Compensation Systems
A sense of fair treatment is essential in any organization. Each employee wants to be treated with fairness by their employers. This is essential in the are of compensation. Therefore, compensation equity is a vital topic of discussion in every company. The increase in the pressure to retain, engage, motivate, and attract employees leaves most human resource leaders concerned. However, the human resource systems are available to deal with such pressures. However, these systems rely on a critical assumption; employees feel they are compensated fairly according to their performance output. For this to be achieved, the salary administration of a company should administer their salary and bonus practices fairly.
Company compensation systems need to be equitable. Being fair means that the compensation systems should be fair in that the compensation amount is honestly and impartially determined in consideration of merit and without prejudice or favor. An equitable compensation system is vital because if the majority of employees feel they are compensated fairly and impartial, they will appreciate and value the rest of the HR system. This increases the productivity, reputation, and overly the success of the company. When employees feel they are equably compensated, they will take part in most of the HR programs, helping the company to thrive (VanOrnum, 2018).
A company should consider the internal factors and the market data during the process of designing a fair and equitable compensation system. There are various approaches companies employ in designing an equitable compensation system. For example, the skill-based pay approach, broad banding, variable pay, and team rewards. The skill-based pay is a system that helps the company to pay its employee for the currently needed skill. However, the companies’ most used approach to design an equitable compensation system is the market pricing data and the salary ranges approach.
Companies use salary ranges to analyze the differences in employee’s abilities and experiences. Appropriate set pay ranges enable the employer to pay its employees in the best way that suits the company why maintaining its market competitiveness. Broad salary ranges risk the introduction of internal equity issues that raise complaints about different compensation for individuals in the same range. On the other hand, market data is an approach used to set competitive rates. In this approach, survey data plays an essential role in the process of making decisions. This data is handled by human professionals who understand the compensation goals. The Integration of market data and salary ranges. Therefore, the company should aim at paying competitively to attract competent talent while maintaining an equitable compensation system (Culpepper, 2018).
References:
VanOrnum, C. (2018, February 24). How to Design a Fair & Equitable Compensation Program. Retrieved June 04, 2020, from https://hrsoft.com/blog/design-fair-equitable-compensation-program/
Culpepper. (2018, April 11). Salary Structures: Creating Competitive and Equitable Pay Levels. Retrieved June 04, 2020, from https://www.shrm.org/resourcesandtools/hr-topics/compensation/pages/salarystructures.aspx