mean the qualities they bring to the table. It is hard to identify or measure one’s qualities, so subjective performance evaluations will allow you to assume that the individual is performing better than they actually are. Objective ratings are usually proven by facts or are measurable but subjective are not. In the service industry how one employee may interact with the customer is subjective.

Because there really is no way to evaluate how well the employee interacted with the customer but subjective performance evaluation will allow you to think that they were friendly and acted in a most professional manner with the customer. Subjective performance evaluations can also allow you to decide how to decide on pay increase, where more training may be needed and can help the HR dept. to devise better training manuals based on the subjective performance evaluation. Describe under what conditions profit sharing plans are not likely to motivate employees.

There can be a number of conditions where profit sharing wouldn’t motivate employees. I would like to note a personal situation. I worked for a manufacturing company that was number 1 in its market for a number of years. While the company’s profits were increasing and the demand for their products were quadrupling, the employees’ profit sharing plans weren’t growing in steps with the company’s profits, yet the demands to produce more were constantly be driven to the employees. I didn’t feel as valued from the company on the level in which I valued the company I worked for.

Also as company’s profits goes up and down and the employee’s earnings and bonus are tied into profit sharing plans, and their pay and bonus are affected by the lost of profits, productivity from the best and brightest employees also go down and eventually employees will began to look at companies with more stable profits, notably your competitors. Based on your knowledge of pay-for-knowledge pay concepts, describe three jobs for which this basis for pay is inappropriate and explain why.

Three jobs for which pay-for-knowledge pay concepts is inappropriate are service industries, warehouse workers and telemarketers. These jobs require very low skills and little to no training. Pay for knowledge pay concepts are designed for higher skilled workers who continue to enhance their knowledge for advancement on their jobs and to create a career path that will result in higher compensation. The three jobs that I described have higher turnovers, higher absenteeism and lack of motivation to want to succeed.