Steps in developing internal consistent compensation system
Most organizations have developed robust compensation systems as a step of increasing employee motivation and achieving organizational goals. Armstrong and Tina (67) illustrates that compensation system is a mechanism that an organization use to reward its employees as a payback for their for their.
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Compensation system may provide benefits which are direct or indirect to the employee and the organization. Direct benefits for the employee may include wages and salaries whereas indirect benefits may encompass aspects such as good working environment, job enlargement and rotation, and paid leave or holiday (Armstrong and Tina 88).
A compensation system should be customized to ensure the organization has the right people with needed skills or knowledge. This will assist the organization achieve its goals. Compensation systems encompass five important areas which are wages, bonuses, benefits and clearly defined agreements.
In developing internal compensation system, an organization has to embrace sound steps for achieving its goals and mission. The first step which an organization can take is analyzing the compensation implication (Kurt).
On this aspect, the human resource department should assess how the compensation system developed will have an effect both on the employee and the organization. In this case both positive and negative aspects of the compensation system should be evaluated to justify the adoption of the internal compensation system (Armstrong and Tina 134).
Second, the organization should fix objectives of the compensation system to be adopted. This is an important step because it will assist the organization towards attaining the its goals (Kurt). An organization has to determine the actual benefits it will attain from the system being developed. For example, if the organization aims at increasing productivity of employees, sustaining organizational growth and development it should tie these aspects to the compensation strategy.
Third, the organization’s human resource management should compare actual conditions of the organization with its objectives to locate the gaps. This will involve assessing the prevailing conditions in the organization such as existing compensation systems, the number of employees and the profitability of the organization (Kurt). The comparison done will ensure the gaps existing in these areas are sealed by the new compensation strategy.
Fourth, focus should be given to the criteria that will reward and improve both employees at the top and bottom level of the organization. This will ensure equal pay rate management of all employees within the organization and avoid conflicts that might arise as a result of discrimination.
Fifth, the compensation plan developed should incorporate the organization’s culture and values aligned with the vision and mission. This will ensure any activity being undertaken within or outside the organization is focused on a common goal of achieving the organizational goals (Armstrong and Tina 124).
Sixth, an organization has to define the values and morals that should be upheld and strictly adhered to. Employees can be involved so as they can have the opportunity to give their contribution. In coming up with values and morals, the general and the specific objective of the organization should be upheld to avoid conflicts in the implementation process.
Seven, the reward scheme is one of the major motivational factors to an employee. It should be handled carefully because it will have a direct influence on the outcome of the employee’s job performance (Armstrong 65). An ideal compensation system should therefore be flexible so that it can be amended when a need arises. Lastly, the human resource department should communicate the compensation system that has been developed.
This process can be achieved through communicating the strategy to the relevant stakeholders such as the employees and the organization’s top management (Kurt). This aspect will ensure the employees and the top management understand the system before it is implemented. It will also give room for those who feel their views were not captured in the system to raise them for appropriate action to be taken.
Compensation policies of a company in Bahrain and its pay level policies
A pay level refers to the average amount of all rates paid to an employee by the employer. In formulating salary or pay level rate, the human resource manager should do a critical analysis before settling for a particular rate. The University of Bahrain is an institution of higher learning in the kingdom of Bahrain. The institution is among the best organization which has streamlined its compensation systems with institutional needs and employees’ requirements.
The University of Bahrain has aligned its compensation systems with the type of skills needed. This aspect has been an influential factor in determining the pay rate in the university. Also, the institution’s human resource management pegs its compensation scheme on duties to be performed by an employee.
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The University view the qualification for a particular position dictates the work to be performed; hence, this determines the pay rate. For example, when the university of Bahrain is hiring an individual for the post of a lecturer, the qualification required for the position, let say in an engineering department and school of business may attract different pay scale.
Also, the university considers the geographic location of the employee. Most employee’s of the university are foreigners, thus, the university human resource management understands the costs of living in different regions of the world differs. The university has devised its compensation system to include a reasonable period of contract, usually two years, but renewable. It also provides free and furnished accommodation, free medical cover, return air ticket for foreign employees, and allowances for shipping academic personal effects.
The university of Bahrain also has a commendable compensation policy. This aspect dictates the level of pay rate. Higher pay rate is given to best qualified employees so as to retain them. The university’s human resource management are of the opinion that highly qualified, and skilled employees are associated with high quality output.
Also, the university has embraced employee’s skill competence. The institution has a strong view that employees’ competence increases with experience and they become more effective and reliable. The university acknowledges the fact the employees’ output is important for the organization, there is a need to retain them through a competitive pay scale.
The university of Bahrain is a highly profitable organization. It records higher admissions annually and has several enterprises which generates more income. Thus, the institution has a higher pay scale mechanism which addresses all the needs of employees with different skill set and qualifications.
The university pay scale is non-discriminatory. It embraces “equal pay for equal work”. This makes both women and male employees to be paid equally depending on their qualifications and skills. Also, the institution has an employee performance review where the best performing employee is compensated regardless of the gender.
Armstrong, Micheal & Tina Stephens. A handbook of employee reward and management. London: Kogan Page Limited, 2005. Print
Armstrong, Micheal. Employee Reward.London: Chattered institute of personnel development, 2004. Print
Dessler, Gary. “Salary Inequalities at Acme Manufacturing”, Human resource Management, 2005. Print
Kurt, Nelson. How Can You Impact Motivation through Incentive Plan Design?, 2012. Web.