An organisations internal pay structure can affect the way employees perform to the business strategy. Where a workers performance not only depends on the level of pay they receive (Solow, 1979, in Alexopoulos & Cohen, 2003), but also takes into consideration their pay compared to workers above and below them, those within the same occupational group, and the external labour market (Akerlof and Yellen, 1990). Pfeffer (2005) argues that wage compression, which is the act of reducing the size of the pay differences among employees, improves productivity. To gain competitive advantage, organisations need to acknowledge not only hierarchical wage compression (between management and employees) but also the differences between individuals at …show more content…
There is also a range of returns employees can receive; the psychological relational returns (learning opportunities, employment security), and total compensation returns which are transactional (benefits such as work/life balance, allowances, as well as cash compensation and bonuses) (Milkovich, Newman, Gerhart, 2011).
However, the validity of Pfeffers’ argument is contestable. Although compressing the pay structure supports fairness and equality, there is also the problem of creating the opposite outcome. When wage differentials are eliminated, it may not be perceived as fair and create a negative effect on effort and motivation (Kraft, 1994). A Swedish study demonstrates this negative effect, whereby the higher paid workers morale and effort subsided leading to lower outputs as they did not feel valued for their skills (Hibbs and Locking, 2000, in Alexopoulos & Cohen, 2003). Therefore, wage differentials aid in distinguishing between workers abilities and responsibilities to organisational performance (Beaumont & Harris, 2003). Theorists have thus developed a counter argument, that it is in fact wage dispersion that leads to increased effort and performance (Lallemand, Plasman, & Rycx, 2004). Instead of emphasising co-operation, Lazear and Rosen’s (1981) ‘tournament’ theory highlights the need to differentiate pay, as larger variations are more motivating than smaller or equal differences.
Each year income increases in the United States. Economic inequality and political inequality may have a connection where our democracy could be affected but americans have the ability to solve this problem. Economic inequality refers to wealth or income between different groups or a society as a whole. There have been past social movements that have tried to improve this problem such as women's suffrage and more. We are still trying to resolve this issue of economic inequality.
Relational returns (recognition and status, employment security, challenging work, learning opportunities) increase efficiency and engagement of employees.
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).
Woman, nor to poor people versus people who come from a rich and prestigious family.
The challenges of an organization can influence the performance of an organization from a satisfaction with pay (Gomez-Mejia, Balkin, & Cardy, 2016, p. 296). The employee salary within an organization is a huge cause for turnover of employees (p. 296). First, the topic of employee salary is of great importance for the current and potential workforce (Lee & Lin, 2014, p. 1577). In addition, employees that have the perception on receiving lower compensation that others within their market will lack in performance and have a desire to leave the organization (p. 1577). In retrospect, the regular evaluation of compensation within the organization is vital to the reduction of employee turnover (p. 1577).
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).
The financial or economic interest is an important motivating factor for employees; however, when the gap in salaries is high, it could result in dissatisfaction and affect the business economically.
Is America the best country in the world like it claims to be? Numerous controversial issues can keep Americans debating all day long. Bias is one of the main causes of these disputable topics. Discrimination against certain groups of people still exist today in America. Issues regarding gender can lead to big disputes because everybody has a different opinion. Some people believe men are the superior gender, while other people believe the opposite. The controversial issue of wage inequality deserves to be addressed because women are just as equal to men. A step further into equalizing genders would be wage equality. There are economical, social and political reasons why the United States should equalize pay.
The closer you look into the world, the more secrets you will unlock. If you were to look closely in world history, you would see racism and inequality. If you look in art, you can see racism and inequality. Inequality has not been eradicated, there is still a heavy divide between races in our nation, the United States. As article one stated, 88 percent of blacks believe the nation still needs to make changes to benefit equality, but 43 percent do not believe these changes will occur. Different races have different views on the changes for equality. Article 1 states the 53 percent of whites believe the nation needs to change to aid the fight for equality. The other 47 percent believes that the country has changed enough to support equality.
Indirect compensation has a large effect of boosting job performance. “The biggest problem with a straight-pay structure is that employees quickly become used to earning a certain level of income regardless of the results they produce. Promotions do usually increase pay, but the motivational influence stems from recognition, increased responsibility, more challenging work and a personal sense of accomplishment all of which are motivating factors, according to Herzberg.”
With the constant change in today’s business world, to have a competitive advantage makes it difficult for employers to attract and retain the most talented employees. Identifying the company’s compensation strategy ensures the organization offers the right pay and manages the pay increases to retain top talents. When we hear the word compensation we think about compensating an employee for their work performed, but there
The minimum wage serves as a mechanism to mitigate poverty and income inequality in our economic system. It is a powerful tool in our society, ensuring that working individuals are receiving a fair wage for their labor. This law plays a huge role in American business and seeks to ensure that our capitalist economy is not benefitting from under compensating the workforce. There is a great deal of debate surrounding this topic in the political arena today, with polarizing opinions on both sides of the issue. Currently there is a movement to raise the minimum wage to $15 dollars across the country. Supporters argue that it reduces poverty and inequality while raising the living standards of a significant portion of our society. Opponents on the other hand see the minimum wage as an attack on small businesses, increased unemployment, and overreach on the part of our government. It is important to realize that raising the minimum wage will result in more positive outcomes than negative but it must be done gradually. It would boost consumer
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.
If the United States is an equal country, then why are men and women still paid different salaries? The U.S. is said to be a country of freedom and equality, but the crucial part of every individual’s life, getting a job and working, is not equal. Men and women in America are separated by a long-existing wage gap. Though the gap may only be a few cents difference, over time, it adds up to a large amount of money. Education seems like a solution to the problem, but it does not help. Also, the gap can hurt young girl’s self-esteem as well as making it harder for single mothers to care for themselves and their children. To achieve a truly equal country, the pay gap
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).