YesterdayMay 11 at 10:17am
Manage Discussion EntryCompensation structures should be designed so that they represent both external equity and internal equity. External equity is represented when job compensation is commensurate with the variables of the external market, while internal equity is represented when job compensation is commensurate with others who do similar jobs within the company. Variables that impact external equity are geography, industry sector, union membership, organization size or prestige, education and experience level of the workforce at large, among other considerations (Romanoff, et al., 1986). Internal equity is determined by the similarity or dissimilarity in job roles, similarity or dissimilarity in departments, and similarity or dissimilarity in qualifications, such as education and certification (Romanoff, et al., 1986). External equity should be considered as a larger priority than internal equity when designing a compensation package in such cases where the business operates in two or more diverse geographic locations (Romanoff, et al., 1986). Workers in metropolitan and rural areas might be paid differently based on the cost of living in that area as consideration for external equity, where workers in metropolitan areas might need to be paid more to offset the cost of living. It is also possible that workers in rural areas could be paid more than those in metropolitan areas if they are skilled workers and there is a scarcity of those resources in that area.
References:
Romanoff, K., Boehm, K., & Benson, E. (1986). Pay equity: Internal and external considerations.Compensation & Benefits Review,
18(6), 17-25. doi:10.1177/088636878601800602
9:20amMay 12 at 9:20am
Manage Discussion EntryThe compensation system tries to ensure fairness in deciding the worth of the workers and considering promotions or increments. In designing a compensation system, an organization must value the equity concept clearly define the wage and salary differentiation and career growth plans, is as to motivate and encourage the human resource to perform better. Internal equity is the pay of an employee relative to the pay that the other employees of the same organization are receiving. It is the assurance that the employer pays salaries which is commensurate to each job's internal value. External compensation equity is the pay of an employee relative to the pay of employees of other organizations. Salary structures are composed of pay grades that reflect the value of a job within both the internal organization and external job market. Compensation structures help simplify fair pay and market pricing analyses, making it easier to evaluate pay across job groups. As the market changes, HR professionals can adjust their compensation structures to assure that employees within the same pay structure are paid equitably compared to their peers. Employers receive compensation from a company in return for the work performed. Most people think the pay and compensation to be the same, but the fact is compensation is much more than just the monetary rewards provided by an employer (Romanoff & Boehm, 1986).
References:
Romanoff, K., Boehm, K., & Benson, E. (1986). Pay equity: Internal and external considerations. Compensation & Benefits Review, 18(6), 17-25. doi:10.1177/088636878601800602