Internal and External Pay Equity in Abu Dhabi - Case Study Example

RUNNING HEAD: INTERNAL AND EXTERNAL PAY EQUITY IN ABU DHABI.  Topic: Internal and External Pay Equity in Abu Dhabi Name: Institution: Internal and External Pay Equity in Abu Dhabi Introduction Pay equity can be termed as equality in payment for the job or services rendered by a party to either an individual or corporation at large. However several aspect also linger when assessing the same term where researchers have derived and statistically acclaimed that the term can also be referred to as a process of job evaluation, this has led uproar with many analyst thinking otherwise, urging that pay equity also does evaluate the person and their performance along the process (McCann, 2004). Background of pay equity in organizations Pay equity in organizations has been achieved through petition and emphasis by law for the employers to oversee that they practice equity to all categories of employees with no discrimination. Employees who hold the same level of qualifications and experience despite of their race or gender have fought for their rights to ensure that they have equal pay (Patten, 2000). This has not been the case for a long time but labor laws have been amended and emphasized all organizations in United Emirates to adhere to the law and that has been the case all along. Equity in payment of the employees has also increased on productivity of the employees as they are not discriminated. Instances that some employees are more favored than others in payments had made most of the employees to demoralized because they used to do the same work but their compensation is much less. According to McCann, (2004) employees who are paid more would view themselves as superior and would mainly seems to be more powerful over the rest hence bringing unnecessary conflict between the different categories of payment discrepancies. Formulation of pay policies and practices in organizations has brought forth a new dimension on how human resources have been viewing pay equity. The policies are currently emphasizing on ensuring that there is equity in the employees who are being employed and their terms of employments are ensured that they are harmonized and none discriminatory. Pay equity have become a federal law, this law has the intent of protecting employees against any form of pay discrimination which would either be based on race, gender, age or any class that seem to be protected (Rhoads, 2001). The law also compels employers whose habit has been to examine the internal pay practices they have put in place and review them to comply with the Act. How organizations can set fair pay systems Organizations have strived to set fair pay systems by formulating policies and practices which are used by human resource departments when structuring different pay packages for the employees in the organization. The policies have been structured in line with Fair Pay Act meant to ensure all the employees in an organization and have the same qualifications and experience have been remunerated in the same way despite of their age, gender or race. The basic pay policies and practices equalize all the employees and makes sure that the payments are reviewed regularly and equitably. In instances which an organization will not be able to set fair pay systems they experience difficulties retaining employees for long and those who are there most of the time they are demoralized because the employees are divided between the different payments which are discriminatory. Although the organization would try to streamline its operations without proper implementation of pay equity the productivity and the morale of the employees would always remain low. It is therefore recommended that organizations should implements fair pay systems not only to pay the employees equitably but also motivate them and improve their participation in activities of the organizations to add value to the goods and services which they offer. Pay Equity in Abu Dhabi There have been pay inequality in the local, semi and government for both expert and citizens. The citizens are highly paid in all the three sectors government, local and semi than the experts. This would have been as a result of discouraging foreigners to flood in the market and gives the local added advantages. For example in the government is the one which has the largest discrepancies as the total payment of the locals are 84000, 51,000, 40,000 30,000 and 25,000 for grades Special 1, 2, 3 and 4 respectively against experts of the same grade who get 50000, 27000, 25000, 22000 and 19000 respectively while, the experts does not get such supplementary allowances. This form of discrepancies would discourage foreigners who most of them are expatriates who add value to the services and goods being delivered. The worse of all is that the citizens of the same grades are given supplementary allowances at the tune of 62000, 35000, 26000, 19000 and 16000 respectively. Such discrepancies would scare aware experts hence being of less participation in development of the locals and governments. The experts who work in United Arabs Emirates in the semi are discriminated against the nationals who are paid much higher. The locals are paid a total of 93715, 70585, 59701, 47226 and 39562 for the different grades special, 1, 2,3 and 4 against the Experts who are paid a total of 38613, 28424, 25844, 20984 and 16544 for the same grades with the nationals. The locals are also the same as well as the citizens are paid highly as compared to the experts the citizens are