HR760_D1 HRM Total Rewards- Week #3: Pay Structures

In chapters 11-13, several types of pay structures are discussed. Select one of the pay structures, research to find a company that uses that pay structure, and discuss the pay structure and the effectiveness of that pay structure within the company that you selected.

Respond to the posts of 2 of your colleagues. Compare and contrast the companies (focusing on the total rewards plans) and the companies' pay structures. Your initial post is due by Wednesday and must be supported by academically sound references. A minimum of two substantive peer responses are due no later than Sunday.

Market-based salary structures are based on the going rate for a job in the external market and are built solely on what the market is paying for similar jobs. External data sources influence the salaries for market-based structures for similar jobs. Salary.com states that market-based structures are best used when the organization prefers to rely on the market for salary information and does not have a performance-based pay philosophy (Salary.com, 2021).

Goodwill of North Georgia utilizes a market-based salary structure expressed in terms of percentiles (25th, 50th, 75th. Goodwill targets the midpoint of their internal salary ranges for experienced professionals and targets between the minimum to midpoint for entry to intermediate level professionals (GING.org, 2021).

The Goodwill of North Georgia believes that the market-based structure helps the organization maintain a competitive advantage in the external workforce.

The text notes that market values do not always reflect internal equity (WorldatWork 2007 pg. 95). This can become a cultural issue as the pay practices may be perceived as unfair, especially by long-standing employees. When new employees are hired based on the current market rate, and it is the same or very close to the current salary of a long-term employee who had to earn their pay rate, this can cause resentment and impact the culture and productivity.

World at Work (2007) notes two interesting facts about market base pay structures:

o the quality of external comparisons is critical (pg 95)

o not all positions compare exactly to what is in the market, which can cause inaccuracy.

o Non-profit organizations typically pay less than the general industry (pg 94)

This adds an extra layer of uncertainty felt by some employees to the fairness or equity of pay at Goodwill of North Georgia. There has been a long-stated perception by employees that they are not paid enough for the work they are required to do daily. When employees discuss personal pay information with each other, it has a significant impact on the motivation and productivity of employees. This has been an ongoing struggle for senior leadership and a question continuously presented to the CEO by employees at town hall meetings.

The perception of effectiveness is opposites when looking from an employee viewpoint compared to seeing it from a senior leadership view. Leadership thinks this brings equity to their pay structure; however, employees do not see the equity or understand where the equity lies. Some believe that the market structure allows for manipulation by selecting comparison data that support the organization's narrative, which they use to validate the pay even if it is deficient. The text states that many organizations find it takes 3-4 years of thorough ongoing communication and education before employees and managers understand their compensation systems (WorldatWork 2007 pg. 100). This may be the solution to employees' perceptions that may not be true; however, this is not always the strategic steps taken.

Reference:

GING.org. (2021, January 12). Human Resource SOP_2021.pdf. Decatur; Goodwill of North Georgia.

Salary.com. (2021, June 28). Designing compensation structures: Which is right for you? Salary.com. https://www.salary.com/blog/designing-compensation-structures/.

WorldatWork (2007). The WorldatWork Handbook of Compensation, Benefits & Total Rewards. A Comprehensive Guide for HR Professionals; Wiley, J. & Son.