What is Pay-for-Performance Compensation?
1. Does money motivate employees? Why or why not?
Most would think the answer to this would be a yes, money motivates employees. What else can be better than you being able to live comfortably and not have the stress of not being able to pay bills? It is safe to say money is the most common type of motivator that most companies have used to ensure that their employees become more productive. Even though it is presumably the most important motivator to most employees, some aspects such as good leadership that allow for employees’ career development also influences employee motivation.
So I’d say money can help motivate me at first but after a while Id needs more than that to continue on in the company.
2. Why should compensation systems be equitable? How can an organization design an equitable compensation system?
The compensation system should be equitable because this system gives the employees a sense of understanding and satisfaction that all employees are treated fairly.
Good way organizations can design an equitable compensation system is by developing great compensational structures that can be aligned with the business strategy and objectives. Most small businesses’ compensational philosophies are modest and easy to administer. Salary structures are an important component of effective compensation programs and help ensure that pay levels for groups of jobs are competitive externally and equitable internally. A well-designed salary structure allows management to reward performance and skills development while controlling overall base salary costs by providing a cap on the range paid for particular jobs or locations.
3. Compare and contrast the four job evaluation methods. Give an example of an organization in which each of the four methods might provide an optimal strategic fit.
The four job evaluation method comprises of the point method, factors comparison method, ranking method, and job classification. The ranking method has some simple advantages to understand and easily calculated. Ranking method major disadvantage is that the method can only be used when there are minimal numbers of job availabilities. Thus the job classification method is economical and has a simple advantage with less time calculation. The disadvantage of this method is the small-scale apprehension. Additionally, the point method stands at it an advantage because it is mostly accurate and widely accepted and used. This method of disadvantage is expensive and time-consuming. Conclusively, the factor comparison method provides reliable results and it disadvantage is that this method is complicated and it’s hard to explain for employees to understand.
4. Discuss the pros and cons of employee pay being fixed versus variable and dependent on performance. How might such decisions impact recruiting, motivation, and retention?
Employees with fixed pay will normally expect no extra incentives and bonuses at the end of the pay period. It’s established that their salary will not go beyond what has been agreed on to receive. However, that situation can be changed when the employee got a promotion. The major problem with this structure pay system is that the employees don’t go above and beyond or do any extra mile work for the organization thus there will be no bonuses or additional pay aside from the agreed salary. Furthermore, this system puts employees into their comfort zone and they don’t create room to grow within the company.
Employees with variable pays normally have a low based salary. Hence, these employees are commissioned based, so they depend on their sales goals set by the company in other to achieve a decent compensation. I had mentioned in question one that I’m a sales worker and commissioned based. We work very hard to earn our livelihood as our income depends on the products and services we offer and sale. Most people believe this is a very difficult job because not everybody feels comfortable with this payment method due to having consistent bills to settle as opposed to what if you don’t have sales to cover your everyday expenditure. In the case of the mortgage market sometimes business is slow and the market may be tough therefore, employees working in that area may not reach their goals and struggle with their income. Even though I’m a commissioned based worker I do believe that there should be some ways of restructuring the said pay method wherein the variable income should be the reverse as opposed to the fixed income. Those designing compensation systems must also bear in mind that compensation is a condition of employment covered under Title VII of the Civil Rights Act of 1964. The design of any compensation system that intentionally or unintentionally discriminates against any protected class can subject the organization to legal action. The Equal Pay Act of 1963 also partially regulates compensation and must be considered when designing and administering compensation programs. (Mello, 2015).
5. Analyze your current job responsibilities. Determine whether the method by which you are compensated is appropriate.
I currently work as a Security Professional for a major financial institution. Some of my responsibilities are:
Maintaining and managing security systems and safety products and equipment. Conduct security checks and inspections of systems and network processes. Perform auditory checks on all security and safety initiatives. Protect internal information systems and sensitive databases. Provide business clients and customers with the best possible security services. Design customer-specific security policies, procedures, and industry standards. Review, analyze, and fine-tune security and safety systems from time to time. Investigate and communicate security violations and infringements. Ensure corporate laws and regulations in designing security and safety aspects.
6. Is performance-based pay effective? Why or why not? How can performance-based pay systems be better designed to ensure optimal results?
Performance-based pay is an effective way of ensuring that employees work hard for their own good and the good of the organization. These informed by the fact that it is result-oriented and it increases the efficiency of the employees. Such a system can be enhanced by motivating and recognizing those who work harder by compensating them in a better way. From an employer’s point of view, it has the advantage of paying the employees whatever you have agreed upon with the employee. The only disadvantage will be on the side of the employee because the employer can use that to exploit the employees. It is a good practice as long as the employer does not use it to exploit and violate the rights of the employee.
7. What are the advantages and disadvantages of organizational policies that mandate pay secrecy? Consider this question from the perspective of managers, employees, and owners. Is pay secrecy a good practice?
Pay secrecy is a well-known yet highly controversial policy in human resource management that has no real basis behind it. Realistically it is a form of systematic withholding of information from employees on either some or all aspects of salaries within a company that can come with both advantages and disadvantages. One of the disadvantages of this policy is that there are misconceptions about the distribution of compensation, reduced motivation, decline of the employees’ loyalty and trust in the company, and a decrease in the management’s ability to influence or guide the behavior of their employees. Advantages of pay secrecy are that there is a possibility of better managerial control of the organization’s processes, fewer conflicts overpay, less turnover, a better position for management when it comes to individual negotiations on salary with the employees.
One thing I will say when it comes to this policy is that every company I have worked for has a section in their department files located online in which an employee has the ability to pull up a pay scale for every position within the company. As an employee looking at this file, I have often wondered why my pay happened to be lower than the minimum that the company was paying for that particular role. When pay scales are increased, I feel that companies should raise the pay on current employees’ salaries if their performance warrants it to avoid any potential issues or turnover.
8. What obstacles exist to developing pay-for-performance plans in the public sector? How can these obstacles best be overcome? Do public sector pay-for-performance plans differ from those found in the private sector?
Some obstacles that may exist when developing a pay-for-performance plan in the public sector may be:
- Non-initiative by the managers to uplift the pay structure through performance.
- Lack of communication
- Unskilled managers or not having skills for determining the evaluation in the process.
- No set of rules for initiatives.
Pay-for-performance has become more utilized as a means to increase productivity and decrease the costs in the public sector. In a government sector, you will find that pay is often based on grades and seniority where the civilian pay had been graduated in the sense that different positions were assigned different grade levels which meant different pay. Once an employee in a government sector has been established they would have to work their way up in pay based on their seniority. This pay scale only works to a certain extent. Financial rewards are often a key motivator in the performance of employees. When the rewards are tied to measurable work output from employees, there is a belief that productivity will increase as employees will often behave in a way that will maximize their earnings overall. In order to overcome some of these obstacles with this particular type of pay scale, it is important that managers not only are well-educated regarding this structure but are possibly on the same structure as well. This will ensure that managers are aware of what it means to be on the same structure as their employees which means they will follow the same guidelines.