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Making Decisions Regarding Employee Compensation Rates Essay

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Updated: Sep 13th, 2022

In today’s complicated financial situation, managers responsible for the compensation decision-making process appear under the great pressure because of the necessity to find the compromise between the desire to treat the personnel right and still fit into the tough budget. In this paper, the factors that need to be taken into consideration while making decisions regarding employee compensation rates will come into focus. Overall, evaluation of facts suggests that the main factors to consider for the best decision-making as for the funds allocation for the salary payment are budget limitations, company goals, the situation in the human resource sector, and the workers’ performance rates.

The decision-making process for the compensation rates approval is a complex process that needs to take a row of circumstances into attention. First, finance committee and executive committee need to take into consideration the fact that the budget of the institution is limited, and the raise in compensation rates can be challenging under such circumstances (Hirsch & Schumacher, 2012). In addition, there is an improved employee turnover over the past years and many people are in a queue to be employed in the organization. On the other hand, the members of the board of directors do not have to forget about the importance of proper financial motivation for the best performing workers. Based on the recommendations offered in Gerhart, Milkovich, and Newman (2014), the right decision lies at the intersection of these factors. In other words, the members of the body of directors need to spend the budget so that it is not exceeded. However, the compensation rates increase for the best performing employees is the right strategy. Thus, the CEO’s initiative to give 1% raise of salary for the personnel with the good results is economically justified even in the lean financial times. The rationale for this position is the significance of financial motivation for the highly-qualified workers since they are the strategic assets of the company that can be lost or deteriorated in case of the ill-conceived compensation decisions (Huber, 2013).

In conclusion, when finance committee considers the problem of funds allocation on the salary payment, the balanced view is the best solution. The priorities for the CEO in the compensation decision-making are meeting the budget limitations and motivating the best-performing employees.

References

Gerhart, B., Milkovich, G., & Newman, J. (2014). Compensation (11th ed.). New York, NY: McGraw-Hill.

Hirsch, B. T., & Schumacher, E. J. (2012). Underpaid or overpaid? Wage analysis for nurses using job and worker attributes. Southern Economic Journal, 78(4), 1096-1119. Web.

Huber, D. (2013). Leadership and nursing care management. London: Elsevier Health Sciences.

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IvyPanda. "Making Decisions Regarding Employee Compensation Rates." September 13, 2022. https://ivypanda.com/essays/making-decisions-regarding-employee-compensation-rates/.

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IvyPanda. 2022. "Making Decisions Regarding Employee Compensation Rates." September 13, 2022. https://ivypanda.com/essays/making-decisions-regarding-employee-compensation-rates/.

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IvyPanda. (2022) 'Making Decisions Regarding Employee Compensation Rates'. 13 September.

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