Please read each passage below and respond to each part. I DO NOT need a reference or title page, however please provide the reference(s) underneath the passage. Please label as I have done below, example Part 1 and place your response along with the reference. Please keep each one on the same document! Please cite properly and use correct grammar. DUE by 6PM CST 5/23/22
Many steps must be taken to develop a competitive pay practice within the organization. When moving toward a competitive pay system, an organization must first get to know their market, benchmark salaries, develop a compensation plan, find pay inequities, and communicate their strategy (Bisk, 2020). To develop a competitive pay practice, it is important to first know the market in which the organization is doing business in. Getting to know competition within the area is critical to understand if pay is fair, above average, or below average in their industry. Once the market has been analyzed, it is important to identify employees who are at a high risk of turnover by benchmarking salary ranges annually to see if it has to do with pay (Bisk, 2020). Then, create a compensation plan that supports organizational strategies, goals, and objectives to mitigate future issues that can affect employee engagement and turnover. After that process, utilize it to determine if there is fair pay within the organization. Finally, communicate the compensation strategy to boost morale and engagement through honesty and transparency so employees feel valued (Bisk, 2020). These steps are a best practice to remain competitive and keep employees happy while building a stronger work environment and culture.
External equity refers to the employees perception of being treated in the same way as employees in the same job but at a competing organization, and internal equity refers to the employees perception of being treated in the same way as employees within their current organization (Torre et al., 2015). One way to develop a competitive pay system is to utilize internal equity by enforcing a fair work environment between employees within the organization and external equity to balance the pay rates from other organizations within the same industry to maintain a competitive advantage. The steps used to develop the system help analyze internal employees and external business to create a fairer yet motivating and engaging organization. The steps help keep up with a competitive market by benchmarking current employees with other organizations’ pay systems and compensating appropriately based on their goals and values.
Bisk. (2020, February 25). Developing a Competitive Pay Practice in Your Organization. Villanova University.
Torre, Edoardo Della; Pelagatti, Matteo; Solari, Luca. (2015). Internal and external equity in compensation systems, organizational absenteeism, and the role of explained inequalities. Human Relations: Sage Publications.
In developing a competitive market pay system, HR specialists along with compensation experts assess organizational needs through the examination of competitive pay structures that in turn lead to the adoption of more progressive measures in an overall job description pertaining to necessary positions needed. Pay structure can further lead to the governance in pay decisions of starting pay, merit pay increases, and promotional pay increases (Managing pay equity, 2021). When initial development in a competitive market pay system in various areas of strategic analysis, observation of competitor’s pay practices, structure to external market pay rates, and compensations policies (Martocchio, 2017 sec 7.1), organizations can further posture toward the attraction and retention of highly qualified candidates.
Internal equity can best be viewed as an assessment of job analysis and job evaluation (Martocchio, 2017 sec. 6.1) to differentiate within the company for those positions that may require more responsibility and oversight. These pay differentials can be an imperative tool in managing organizational funds to ensure that the correct compensation is applied from within to select areas deemed critical in meeting organizational goals.
When examining external equity, organizational leaders view the competitive market’s direct pay structure as providing a more promotable platform in an effort to grow their talent pool of viable candidates. Rand (2015), specifies that remaining competitive is managing the amount in which payment would have to move to match the market rate (para. 5).
Martocchio, J.J. (2017).Strategic compensation: A human resource management approach (9th ed.). Pearson
Managing pay equity. (2021, April 28). SHRM.https://www.shrm.org/resourcesandtools/tools-and-samples/toolkits/pages/managingpayequity.aspx(Links to an external site.)
Rand, D. (2015, January 6). What Does It Mean to be Competitive with Employee Pay? https://hrdailyadvisor.blr.com/2015/01/06/what-does-it-mean-to-be-competitive-with-employee-pay/