Understanding the concept of seniority and merit pay plans
Seniority as it applies in organizations refers to the situation whereby a person is put in charge of a group of people in an organization. It could also be a group of persons put in charge of another group in the organization. The most experienced persons mostly take the seniority position due to the experience they have, skills and knowledge.
According to HR Guide (2009, 1), the concept of seniority generally means granting preference to the employees who have served the organization for a certain period of time on which such preference are accorded.
The notion of seniority is meant to ensure that there is security to those persons who have rendered long service to the organization. Preferences are given according to the length of service rendered by the employees.
Merit pay plans on the other side are employment incentive plans that give equal consideration opportunities to the employees without taking in to account the financing sources.
According to HR Guide,” The merit increase program is implemented when funds are designated for that purpose by the institution’s administration, dependent upon the availability of funds and other constraints” (HR Guide 2009, 1). The employees according to merit pay plans are compensated according to their performance at work.
Strengths and limitations of seniority and merit pay plans within an organization
According to University of Illinois. (1947, 1), one of the key strength of seniority and merit pay plans is that they act as motivators to the employees. The employees work hard because they know that they will be compensated for their work. The employees wishing to benefit from the seniority plans are empowered to continue working for the company.
Through seniority also, the qualified, skillful and experienced employees are promoted to the tenured positions in order to offer them job security. The other strength is that the merit pay strengthens the organizations performance appraisal because they separate the individual performance and that of the company.
This also helps the company to compensate employees who are high performers thus satisfying and retaining them in the organization. The major limitation of these plans is that it is not possible to measure merit and their compensation. This also makes the plans to be more subjective and therefore may not necessarily achieve the ultimate goals.
When deciding between the merit pay and seniority concept, one of the factors to consider is that the jobs already held must be permanent and acquired on merit. The organization must also be strong enough to support such plans and there must be legal system allowing such plans.
Incentive pay plans and employee performance
The incentive pay plans, both individual and group motivate the employees to achieve high performance in that the employees are sure that they will be compensated if they achieve a specified level of performance. They enable them to set their own goals and work to achieve them. They also perform personal evaluation in order to improve their performance so as to qualify for the reward.
The potential weakness of these plans is that they ignore the risk factor by assuming that the employees will actually perform what they are rewarded to perform which may not always be guaranteed (University of Illinois, 1947, 1). They may also discourage some workers because of ignoring the reason for low or high performance by different employees.
There may be some reasons that favored one employee and not the other. These potential weaknesses could be addressed by considering all the factors that are likely to affect the employee performance. A model should be devised to incorporate all the factors and ensure that the employees are working under the same or similar environment.
The incentive pay plans work better in teaching field where it is possible to measure the merit of the teachers although not with certainty. It is possible to subject teachers into similar learning environment and measure their output. The performance of the teacher can easily be measured by the performance of the students and also taking into account the factors that affect learning. It is possible to incorporate these factors in the appraisal model.
Conclusion
The seniority and merit pay plans are important in an organization because they enable the organization to recognize and reward high performers in the organization.
Reference List
HR Guide (2009).HR Guide to the Internet: Compensation, Incentive Plans, and Merit Pay. Web.
University of Illinois. (1947). Seniority and job security. Chicago: Institute Of Labor And Industrial Relations. Web.