Paying employees fairly is a feature that is believed to be good for any business. Underpaying employees is a receipt for disaster because many leave the company in search of greener pastures. Overpaying employees is also a problem because the profitability of the business would be compromised. In this way, companies make use of market data to “benchmark” jobs using compensation surveys to determine the prevailing rate of employee salary in the market. Salary surveys are taken approximately once a year and organizations needs to consider employees needs in determining their salary levels. In reality, many employees would like to be included in determining their pay because it makes them feel valuable to the company (Milkovich, NewMan & Gerhart, 2013).

A salary survey makes uses of standard and proven processes of collecting data as well as statistical analysis to evaluate how much firms pay for a particular job within a specific industry. The purpose of a salary is to assist the firm design and control their compensation structure in order to maintain internal uniformity and also remain at par with the available industry standards. The salary survey is designed by gathering appropriate data that relates to the market conditions. There are custom surveys that try to collect data on specific questions from a small selection of peer firms. The custom surveys are created by a particular firm for their own use. On the other hand, standard surveys are designed to cover an entire year through investigation of same rage of firms and jobs. These are broad surveys can be purchased by other firms that did not participate or made available to the member/participant firms. In essence, the designing of these surveys involves careful planning and proper execution to gather the correct data. In this way, they consume time, people resources and economic investment to access a wide range of participants (Milkovich, NewMan & Gerhart, 2013).

Adjusting the pay levels according to the results from a survey is important because it ensures that firm internal structures remain stable. In reality, the organization’s plans become internally equitable and also they maintain an externally competitive advantage. Additionally, employees feel motivated and encouraged to work in a firm that pays comparably to the industry levels. When employees feel they are underpaid in a certain sector, they make plans to look for better positions with a better salary elsewhere. Organizations would be suited to use salary surveys conducted by third parties because of the cost involved. These surveys made by associations, survey vendors, and consultants are relatively cheaper and more inclusive than those done by a single company. In addition, surveys done by vendors or associations involve a large number of participants and this gives more accurate results (Milkovich, NewMan & Gerhart, 2013).

The base pay for employees should be set at a reasonable rate to ensure that the workers can manage to meet their basic requirements. The issue of performance based pay can be introduced because it has various advantages that can motivate employees. Performance-based pay has been found to motivate employees to become high achievers. In this way, employees focus on areas that they perform better and enhance it with the inspiration that rewards would be offered for improved work. However, there are disadvantages to performance-based pay including the fact that it encourages competition and eliminates collaboration. In reality, employees focus on improving their performance at the expense of working in teams to better the company. Additionally, it would be difficult to measure the level of performance in various areas of work (Randhawa, 2007).

The competitive pay policy I would recommend is based on market pay level. This is a competitive pay policy because it relates to the market conditions experienced in each industry. This policy offers flexibility in recruiting employees, enhances the chances of retaining employees, and offer competitive advantage for the company. In reality, this pay policy is inclusive because it includes the normal employees’ benefits and a competitive salary within the market. It would be wise to choose this policy because it is inclusive and keeps the workers satisfied because they know what is available in the market. The market pay level policy also includes nonmonetary benefits because it enhances employee morale in the workplace. Employees feel satisfied knowing that they are working and compensated fairly and this pushes them to better their work to retain the job (Randhawa, 2007, p. 212).

The policy would depend on the circumstances of the employers because if there is no money available it would be difficult to get compensation. This policy would not work if there are no funds because no compensation can exceed the money that is available. When the money is ready and available for the employer, it would make sense to pay employees according to the market level. Lack of funds would mean that a different policy has to be assumed because it would not make any economic value to the company. For instance, in times when there is economic instability in the country or across the globe, the company may be affected to an extent that it cannot pay as per the market level. This would mean that the company has to reduce it pay to fit the economic climate that is facing the country and the industry (Randhawa, 2007)

References

Milkovich, G., NewMan, J., & Gerhart, B. (2013). Compensation: 11th Edition. New York: McGraw-Hill Higher Education.

Randhawa, G. (2007). Human Resource Management. New Delhi, India: Atlantic Publishers & Dist.