The System of Compensation - Essay Example

However, merit pay has been used to develop a standard payment structure that is common and applicable to all employees (World at Work 60). Merit pay is described as pay for performance based on the results set on a standard operative module. It is an approach to compensation that rewards well-performing employees. It focuses on offering additional pay for the best-performing employees. Despite the challenges, the merit pay system has several advantages. First, it enables the employer to differentiate between high and low performers in the company.

Unlike profit sharing or bonus pay schemes, it allows the employer to differentiate between the performances of employees. While there are several programs and schemes developed to reward the overall performance of employees, merit pay offers compensation for strong performers. Merit pay allows the employer to recognize individual performance meaning to continue benefiting from the scheme the employee must be able to continue performing perfectly (Jiang, Xiao and Qi 67). Despite the numerous advantages of the scheme, it has been found that it does not offer a better support mechanism to the employees and the employer.

The failure to address the essential issues that may affect the performance of both the group and the individual makes the scheme ineffective. The scheme lacks accuracy affecting its ability to differentiate the ability of the individual employees. The success of the scheme has been reduced by the increasing dynamism in human behaviour and factors that affect performance. The merit pay structure is different and creates a serious challenge in managing workers. The use of the total reward system has taken over the development of compensation structures.

The total reward scheme is a program developed, by employers, to attract, motivate, and retain employees. The main focus of the program is to include everything the employee perceives to be value resulting from the employment relationships. The concept has been advanced tremendously through evaluation and restructuring of the process of rewarding employees. When developing a total reward system, analyzing the needs of every employee in the team (Jiang, Xiao and Qi 112). The development of a total reward scheme involves six steps with the first phase of the process in analyzing.

The process of analyzing the needs of the employees includes the examining of the current policies. After analysis, the design process will involve the determination of compensation and the compensation strategies that can be employed in the process. During the design process, all the available approaches in total reward schemes. After the design, of the total reward scheme, the development of the plan and operation strategy involves the use of various methods (World at Work 45). After the creation of the necessary plan and strategy, the plan must be communicated to the employees, so that they understand the reward scheme.

Additionally, communication in the company is vital because of the various reasons. Communication facilitates the development process and the reasons for promotion and wage level setting. The success of the total reward scheme will depend on various factors including the management design of the process (World at Work 213). The inclusion of all the factors that affect motivation and employee welfare will ensure that the total reward scheme is perfect. In conclusion, the total reward scheme is based on the inclusion of all factors affecting employee performance with the main support factor being communicated.