Pay Systems in U.S. Organizations
Nicole M. Hawkins
Session Long Project
Dr. Kyle Steadham
Introduction Pay systems within the United States vary from organization to organization, as there is a vast divide in compensation scales amongst the public and private sector. This paper will examine the difference of internal and external equity; and if employees are compensated fairly. This will also lay-out how or what the factor for determining employee pay-rates and basis for increase. It will also address Google as a private sector organization and how it motivates employees to increase output, and finally recommendations for pay system improvements.
Internal & External Equity Organizations should conduct an equity pay analysis that allows for evaluation of the compensation plan based on fairness and employee compensation. The impact from both internal and external factors is vital when building pay structures. Internal influences involve employees who perform the same type of work, but have different responsibilities within the scope of h/her position, or a specific department within the same company. A structured pay scale could reflect the highest pay to be at the top, and the lowest pay at the bottom; much of this based on responsibility. Employees are able to view benefits that may be achieved based on the rate of responsibility assigned. The rate of pay, and work conditions are important factors for employees; much of which will affect output and/or rate of work. (HubPages) External influences are just as important as those internal to the organization. Evaluations of external factors allow an organization to remain competitive in that particular market. It is important to understand that similar businesses are competing with other organizations for top talent. In comparison, organizations typically look at what others in the field are paying for the same position. Managers are responsible for keeping pay and compensation competitive between the markets; failure to do so might result in the raiding or poaching of internal talent. (HubPages) I do not believe that pay systems are adequately or equally fair. There are pay/employee factors that should be taken into consideration. The pay range from private to public sector positions is truly eye-opening, and should be considered and reevaluated on a continual basis. A real-time example: I currently work for a large military medical organization, and I have just elected to leave my current position for another area within the organization. I work with six individuals who are paid more than I am; all have less education, experience, and responsibility than I do. There is no equity in the current standard, or process of how personnel are compensated. To date there is nothing that stipulates if an individual works at this level or beyond h/she would be compensated at this rate.
So, how did this happen? Failures in management and the promotion process cost our department to lose the higher paying graded slots. Understanding that there are no promotion opportunities now, or in the future for me; other department chiefs took notice and began head-hunting me for better opportunities that will result in higher pay.
Pay Factors & Increases Several approaches are commonly used for determining salary increases. Performance/merit systems are the most common. Across-the-board or general increases are often tied to increases in the cost-of-living index. For unionized employees, the collective bargaining agreement will include a negotiated provision for wage increases that usually includes a fixed general annual increase that may be combined in some instances with merit provisions and cost-of-living escalators that add to the across-the-board increase when the cost-of-living index goes up more than a predetermined amount.
Many employers utilize a grid system with low,