Advantages and Disadvantages of the Agile Compensation Structures

Advantages and Disadvantages of the Agile Compensation Structures:

Compensation refers to the cash benefits that are offered to employees as a form of exchange for hours worked or services provided. A good compensation plan ensures that there is an increased level of competitiveness both internally and also externally. Proper compensation attracts the best employees to work in the organization. When businesses pay employees too much, there is a danger of increased operational costs that are not commensurate with the services offered (Payscale, n.d.). When employees are paid too little, workers are demotivated and the company finds difficulty in attracting the top talent. Similarly, it becomes impossible to attract top talent in situations where employees are being offered little pay.

Advantages of the Agile Compensation Structures

Some of the agile compensation strategies that organizations use are the job-based ranges that are possible with pay software like Payscale. The Advantages of these agile payment strategies are as follows:

Incorporates the Agile Human Resource Values in the Pay Structure

Employees benefit more if the pay and compensation plan incorporates learning and sharing of knowledge between employees. Apart from this learning and knowledge sharing exercise, some of the contemporary organization uses these agile compensation strategies to offer rewards to the best performing employees without necessarily inflating the financial resources (Payscale, n.d.). For example, the focus is on extending into individual personal wealth, wellness, and health and ensuring that the right culture that inspires sufficient creativity and purpose is created as part of the pay structure.

Determination of the necessary payments for the new and hybrid jobs

For organizations that are creating new departments, there is also the need to create and fill new jobs. Because there is no market going rate information that determines the market pay rate that could inform the pay decision, the business will have no choice but to use a job-based structure to determine the value of relevant skills in the organization and how to compensate these skills based on the value they provide the organization (Payscale, n.d.). For instance, a contemporary organization is creating positions of data engineers to design the software infrastructure of the e-commerce segment of the business set to be introduced. Because there is not much data that determines how much these data engineers are paid.

Identification of the pay structure for the fast-moving volatile jobs

In the companies, there are fast-moving jobs whose rate of unemployment is very low and there is very few skilled personnel. Some of these fast-moving jobs are found in manufacturing, finance, technology, and computer science fields. Agile Compensation Structure which is powered by software such as Agile can notify the employer of the specific changes in the market rate pay. This notification ensures organizations design the right payment structure so that companies do not suffer when their in-demand employees handling specific and inform jobs are poached by competitors.

Identification of pay structure that reflects the realities in the society

The realities in the society are that employees are now aware of their rights, there is an increase in the parental share of responsibilities, female employees may require longer leave days, in some countries, there is a definite national living wage that employers must adhere to and employees are, now more than ever demanding a more transparent compensation structure. Organizations use the agile compensation structure to ensure that the pay levels reflect the needs of the employees in the current world (Choice, 2021).

Agile Payment Structure helps an organization avoid the, ''one size fits,’’ all

The, '' one size fits all, '' approach to pay may have worked in the past but not anymore. Currently, there is diversity in the workforce where the millennials, the generation Y, and the baby boomers are now in the workforce (Hou et al., 2016). Some members of the millennial generation are fast rising and even entering into management. These have different needs and aspirations. Contemporary organizations can use agile to design the right compensation for Chief Executive Officers that includes bonuses and salary increments. They may need to discard the old,'' one size fits all approach,'' where all employees were compensated with share ownership plans.

Disadvantages of Agile Compensation Structure

Agile payment structure delivery structure is often done in steps or on an incremental basis therefore it can be difficult for the organization to predict the progress of employee satisfaction based on the skills increase. It is also difficult to accurately predict the change in productivity and savings in time, resources, and money that the organization will benefit from as a result of adopting an agile payment structure. Some pay issues remain unresolved even with using agile compensation structures such as Payscale. One such issue is employee compensation perception. Change in attitude, productivity, and behavior may be minimal if the employees have an attitude that they are poorly compensated. There will be no super increase in company productivity if even the highly paid employees do think that they are paid less. The implementation of the agile compensation strategy may be difficult if the employers do not bring employees along with them. For example, the workers may resist the strategy and this can become counterproductive (Worldatwork, 2007). Unless proper planning and budgeting are in place, there is a possibility of further increases in organizational operational costs that occurs as a result of training, licensing, operation, and installation of the pay determination software.

References

Choice, E. (2021, May 27). Agile Compensation Strategies: An Employers Guide. Hppy. https://gethppy.com/hrtrends/an-employers-guide-to-agile-compensation-strategies

Hou, W., Priem, R. L., & Goranova, M. (2016). Does One Size Fit All? Investigating Pay–Future Performance Relationships Over the “Seasons” of CEO Tenure. Journal of Management, 43(3), 864–891. https://doi.org/10.1177/0149206314544744

Payscale. (n.d.). How to Design a More Agile Compensation Structure. PayScale. Retrieved September 8, 2021, from https://www.payscale.com/hr/compensation-structures

WorldatWork. (2007). The WorldatWork handbook of compensation, benefits & total rewards:

A comprehensive guide for HR professionals. John Wiley & Sons.