Determining appropriate compensation and benefits represents one of the many challenges in HRM.
Determining appropriate compensation and benefits represents one of the many challenges in HRM.
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- Two important factors in determining pay for any given position are the position’s pay in relation to the marketplace (external equity) and the position’s pay relative to others within the organization (internal equity).
- Evaluate potential pros and cons of using either external or internal equity but not the other.
- Assess how the Equal Pay Act (EPA) of 1963 and the Lilly Ledbetter Fair Pay Act of 2009 might impact the use of external and internal equity to determine pay.
- What action steps should HRM consider?
- Multiple publications regularly report on CEO compensation. The themes in those reports are usually similar including (a) CEO pay rates tended to grow more rapidly than other executives during the last three decades, (b) CEOs are often paid 250 times (or more!) than their average employee, and (c) CEO pay may not be dependent upon company performance.
- Evaluate executive compensation. Is it too much? Is it justified? Is it equitable?
- What are the potential factors that contribute to how executives are compensated?
- Although the health benefit landscape for organizations has changed as a result of the Affordable Care Act (ACA), assessing the potential strategic value of health benefits remains an important leadership question.
- For example, are health benefits primarily a cost issue to manage or eliminate?
- Are health benefits primarily an attraction and retention tool? Or, do they affect productivity and can be considered a potential business advantage?
- Evaluate the role of health care benefits in organizations.
- Lawler (2008) proposed that organizations shift their compensation policies to focus on the person rather than the job. In other words, pay should be based on the quality of performance as tied to strategic objectives rather than job categories or industry pay rates.
- Evaluate the pros and cons of Lawler’s position.
- Assess the leadership issues that are embedded in Lawler’s view.
- Consider the following reflection questions:
- Why do people choose their jobs or careers?
- What causes people to be satisfied with their jobs or careers?
- What causes them to leave their jobs or careers?
- Assess the critical factors pertaining to job selection, satisfaction, retention, and performance. In other words, what can HRM do to attract, satisfy, retain, and stimulate high performance in workers?
Lawler, E. E., III. (2008). Rewarding excellence: Pay strategies for the new economy. San Francisco, CA: Jossey-Bass.
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