1.0 Introduction This chapter consists of the background of the study, problem statement, research objectives, includes both general and specific objectives, finally the significant of the study. 1.1 Research background According to David E. Terpstra (2003), organization policies on the compensation and practices play competitive roles in the business environment. However, organization must be able to define and design a form of equity systems which consists of distributive equity (external equity, internal equity, individual equity) and procedural equity in constructing pay system. Hence, it is important for the organization in packaging attractive pay and compensation policies as part as to be competitive with the market in the similar industry by adopting form of relevant equity systems. Milkovich & Newman (1996), define pay distribution as compensation levels paid for the individual performance, human capital and work responsibilities within a single organization. However, Gary Dessler (11th edition, 2008) viewed that, manager should categorize equity systems into four elements which are: i. External equity refers to the differences in jobs pay rate from one company to other companies. ii. Internal equity which measuring the differences in the jobs pay rate from one position to another position in the same company. iii. Individual equity refers to fairness of the pay that made by the company by looking at the individual performance at the same or very similar kind of jobs within the company. iv. Procedural equity refers to the decision made regarding the allocation of pay by looking at the fairness in the processes and procedures. Employees received rewards which satisfy their needs and expectations (individual go... ... middle of paper ... ...ng the organization productivity (Lawler, 2003). The importance in conducting this study is actually to oversee whether the equity systems are considered during assessing the employee performance. If the equity systems linked with the performance, most of the organization must be used equity systems in setting their compensation rate. It is learnt that, money is one of motivator factor which may increase the employee credibility level in performing well. For example, if the individual is performing well, the organization may use individual equity in assessing the level of the performance before rewarding them. Since most of the employee believes equity rate is the most importance elements that need to be considered by the organization, it is the organization responsibilities to designing a competitive compensation package which may benefit both parties.
“Equity considerations play a major role not only in the evolution of distributive systems but all in the emergence of supporting ideologies and the processes through which distributive systems are challenged and replaced” (Cook,K.S., & Parcel, T.L. 1997, p.2). Therefore, when the employees are rewarded for their work they will most likely work harder to restore the balance of equity. Whereas if an employee is under rewarded the employee will most likely do the opposite and not work as hard. The ongoing issue at Engstrom Auto Mirror Plant was that the employees were being under- rewarded and not appreciated by upper management, which lead to low productivity that severely impacted the companies
Compensation is made of a base salary (paid by the hour, work or the year; excluding overtime or bonuses), variable pay (bonuses, profit sharing/stock options which work hand and hand with the performance of the company), and benefits (to include health insurance/savings plans – 401(k), or tuition reimbursement). The traditional way of determining base pay for jobs was to compare jobs in the same industry. Now industry and market, no long work by themselves, the current thinking is more person-based that considers knowledge, skills, and competencies of the work. This, however, is best suited for high-performing environments that remain flexible in their deployment of human capital.
Deciding which pay form to use when compensating employees is extremely important to a company. Many things are taken into consideration: labor costs, the correlation between performance and pay, customer service, and the ability to attract and retain employees which is extremely important to FastCat’s need for innovation. We believe a single pay structure coincides with our single based plan for the organization. We want to keep things simple and understandable to all areas of the organization. This strategy will allow employees to understand how their performance and the performance of others relate to the success of the company through specific measures. It is also important that the strategies align with the objectives of FastCat. We beli...
External equity exists when an employer pays a wage rate commensurate with the wages prevailing in external labor markets.
CEO compensation has been a heated debate for many years recently, and it can be argued that they are either overpaid or that there payment is justified by the amount of work they do and their performance. To answer the question about whether CEO compensation is justified it must be looked at by the utilitarian viewpoint where the good of many outweighs the good of one. It is true that many CEO’s are paid an exorbitant amount of money; however, their payment is justified by the amount of money that they bring back to the company and the shareholders. There are many factors that impact the pay that the CEO receives according to Shah et.al CEO compensation relies on more than just the performance of the CEO, there are a number of factors that play a rule in the compensation of the CEO including the fellow people who help govern the corporation (Board of Directors, Audit Committee), the size of the company, and the performance that the CEO accomplishes (2009). In this paper the focus will be on the performace aspect of the CEO.
