Bus 409 Compensation Management
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 pay systems attract and retain the most qualified employees. (Martocchio, pg. 22, 2011) By obtaining a strategic analysis and compensation surveys companies can determine who is most beneficial to the company based on the results.
Strategic analysis examines long term growth and outlines the company’s profile to keep them in the market. Compensation surveys are collected and reviewed to determine different pay and which benefit packages are best needed. Compensation surveys are important because they enable compensation professionals to obtain realistic views of competitors’ pay practices. (Martocchio, pg. 22, 2011) Finally, recognizing individual contributions determines pay structures, pay grades, and pay ranges.
The pay structures focuses on the difference in an employees’ contribution to company. With this structure it helps the company determine which employee has greater knowledge of the job their performing which leads to better pay. Companies with similar job groups use pay grades to determine compensation. Pay ranges start at the bottom and reach the maximum allowed depending on the job. The contextual influence that may pose the greatest challenge to companies’ competiveness is the government.
The government has laws and executive orders put into place for employees who work within: military service, executive agencies, postal service, and library of congress, judicial and legislative branches. With laws into place, government employees are not a part of any group or provided representation, they must adhere to what is outlined for them to promote equal employment The contextual influence that may pose the least challenge to companies’ competiveness is labor unions. Many who work for a company with a union tend to join to seek additional job protection.
Union leaders discuss important issues among employees such as, benefits, rights, job security, pay, and any other job related concerns. Unions determine goals, strategies, and implement policies and procedures in order to excel in performance. The main purpose of unions and management is to make sure they both focus on what’s important, which includes any upcoming issues from employees, new technology, and making sure they continue to stay competitive. Subjective performance evaluations might be more feasible than objective ratings based on errors of central tendency.
Employers rate all employees on the same average. Such errors are most often committed when raters are forced to justify only extreme behavior with written explanations. (Martocchio, pg. 73, 2011) Many employers need different tools in order to complete a more detail evaluation, and the only times issues are addressed is when a problem occurs. Profit sharing plans pay a portion of company profits to employees, separate from base pay, cost-of-living adjustments, or permanent merit pay increases. Martocchio, pg. 96, 2011) The current profit sharing plan may not motivate employees even though, the plan provides cash to employees as part of their regular pay, and money received is taxed higher by the IRS. Some employees rely on the extra income every couple of months to help with expenses, but because of the high taxes attached to the income depending on what the actual amount would be may not be worth it at all. The purpose of most profit plans provides more financial flexibility to the company.
Profit sharing plans may fail to motivate employees because they do not see a direct link between their efforts and corporate profits. Hourly employees may have trouble seeing the connection because their efforts appear to be several steps removed from the company’s performance, and because company profits vary from year to year, employees’ receive their earnings based off company profits. Employees will find it difficult to predict their earnings, which will affect their saving and buying behavior. Martocchio, pg. 97, 2011) Pay-for-knowledge plans reward managerial, service, or professional workers for successfully learning specific curricula. This program awards employees for the range, depth, and types of skills or knowledge they are capable of applying productively to their jobs. (Martocchio, pg. 104, 2011) Based on the pay-for-knowledge pay concepts, the three jobs for which this basis for pay is inappropriate are: bus drivers, cashiers, and janitorial services.
Bus drivers are all paid around the same pay scale and the compensation may differ depending on how much experience they may have. There is no reward plan for this job mainly because they usually have the same route everyday and there is no training needed besides basic certification and obtaining the appropriate license. Cashiers are paid based of experience, and only receives raises determined by the company annually.
Before they are hired the rate of pay is already set and no additional rewards are granted unless the company has a company- wide contest and all employees become involved. Janitors would also not fall into the category pay-for-knowledge because most companies group this position within a certain pay rage. Regardless, of the experience one may have there are not any additional rewards given out to janitors. Once hired, they follow a certain protocol in making sure they have taken care of the area assigned to them and there is no training provided for this position.