The E-Sonic Compensation System: External Market Competitiveness

Employees were rated with respect to others unlike the old system where there was absolute ranking.

Pay and reward systems exist in the form of pay, bonuses and benefits, financial and non-financial and designed to improve performance, increase motivation, staff retention and increase profitability. Appreciation and gratitude is widely received as reward and the opportunity for training and development for career progression.

At the end of each performance year, employees will be evaluated on their performance for the previous year. The performance ratings will go from 1 being the lowest to 5 being the highest. How they rank for the year will determine bonuses, if any, as well as any increase to their base pay. The following table illustrates how the performance rating is distributed.

A well-articulated compensation philosophy drives organizational success by aligning pay and other rewards with business strategy. It provides the foundation for plan design and administration and anchors current and future plans to the company's culture and values (Kaplan, 2006, p.32). Recognizing and rewarding achievement is the cornerstone of the company A’s compensation philosophy. The mission of the company is to attract, select, place and promote all individuals based on their qualifications. The company believes that performance-based compensation helps attract, develop and retain talented professionals. In addition to base pay which based upon local market conditions and targeted to be above market, the company provides the following types of potential compensation to reward performance:

Work rated as Equivalent – where two different jobs have the same grading within a grading structure or when evaluated and when each component is broken down the jobs

This paper will examine setting the stage for strategic compensation and bases for pay. There are three main goals of compensation departments: internal consistency, market competitiveness, and recognition of individual contributions. Internally consistent compensation systems define the relative value of each job among all jobs within a company. (Martocchio, pg. 22, 2011) With this system companies want employees to be paid more based on their qualifications and responsibilities. They believe someone with less experience should be paid differently. To determine such evaluation companies use job analysis in order to provide job descriptions. The job evaluation is to determine pay according to a particular position. Market-competitive

not apply to Richer Sounds as it is owned by only one person. They may

The CCUA department is paying these specific employees approximately $950 a year per employee (roughly $79/month), which includes both health and life insurance. Benefits, such as health and life insurance, are a definite attraction for employees as the health care costs are on a rise and the more attractive the benefit package is, the more attractive the company is to potential employees and current employees (Haar and Kossack, 1990, p. 187). Even though the department has a lower base salary, we do not know how the department compares with other companies in terms of these benefits offered to data processors IIs or computer analysts. It would be beneficial for the department to have an idea about what their competitors are paying, so that they can ensure they are offering the same or better benefit packages; since benefits are becoming more of a priority during the hiring process. What is a company is offering a higher base salary, but the benefits are really not that great? The employee may decide to take the job offer from a different company who is offering a lower salary but better benefits. The CCUA department needs more information about other companies benefit packages in order to assess how accurate and competitive their $950/year per employee is in comparison to other

Similarly, Cascio (1991) suggests that the combination of the following five requirements along with a performance based pay system can also have a very significant impact on performance. The first of these is skill variety, where a wide variety of tasks or procedures is available to the employee. Next is task identity, where the employee can clearly identify the output of a task as a product of their efforts. This is followed by task significance, where the work is recognised as important and meaningful. After this comes autonomy, where the employees have a major say in work planning and execution. The final requirement is feedback, where employees receive constructive advice or criticism on their performance.

In relations to Dr. Carl Jones and Dean Smith’s merit processes, the university has a policy to provide pay increases based on merit. To meet that objective, Dr. Jones has created a robust systems of metrics to evaluate his staff based on specific criteria. Dr. Jones process includes a weighted point system with 40 percent based on teaching, 40 percent based on research and 20 percent based on service. As chair of his department, Dr. Jones provided his recommendations for salary increases based on his detailed criteria to the Dean who approved them.

Employees are sourced from two streams; academic (undergraduate and graduate students) and experienced hires (working professionals with 1 or more years of experience). Employees hired as a part of the academic recruitment cycle are place into a “class” that represents a group of people hired at the same time and bounded to a limited range of incentives (salary and entitlements). Experienced hires base salaries are calculated based on the average industry salary for

Managers then meet to recalibrate and gain final agreement on performance levels; this becomes a bun fight, and many of those rated at ‘exceeds’ level are reappraised at ‘meets’, which can be discouraging. The idea that five people in a work group could all be performing equally, but must be ranked from one to five in order to divide up compensation dollars, seems unfair. In fact, many employees cite informal, forced ranking as their major source of frustration with their organisation’s performance management system. This approach often results in fostering competitive rather than collaborative

Performance- related pay (PRP) links reward or salary progression to some form of performance rating. This could be part of a performance management or appraisal system, or it could be based on an entirely separate appraisal of performance exclusively for pay purposes (Armstrong 2001). PRP often requires a number of procedures in order to work including: regular target-setting (establishing specific objectives for the individual), annual appraisals of the worker’s performance against pre-set targets and paying each worker a bonus according to the degree to which the targets have been exceeded (Stimpson 2014). PRP has been used for a long time in the private sector, traditionally being used as a more of a reward for

“Evaluator should specifically advocate for the program/project being evaluated, but rather should advocate for an inclusive, open evaluation process that will lead to the retention of good services and the improvement of bad services, in a way that is seen as appropriate and acceptable by the program’s stakeholders.” (Mathison, 1998) Second, is grade creep. Grade creep is undefined rise in the median grade of employees within the agency. This increase can cause a rupture, where taxpayer would complain and states their local government is overpaid and underworked. In addition, this can be cause by the connection and pay ranges. Third, is if evaluation system is removed, workers will undermined the effectiveness and efficiency of their job duties. Forth, challenges are they are not fair. “Regarding fairness and equity, the accuracy and objectivity of job analysis and classifications actions have always been suspect because none of the systems in use comes close to completely eliminating professional or managerial judgment and discretion.” (Nigro, 2007)

In today’s competitive workforce, compensation and benefit packages plays a crucial role on recruitment and retention for both the organization and the employee. Bumpbie finds itself in a situation where it could positively affect its employee’s morale, turnover rate and longevity; by making a strategic decision to implement compensation and benefit packages that will encourage current workers to stay and entice new applicants. Money is not always the inherent reason businesses experience high turnover rate, the constant shifting in the job market will always be a contributing factor as well as employee’s moral. Mayhew, R. (2016), explains that an “employee compensation plan” refers to all the components offered as well as the way in which they are paid, and the reason behind the employees getting the compensation case bonuses, salary increases and incentives. The fact that there are voluntary and mandatory benefits that organization provides to their employees give employees the freedom of choice, as well as the option to make the whether to stay with or leave an organization based on the benefits it provides. Variable Pay is also an option that some employers offer their employee which is performance based or results oriented. Whether it is profit sharing, merit based programs or incentive bonuses; it all comes down to which organization can provide employees with the compensation or benefits packages that best satisfy their needs.