Internally Consistent Compensation Systems
Internally consistent compensations are systems that try to compare the value of each job within the same company against all the other tasks found in the same group. It represents the structure of the position, descriptions of that role and recognizes differences in the characteristics of jobs (Holland & Powell, 2014). These systems have a principle that suggests that jobs with higher qualification, more responsibilities and duties are more complicated and should be paid higher than jobs of low responsibilities and skill.
A valid employee compensation program should be able to balance two aspects which are worker motivation and labor costs. For a small business that is trying to develop a vast organizational workforce, it has to make sure that the employees in that company are motivated adequately and will not look for jobs anywhere else (Paloviita & Viren, 2013). This can be done through maintaining a fair pay in employees with jobs of the same category. This is called internal equity.
These reasons explain the importance of creating an internally consistent compensation system. These include fairness perception among workers which in turn will motivate the employees. If employees in an organization look at other agencies and note that the amount of pay they receive is similar to theirs, they will value and respect the front-runners of the group as they are fair to them (Paloviita & Viren, 2013). When employees start seeing you as a fair leader, they will respect and listen to your guidance.
According to Martocchio (2017) reduced exposure to discrimination is another reason as to why these compensations should be created. Better equity of employees offers better discrimination protection. Workers of the same role should be paid equally without any discrimination, and this will result in a good coordination and togetherness among them.
Consistent compensation helps in improving the structure of team of an organization. In organizations that workers work as a team, they should be compensated as peers and paid the same level. This way, they will improve the work they perform and work as a team (Paloviita & Viren, 2013). Finally, if employees are compensated at a uniform standard, the chances of maintaining a consistent performance standard are also high.
Internally consistent compensation systems building is a continuous process that involves the coordination of many steps. It begins by gathering of background data related to the current compensation systems in the industry. This is followed by the definition of the compensation philosophy. Performing internal analysis which involves the creation of internal, external and individual equity follows. It involves determining benchmark jobs, rank and group positions, doing salary survey, work locations among many others. This step is followed by the selection of data to be used in external comparisons of the same, and it weighs comparisons for skill, effort, and responsibilities of individuals (White, 2015). Surveys and comparisons to compensation philosophy and equity in the analysis should be ensured by the basis of using a non-biased review of the finding and the steps states below should be followed.
According to White, (2015) the process is further a long one, but it entails creating a market pay line, developing a pay-structure by grading jobs, calculate ranges and gross costs of benchmark positions. After this, the findings and recommendations to the principal decision makers are presented which in turn leads to adjustment of the compensation as necessary.
After the findings are presented, the compensation should be implemented and evaluated in effective dates and roles and responsibilities. The revised compensation system should be identified and taken to the stakeholders, train them on this revised compensation system, creating evaluation platforms and comparisons and timelines for doing them and finally adjusting the compensation system as necessary after reviewing the evaluations and comparisons (White, 2015). These steps will help in creating an effective compensation system.
HOLLAND, T. J., & POWELL, R. (2014). An internally consistent thermodynamic data set for phases of petrological interest. Journal of Metamorphic Geology, 16(3), 309-343. doi:10.1111/j.1525-1314.1998.00140.x
Martocchio,, J. J. (2017). Strategic compensation: A human resource management approach. Hoboken,: NJ:Pearson.
Paloviita, M., & Viren, M. (2013). Are Individual Survey Expectations Internally Consistent? SSRN Electronic Journal. doi:10.2139/ssrn.2213716
White, R. (2015). A Strategic Approach to Building a Consistent Global Rewards Program. Compensation & Benefits Review, 37(4), 23-40. doi:10.1177/0886368705278061