paid a total of 84750, 61950, 48700 40300 and 31800 against 52000, 39000, 29750, 21750 and 16500 for the experts. Although both experts and nationals of UAE are paid supplementary allowances the citizens are paid much higher with a payment of 62000, 45000, 35000, 29000, 23000 against what is given to foreigners experts 30000, 22750, 16750 11250 and 8500 respectively. This form of discrepancies would as well discourage foreigners who most of them are expatriates who add value to the services and goods being delivered. There is a latest setback on the investment market authority of Abu Dhabi. This will be seen and enforced because of the Citi-group bank the equity investors for Abu Dhabi, whom they struck a deal with two years ago, will be charging them overly on stocks shares; purchasing at seven times the rest. This is because the bank is now in hands of the U.S. government, they own 34% of the bank this is due to government treasury infusion of capital twice when the bank was in the verge of collapsing. The prices of shares of Citigroup’s stock comes March will ultimately shape the value of Abu Dhabi investment. This comes barely a month when the United Arab Emirates was hit shamelessly by the debt scandals that have left Dubai image tainted and investors shying away from trading with this region, although Abu Dhabi chipped in by bailing out Dubai with $10 billion which brought a stand still on the debt payment. Although Abu Dhabi bailed out Citigroup the New York bank that was nearly crumbling from soared investment loses tied to the mortgage and housing markets depression in the U.S. This move by the bank has shocked the world markets. Pay equity in most Arab country is mainly advocated to foreigners working abroad in this States either it been in gender or discriminatory violation (Milton, 2002). Pay equity in Arabs countries has been an issue that has been so defiled by the tradition and cultures of the community in this region. Abu Dhabi lies among the richest oil Arab states and the opportunities of careers here are many. The pay equity in this region have been advocating for equal right in job opportunity for both male and female in the region, not only for nationals of this states but also foreigners from this states. The employment of these states is largely based by foreigners from other neighboring countries and abroad, but these only are based on lower paying jobs. In Abu Dhabi women have joined hands and want the federal government and workers unions to advocate for pay and employment equity in all major industry for they are the worst hit with discriminatory accusations. They want same opportunities to be promoted, participate in senior levels of the industries and also to develop their skills. This is because pay equity policy advocates and is remedial for; recognition of work done by women, paid and valued accordingly. Pay equity suitable application for federal, semi and local government The government of Abu Dhabi and most Arabs community in the recent years have upper handedly introduced bills although many are not yet passed they are under great scrutiny by analyst and maybe evaluated in coming months or years. Among the negotiated topics are to structure a budget that will reclassify pay equity, this will enable and negotiate collective agreement that will replicate pay equity as labor issue. This aimed as having a body that will be looking over the matters of pay equity within the government, other than independent bodies that its accuracy is sometimes altered for political gains. Although involvement from other parties of nongovernmental bodies are also advised to the scrutiny purpose and well being of the setup organ that the Abu Dhabi federal government are advocating for this to ensure that the gender violation cases that are high in the Arabs community are on decline especially this time when the Arab community States are on economic recess. Lobbyist groups have suggested that the government create a federal pay equity commission that would affirm the implementation of equal payment regime in all federal, local and semi-public services fields and engines. Although the cost of the funding of the initiative has been an issue, the lobbyist subjects the principles and considers it a worth cause for the Abu Dhabi governance to fund for the welfare of the minority and equality in the work and task force rendered by both parties of either gender (Acker, 2004). This is aimed at reducing the gap on earning between male and female workers which is lowest in the States of Arabs and in Abu Dhabi at 73% of corporate highest paying job are dominated by male, and female occupying the least percentage even in lowest paying jobs. On this study because of the recent recess in economics and in the capitalist markets, I would advocates that most seat in the high offices of the governing body of Abu Dhabi be given first priority to qualified women of this regions. The government should also see that some province in the state are run and manned by women, if this exercise can be implicated and the parties that are supposed to work together unite then the setup on other field not only governmental but nongovernmental would also follow suit. Having many women in the public sector will also advocate not only for equity in payment but also girl child education, this gain will see raise in all department of employment for education is the main excuse for leaders in the Arab community (Rhoads, 2001). This equality also will diminish discrimination cases that are very high among the Arab community and the