Compensation Evaluation: Effective Compensation Strategy

Compensation Evaluation

Businesses have a variety of skilled workers, detailed oriented Human Resource department personnel controlling and regulating compensation. The human resource department’s job is to ensure that all employees are treated fair with good employment practices. People can make mistakes from time to time if they are not careful and do not double check their work. Sometimes, because of these mistakes some bosses don’t really care and use that as an excuse to pay employees little as possible. Let us take a small local hospital as an example that is wanting to expand its workforce and hire more certified medical assistants. As the new Human Resources consultant hired to assist in the development, I had discovered that there were some discrepancies between three certified medical assistants’ salaries. The first one is employee is named Susi and she is a 2-year employee who makes $28,000 annually. The second employee is named Tom who is a 5-year employee that makes $27,000 a year. The last employee is Raul who is a 10-year employee who makes $33,000 annually. All three of the certified medical assistants scored near perfect scores in their most recent performance reviews. Also, all three of them are below the market rate for their job in the local market. Business owners may have tired to make a profit off these employees, but we will dive deep to find out. As the HR consultant, I will expand on some possible issues about compensation that will including the discrepancy in the pay differences between the three employees, effective strategies for internal and external processes, and have suggested salaries for the three employees based on seniority. As an HR consultant I will develop a good compensation plan that will bring in talent, motivate and keep employees that are high performing.

There are laws prohibits employers from paying same level and job duties different pay because of race, gender, or any other discrimination. However, there is no law that doesn’t allow or enforces an employer to pay new hires more than long-term employees. This is one reason why we see a difference in pay for the three medical assistants. Between Susi, Tom, and Raul there is a $7,000 gap of pay for 8-year gap in years worked in the local hospital. Susi and Tom have a 3-year gap of working at that hospital, yet Tom only gets paid $1,000 less yearly compared to Susi. Raul and Tom have a 5-year gap and Raul gets paid $6,000 more yearly compared to Tom. This is a huge difference. This may be pay discrimination, but this only occurs when employees performing substantially equal work do not receive equal salaries for their efforts (Workplace Fairness, 2017). Some things taken into consideration should be used to determine pay are skill, effort, responsibility, working conditions, and establishment. The difference in pay are permitted solely if based on seniority, merit, quantity or quality of production (Workplace Fairness, 2017). Employers can compensate different employees at different rates of pay for doing the same job, as long as they do not break any equality laws. Raul, being the 10-year employee, more than likely has earned his rewards through seniority or length of service. One issue may be that Susi earning more than Tom. The differences in pay for Tom and Susi may be the result of past events, education, and experience.

Internal and External Equity

The way that compensation is decided for each position in a company is that companies analyze each job’s responsibilities, what the job or position contributes to the company’s mission, market value pay, and comparing the value internally and what the market values externally. How one employee’s pay package compares to others inside the same organization is internal equity. External equity compares pay packages to other outside the organization. By defining company standards on how employee performance is evaluated, companies can prevent internal and external equity issues. One way to figure out a better and accurate pay for the three employees, research will need to be done by figuring out what the offering rate is in different companies to determine market value salaries to offer to the employees. If done correctly, a job analysis is an efficient method to discover and describe the differences and similarities among jobs. Also, job evaluation is the process of collecting information from analysis and identifies a value for the job. This evaluation will be reviewed by upper management to come up with a fair compensation plan within the hospital’s budget and organizational needs. The employees will be brought in for discussions separately to go over what was discovered and what will be rewarded to them to make up for the financial differences (Thibodeaux, 2017). To prevent future pay discrepancies, employers should develop detailed job descriptions for each job to determine fair base pay levels to be able to pay their employees on a more equal scale.

Effective Compensation Strategy

An effective compensation and benefit plan can help attract, motivate, and retain employee if they target their desired workforce. The small local hospital needs to figure out what their budget is when it comes to benefits and compensation and what positions are needed to fill in order to accomplish their organization’s mission and goals. The HR consultant and upper management should work together to come up with a good compensation strategy to help bring in highly qualified medical assistants and retain them. The compensation and benefit plan should include cash, stocks, performance reviews, merit increases, incentives and noncash compensation like protection plans. Good compensation plans influence the attitudes and behaviors of employees and this can increase employee morale, which can have a positive reputation for the company. The compensation and benefits package should be communicated in detail to ensure the clarity in job responsibilities and expectations of the employee, when hiring a new employee.

Conclusion

Having or developing compensation and benefits plan that are effective is a great strategy that not only helps attract, motivate and retain highly skilled employees, but also help increase productivity, increase revenue but also reduce turnover. Minimum turnover will help avoid excessive expenditures in time and money in recruitment and training. When developing the compensation and benefit plan the budget, law, and organization’s mission and goals must be taken in account and kept in mind. Without one of them the plan would not be effective long term. Budget, law and organization’s goals and mission should be treated a foundation to a strong compensation plan.

References

1. Building a Market-Based Pay Structure from Scratch. (2019, August 16). Retrieved from https://www.shrm.org/resourcesandtools/tools-and-samples/toolkits/pages/buildingamarket-basedpaystructurefromscratch.aspx
2. Lumen Candela. (n.d.). Retrieved from https://courses.lumenlearning.com/boundless-business/chapter/managing-employees/
3. Thibodeaux, W. (October 31, 2017). How to Deal With Internal Equity Problems. Retrieved from https://bizfluent.com/12810935/how-to-deal-with-internal-equity-problems
4. Workplace Fairness. (2017). Pay or Compensation Discrimination. Retrieved from https://www.workplacefairness.org/pay-discrimination