1. Explain the similarities and differences that exist among merit pay systems, incentive pay systems, and person-focused pay systems. Of the three of these pay systems, which one would you implement at your company? Explain your choice.
Merit pay is a system that gives workers a permanent pay raise with regards to past performance. The system fails to create an apparent relationship between pay and performance and do not also pay better performers extra in overall compensation.
Incentive payment is a system of payment where a proportion of earnings is associated to the level of employee effort or the degree of output. It is used to cover plans where employees may be expected to perform well devoid of any necessary relationship to production. It is known as compensation that varies depending on an already established formula, individual goals, group goals, as well as company earnings. The pay system adds to the basic pay as a onetime disbursement. Companies design it to control costs along with motivation to employee productivity.
Person focused pay system rewards workers for obtaining job related skills as well as relevant knowledge. There are usually two types of experience based pay systems i.e. pay-for-knowledge system and skill-based pay system. The system is thought to provide job improvement as well as security to employees acting as a motivation factor.
In my company I would implement the merit pay system. Every organization seeks to have a higher performance and productivity. The merit pay system is able to motivate work performance and raise practice competence. Incentive systems only focus on promoting a relationship between pay and performance without looking at efficiency.
2. You are the compensation manager for a local Internet training company. Your CEO would like you to determine how well the salaries he pays his instructional designers measure up to other companies in the same field. Outline the steps you would take to determine this and compose a memo to your CEO showing your results. Also, make recommendations to your CEO concerning the pay rates based on the information you gathered from your research.
For any business, having good employees is a valuable thing. However, retaining them with satisfactory compensation is an issue because they will always look for potential areas to run to when they feel they are not appreciated accordingly. Companies therefore have to carry out compensation comparison between themselves and industries that they are in. To successfully do this, as the compensation manager;
The first step will be evaluating the stage of growth of the company compared to the rest. A well grown company will have higher pay packs.The second step will be evaluating the nature of transactions and the cost benefit after every transaction. A company with big volumes of transactions will have high pay packs.The last step will be comparing the competence of employees in the organization and their remuneration to the competence of employees in other organizations and their pay as well. If the organizations have very competent employees they are likely to pay higher salaries.
Memo
After evaluating the salary rates in our company and other companies in the instructional design field, we have to adjust our salaries upwards since our organization is at the maturity stage, having at least one hundred client transactions every day and has employed a very competent workforce. According to the cost benefit analysis of this decision, I recommend that it is important the salaries be reviewed in the coming month pay.
3. What is job evaluation, and how is it used by compensation professionals? Discuss the various techniques used in job evaluation.
Job evaluation is an organized process for evaluating the relationship between a job and its value to the organization. It entails a comprehensive examination of all positions responsibilities, tasks, and comprehension and skill necessities and assesses the worth to the employer of the job eventually providing an internal position in the organization. It is essential to bear in mind that job evaluation measures the internal relativity of the position, not the individual in that position.
There exists three major techniques of job evaluation;
Ranking method: this method arranges jobs from the highest to the lowest, categorizing them based on value to the organization, the job at the top having the highest value. They are ranked in each division and then the division rankings are joined to grow an organizational ranking.
Classification method establishes a number of job groups or classes which are assigned to specific classifications. The method puts groups of jobs into job grades and every separate class could for instance include an office with unskilled workers, semi skilled workers, skilled workers and executives.
Point method is the commonly used technique in the contemporary world. Jobs are articulated in terms of primary factors, where points are allocated to every factor following prioritizing every factor in order of significance. Finally, the points are added together to establish the salary for the job. Jobs that fall on similar summed points are positioned in parallel pay grades.
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