change in this trends well enhance productivity of products and good the competition of the genders result to very positive result if there is no discrimination. External and internal factors that influence equity External equity External equity is the payment of wages rating with commensurate, wages triumphing over external market in labor section by the employees. In order to review external equity one has to have and evaluate the labor markets. This wages differs from time to time this because of differential in supply and demand sustainability. Major attributes that affect external equity are; Industrial sector Geographical location Union status Organization size Product competition Licensing or certification and education Experience level of available work force Internal equity Internal equity is experienced when internal value of each job payments are commensurate relatively with the wages paid by the employee. Importance of the job performed is reputable according to the perception of the employer. There are factors that compensate the internal equity and cause the level of competency used to lower-level job; Experience required Education required Working condition Public contract Accident or health hazards Responsibility for the safety of others and physical demands Large or complex organization are head ache to determine the relative internal value of jobs. Relative job value is determined through job hierarchy that reflects relative value of jobs based on skills, responsibility, and effort and working conditions (Rhoads, 2001). The are approaches that have been developed to combat internal job evaluation this includes; Classification Whole job ranking Slotting Factor comparison Scored questionnaires Point factor Pay Equity in Abu Dhabi Government; The federal government of Abu Dhabi which has been in the lime light of critics, analyst all over the world were keen to observe how the federal government will respond to the crisis that has rocked the UAE constituencies and the economical recess that has been looming in the region. The government has been forced to pump billion of equities to bail out one of the UAE state that shocked the world recently when it asked for a moratorium on debt repayment. This was highly criticized by stock market analyst and it sparked fears defaulting of debt by the sovereign. The federal government of Abu Dhabi bailed out Dubai of the debt of $10 billion and this was because the welfare of Dubai business also affects the markets of Abu Dhabi. In pay equity this is a good case of internal equity where resources are used to straighten the market of the region from inside. The Abu Dhabi government also suffered a big set back as the only semi-government organization controlling the highest stock shares in Dubai market ADIA was also affected by misconception of external equity and earning management. The government has been advocating for changes and has now implemented laws that will procure the “comprehensive reorganization law” in near future which will be solely based on credit protection and accepted international standards of transparency. This will also be involved in advocating for pay equity by the government for the central bank of UAE has agreed to provide support to local banks and administer the campaign set up by the constituencies of this regions, this includes the equity management trends that will be used to bring the economy of this state back to normal as the state did loose billion in the earning scandal perpetrated by the New York Citigroup, which saw ADIA loosing nearly $7.5 billions (National Research Council & Panel on Pay Equity Research, 2005). The government is also in hands to combat bad managerial decisions like the one that accosted the states billions of dollars, due to external equity bad decision making and wrong assumption by the ADIA. The federal government has advocated for remedial stances that will enable pay equity to be practiced in the capital market so to bring the confidence of the foreign investors who had earlier shied away from the capital market in the UAE because of the economic crisis the states were undergoing of late. After the bailing out of Dubai by the Federal government now the stock market of the UAE states are slowly trailing back in the capital market (Sympatico News, 2009). However critics are ruling that the economy of the states of UAE are in critical conditions following the fall out of Dubai to debt and the Abu Dhabi earning management scandals with the Citigroup bank of New York . Local government sector will also get boost from the UAE central bank in able to combat also pay equity and other adherence that are hindering the capital market from improving. Because this sector is the most affected sector by pay equity all over the world (Acker, 2004). This come at a critical time when Abu Dhabi is trying to clear out its image in the stock markets and any negative impact will result to major setback and foreign investor’s withdrawal from these markets. The local government has in the recent expressed commitment and obliged to model the systems of the public sector by introduction of pay equity and helping shape the long health of the economy and resources generated in this sector. This is to streamline the efficiency of the public sector markets as the state is in scrutiny and investor are keen to see what drastic measures the federal government and the local government will take so as to help bail out the economic crisis the state is in now. The laws that are to be set up will not only advocate for transparency