Internal data would drive up labor costs and create product - market problems.
If external market data are emphasized and a job
is paid lower internally, comparisons that employees make internally would result in dissatisfaction.
An organization should consider its strategy, what
jobs and/or functions will be critical for success and market-competitive pressures.
Monitoring Compensation Costs One way to examine the difference between policy and practice is to compute a compa-ratio , which is an index of the correspondence between actual and intended pay. 11-
Globalization, Geographic Region and Pay Structure
Pay structures differ across countries
in level and relative worth of jobs.
Although expatriate pay and benefits
have been linked more closely to the home country, this link now appears to depend more on the assignment’s nature and length.
The Importance of Process: Participation and Communication
Participation should involve those who will manage and be affected by the process.
Participation includes recommending, designing and communicating a pay program.
Typically, pay-level decisions are only made by top management.
The effect of communication is likely to impact employees' perceptions of equity.
Managers must be prepared to explain why the pay structure is designed the way it is and to judge whether changes should be made to the structure.
Equity theory suggests that social comparisons are an important influence on how employees evaluate their pay.
Employees make external comparisons between their pay and the pay they believe is received by employees in other organizations which may have consequences for employee attitudes and retention.
Employees make internal comparisons between what they receive and what they perceive others within the organization are paid. These comparisons may have consequences for internal movement, cooperation, and attitudes (like organization commitment).
Such comparisons play an important role in the controversy over executive pay.
Pay benchmarking surveys and job evaluation are tools used in managing pay level and job structure components of the pay structure.
Pay surveys permit organizations to benchmark their labor costs.
Globalization is increasing the need to be competitive in labor costs and productivity.
Pay structures is moving to fewer pay levels to reduce labor costs and bureaucracy and shifting from paying employees for narrow jobs to giving broader responsibilities and paying them to learn necessary skills.