The purpose of this paper is to explore the use of Merit Pay and Incentives
The company Steel Co, which has been established for around 30 years, has been in a steady decline during the current recession and although a Divisional Director has been employed by the owner the fortunes of the company have not improved. The staff is unhappy, unproductive and unimpressed by the Human Resource system that currently exists in the company. The pay structure that currently exists within the organisation has been much debated among employees who feel it is unsatisfactory. The Business Adviser will research Performance and Reward management tools in order to help the company develop a more suitable Performance and Reward system to use. A variety of sources will be used in order to evaluate the system and tools against other organisational frameworks. The pay structure within the company will also be looked at in order to identify any possible changes that could be made.
residual earnings growth from 2009 to 2010, and then dividing this figure by the difference between the cost of equity and the residual growth.
Employee compensation and reward systems have undergone a couple of paradigm shifts since inception. Reward systems were traditionally compensation based and focused on the individual or the position (Beam 1995). After a recession in the early 1980's, employers turned to performance based models in an attempt to save money while still rewarding top performers (Applebaum & Shapiro, 1992). Today, the most successful organizations are using a total reward model, a hybrid of the performance based model combined with strategic human resource management planning to create reward systems that both benefit the employee and help organizations realize their operational goals (Chen & Hsieh, 2006).
Remuneration management is defined as the sum received for an employment or service delivered, this includes the money received on a monthly basis as well as benefits given as rewards (investopedia,para.1 ). Individualism need to be taken into account when implementing these remuneration structures or reward schemes, equal pay plays a role in balancing earnings among the diverse workforce (Shen, Chanda, D’Neetto and Monga,2009,p.241). The Woolworth’s Holdings uphold remuneration policies which have the purpose of making sure to attract and hold on to the best talent, that they are congruent with the strategies of the company and are the determinants of performance during the short and long phases. The policy considers the board members and the employees. This policy manages employees of the company by giving...
Organizations are working hard in today’s world of business, not only to remain competitive, but also to focus on stability and structure. Employees are the backbone of an organization. It is becoming more important to offer quality HRM programs to staff, in order to support the retention of trained and experienced staff. Employees have always been concerned with salary however, there is a new focus emerging that looks at compensation as a whole entity. Monetary wages are now just as important as other benefits such as paid time off, medical and dental offerings and retirement. This paper will discuss the importance of the total compensation program which includes many aspects, not just salary. Attention must be paid to equal pay, pay
Reward systems have been evolving and growing throughout the years, but there are many types that have always been there. Base pay is the most common, which is an employee’s base wages and salary that they are paid on hourly, weekly, monthly, or annually (Luthans, 2011, p.94). Merit based pay is another type of incentive, which rewards and motivates an individual to perform their jobs to the standards of their employers. According to the text Organizational Behaviors, by Fred Luthans, there are three other options for paying an employee for their performance: individual incentives pay plans, using of bonuses, and the use of stock options. Individual based pay plans are based on the employees output and/or quality. Some organizations use bonuses as incentives to their employees. These are offered sometimes as op...
In large organisation, competition is not only in the market for goods and services but also for the quality of employees. As such, a large organization can only become attractive to the most skilled and high quality workers if it has an effective compensation and benefit plan. The key purpose of an effective compensation and benefit system is to provide employees with the right rewards for their work and right behavior in the workplace. Typically, organizational success is determined by the quality of employees an organization has. In turn, the organization can only attract such quality workers and maintain them through effective compensation and benefit
Formalized compensation goals serve as guidelines for managers to ensure that wage and benefit policies achieve their intended pur¬pose. The more common goals of compensation policy include to reward employees’ past performance, to remain competitive in the labor market, to maintain salary equity among employees, to motivate employees’ future performance, to maintain the budget, to attract new employees, and to reduce unnecessary turnover. It is important for the organ...
The foundation for effective job performance and compensation system can be traced to effective job analysis process. Fundamentally, a job analysis should consist of a thorough examination of the job 's duties and knowledge, skills, abilities, and qualities that are required in order to be successful in a specific position, upon which appropriate rewards or compensation can be determined. For many perspectives, jobs are usually made up of requirements and rewards, where rewards may be regarded as a major recruitment strategy for motivating potential employees in order to influence them to stay the organization for a longer period as well as enhance their performance. The most common or basic form of rewards which attracts employees is extrinsic