on debt issues but also restructure the local government phrase in combating the mistakes that the UAE states has suffered from. Analysis for Semi-Governmental Organizations Abu Dhabi Investment Authority (ADIA) This organization was established and founded on the year 1976 its main funding come from the financial surplus from oil exports it’s replaced the financial investment board that was implemented in the year 1967 which was part of the then ministry of finance in Abu Dhabi. This organization is world rumored to be the wealthiest sovereign funds. The government of Abu Dhabi fully owns and supervises the running of the organization. The mandates and objectives of this organization are fully executed by the funds which are independent legal identity which are statutory to capacitate and fulfill any act to be performed by the organization (Weinberg, 2004). External managers administers 75% of the asset of this organization, in this 60% are managed by funds in the tracking indexes. The oil funds that run this organization are derived from Abu Dhabi National Oil Company (ADNOC) and some other subsidiaries of the latter. This fund are also channeled to the sister council Abu Dhabi Investment Council (ADIC) whom get the 30% of the surplus budget funds from the oil firms while ADIA gets 70% of the funds. The ADIC organization specializes in provision of corporate finance and investment and provision of advisory service to both sectors, as a joint stock company. Some of the asset that is allocated to the ADIA are; Equities of developed markets and emerging markets, Corporate and Sovereign debt, Real estate Private equity Infrastructures Disadvantages of lack of pay equity in governments Lack of pay equity in governmental sphere has brought tremendous error in the capital markets and the countries like the Abu Dhabi has been dented financially by this recesses that are experienced by the lack of this practices. The fall out of the Citigroup stocks could have been avoided if the external managerial stance were well advised and the practice of external equity was advocated for this would now be news. Though this also has shed light and brought also new trends in shaping pay equity in a country where gender equality was history they have now advocated for non discriminatory acts within union of workers to combat this unethical behaviors. Also the ADIA OR ADIC council who would have advised Dubai on good internal equity etiquettes that would have sustained them from the debt they are seriously engulfed with also had not given heed to the importance of these practices (Ferraro, 2009). Lack pay equity trends by most of the governments of UAE has brought them to stand still in business and investors are shying away from this markets and venturing into Europe and Asian countries like Japan and China. Conclusion Internal and external equity would be best suited by this UAE community as they mainly deals with business activities that run outside their region domain. These practices would only yield result if the participants are cooperative and the government chips in with resources to support these schemes. If the firm affected by the recent scandals can learn and put these practices into action then the UAE will gain the high stocks indexes in the capital markets. In some sectors combination of these factors determine the labor market for particular job in the markets, employees should consider this when evaluating and defining appropriate market for external comparison of wages. Although all approaches are subjective the related party to the evaluation process should note that no matter what kind of approach one decides to take either it be rigorous and disciplined or a simple one they are all subjective. These are mainly determined by the manager’s authenticity in judgment in their commitment and accuracy in their applications. The most important aspect to have in mind when setting out to payment to the employees, the acting manager should compensate and have in mind the employee’s welfare and their perception of fairness and equitable compensation for the task and work force performed. References Acker, J. (2004). Doing Comparable Worth: Gender, Class, and Pay Equity (Women In The Political Economy). Cambridge: Temple University Press Ferraro, T. (2009). US Democrats Flex New Power, Pass Pay Equity Bill. Retrieved on December 23, 2009 from http://in.reuters.com/article/governmentFilingsNews/idINN2225850520090122 McCann, M. (2004). Rights at Work: Pay Equity Reform and the Politics of Legal Mobilization. Chicago: University Of Chicago Press Milton, L. (2002). Handbook of Wage and Salary Administration, New York: McGraw-Hill National Research Council & Panel on Pay Equity Research. (2005). Pay Equity: Empirical Inquiries. Washington D.C: National Academies Press Patten, T. (2000). Pay: Employee Compensation and Incentive Plans, Upper-Saddle-River: Prentice Hall Rhoads, S. (2001). Incomparable Worth: Pay Equity Meets the Market. Cambridge: Cambridge University Press Rhoads, S. (2001). Incomparable worth. (pay equity) (World Trends & Forecasts: Business). New York: McGraw Hill Sympatico News. (2009). Ignatieff Wants To Make Pay Equity A Human Right. http://news.sympatico.ctv.ca/Canada/ContentPosting?newsitemid=CTVNews%2F20091210%2Fignatieff_bill_091210&feedname=CTV-NATIONAL_V3&show=False&number=0&showbyline=False&subtitle=&detect=&abc=abc&date=False Weinberg, D. (2004). About Earnings By Detailed Occupation For Men And Women. Retrieved on December 23, 2009 from http://www.census.gov/prod/2004pubs/censr-15.pdf Read More