A Pay Model and Defining Internal Alignment

Several factors should be considered when determining a fair and equal wage across the labor force. Preservation of the existing labor force, while minimizing the impacts on a business being able to maintain their competiveness is a critical

Each employee will be paid based on their capabilities rather than on the characteristics of their job. This will provide an incentive for employees to develop their skills and move into other roles.

FastCat has recently been rated as lower than the national average as a “Best Place to Work”, and a survey shows that 21% of our employees would consider leaving. The turnover costs alone of losing 42 of our employees is around $420k. Salary information is now readily available on the internet, which makes our employees aware of how we value them relative to other organizations in the market. Being more competitive with our base pay will signal to our employees their value. When making external comparisons, our employees will see that their place of work is one of the best paid, which will eliminate the need to look elsewhere for work as well as encourage commitment and performance as they recognize that the jobs they currently possess are some of the best paid in the industry. It is also a great branding strategy for our business as we continue to grow. Establishing a reputation as one of the best paying in the industry encourages employees to work harder and will increase our potential talent pipeline, decreasing the amount needing to be spent on

carefully planned out and considered, the total closure or failure of the organization could be at hand in the near future. In our modern age, employers know that salary is not the only factor that should be considered and that salary alone will not lead to better or more highly profitable workers alone. This is why compensation planning is important and why pay should have some connection between performance and compensation. This is why the human resources department should consider many monetary and non-monetary factors when considering how to properly compensate and motivate employees (Dessler, 2013).

James recalls a story of when he asked his supervisor for a raise stating that he was tired of being paid such low wages for his hard work. His supervisor, Phonse Bean responded with, “Really, by you doing so many jobs, it cuts you high-level pay down to lower pay, to medium grade. Actually, the way I got it figured, you 're fifteen cents overpaid now an hour. But I 'm going to give you a nickel raise-because I think you 're worth it.”

For the most part, a company’s compensation policy aims to ensure that employees are compensated in a fair and competitive manner. However, the compensation objectives employed by different companies can vary widely. This is especially true when taking into account wages vs. skills, competitor salaries, pay-for-performance, and other elements of compensation, like overtime, incentives, etc. (Snell, Morris, & Bohlander, 2015).

Thus, employers must know how the compensation they offer for critical positions differs with compensation for similar positions at other organizations in the market. Therefore, if an organization is recognized to be a great place to work in terms of factors such as training, resources, technology, work environment, staffing, and scheduling, the organization may be able to pay less than its competitors do within an acceptable range. However, if competitors are viewed more favorably as an employer, on the other hand, the organization will need to use compensation as its strength. Although, any strategy based solely on compensation will not succeed in the long run because a successful strategy combines market-rate compensation and a work environment that is competitively distinguishing and unique (Gering & Conner,

The right compensation program will depend on the organization’s business strategy and goals. To achieve these, an organization must recruit and select the best possible employees. To attract such employees, there must be an attractive compensation plan. Competitors will be offering different payment options, this may be based on pay rate or special perks, and a company’s stock options. Organizations must be aggressive yet reasonable to compete with competitors. Retaining and encouraging employees to perform at their best may be achieved through an immediate incentive award

“I have mentioned the way the hiring process seems designed, in some cases, to prevent any discussion or even disclosure of wage- whisking the applicant from interview to orientation before the crass subject of money can be raised. Some employers go further; instead of relying on the informal “money taboo” to keep workers from discussing and comparing wages, they specifically enjoin workers from doing so.” (207)

When making compensation decisions, whether it is internal or external, comparisons must be considered. However, employers must carefully balance pay structures, because internal and external comparisons may not converge. Therefore, employers may differ in the way they place priorities on internal and/or external comparison data when they are developing pay structures.

In Peter Eavis’ article “Executive Pay: The Invasion of Supersalaries” the conflict of CEOs and top executives outrageous pay grade is discussed. Even though the “compensation machine” of Corporate America is running smoothly, there are multiple negative and dark undertones. In fact, many people believe that these shocking salaries are the roots of inequality within America. Currently, some CEOs are being compensated millions and millions of dollars as their normal annual salary. Even though the current executive compensation system focuses on performance and can “theoretically constrain pay,” there is nothing stopping the companies from giving their CEOs more. According to the Equilar 100 C.E.O Pay Study, “the median compensation of a

In the article “Having trouble hiring? Try paying more” by Barry Ritholtz, he describes his experience filling an opening in his New York office. Barry was confident about his job offer and believed it was attractive and covered all the necessary details. However, to his surprise, he was unsuccessful in filling the position. Barry decided to consult a friend who had more hiring experience to discuss the details. Everything seemed fine up until Barry mentioned the pay he was offering. His friend laughed and said, “you are trying to hire someone in a high paying industry in the most competitive and expensive city in the country for that job”. He advised him to raise his offer by 50%. Shortly after, he had a lot of qualified applicants apply.

This report explores the issue of the pay that top executives make, and the reasons why they do. It also suggests improvements that can be made to make the system better. High Pay Seems Small When Compared To Company Profits Many companies pull in profits that are extremely high. When an employee of such a companies salary is compared to the amount of profit that the company earns, it starts to seem reasonable. It only makes sense that if the employee is directly responsible for the success of their company, then they deserve to get their payback. It seems ironic, but many salaries even look small once compared with a companies profits. Top Executives Are Under A Lot Of Pressure Being the CEO of a

Some organizations are unwilling to show their reward systems and pay policies (Lawler, 1995). Many Human Resources professionals believe gender pay gaps to be resolvable through the monitoring of pay levels and communication (Report on Salary Surveys).Greater pay transparency has been a great benefit to the board, employees and managers as they now know what is happening across the business and they are able to confidently justify their actions (Commission Policy Report).All market-related supplements are recorded and reviewed separately from basic salary to ensure openness and transparency. Regular research market rates within the various labor markets in which they operate is undertaken improving transparency would also help to improve talent development, as employees would be able to see what they could earn if they wanted to move to another division and upgrade their skill set. (Commission Policy Report).

In developing his theory Spence makes numerous foundational assumptions. He assumes that for employers to go out and start scouting for prospective employees there must be a vacancy existing that needs a specific set of skills and personality. He understands the pool of skills existing at the time can be divided into a symmetrical set of “bad” and “good” employees. This selection depends on the real value that these employees will bring to the organization. The employer may not predict if the person he is signing up will be good or bad hence he pegs the question of pay on some evidence given by the education credentials submitted by the prospective employee. Though Spence identifies that education may not necessarily increase the rate of production, he concurs with the idea that good employees have a less opportunity cost.