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Equity or fairness, from the employee’s perspective is best explained with the equity theory.
Equity theory suggest that in the quest for fairness and justice, employees quantify their inputs and outputs and judge fairness or otherwise, by comparing these to that of a referent other (Werner and Mero, 1999 p.1291). According to Werner and Mero (1999), employee inputs include quality of job performance, length of service, education, experience, amount of responsibility and pressure, productivity on the job, effort expended on the job and organizational citizenship behavior. While outputs subsumes pay and benefits, promotions, status and intrinsic rewards (p.1291).
Compensation can be defined as including pay and benefits, with particular emphasis on pay i.e. wages/salary, bonuses, stock options, incentives, etc. Fairness, on the other hand, is an objective evaluation of competencies, performance and compensation (CAPS, 2003). Fairness or the perception of fairness plays a crucial role in understanding employee behaviors/morale in any organizational settings (Charness and Haruvy, 2000 p.655); employees that perceive that they are being under or over compensated tend to experience feelings of anger or guilt and therefore act in a way to correct the situation or achieve fairness either by altering inputs or outputs, using a different referent for comparison or creating psychological justifications (Werner and Mero, 1999 p.1292).
In this regard, employee perception of fairness is bound to have a profound effect on productivity, job performance, and organizational citizenship behavior. For example, underpayment and other perceived inequities have been related to lower satisfaction, lower productivity, illegal behavior, lower production quality, and increased turnover. Therefore, as concluded by Bass (1995), understanding factors that shape employee perception of fairness will greatly help in building employee trust and improve productivity (Bass 1995
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The problem statement for this study as reveals from the case of American Airlines is immense employee resistance emerged out of the management’s decisions to cut down wages and salaries in order to curtail costs. The paper suggests recommendations in order to tackle the problem, and considering the views reflecting from arguments presented by various researchers
Some of the major workplace issues include employee – employer and employee – employee conflicts, discrimination on the basis of race / ethnicity, religion, gender, disability and age, unhealthy working conditions, unfair compensation and untimely pay, unpaid time, no or fewer employee benefits, unhealthy and unsafe working conditions (ventilation, washroom, flammable hazards etc.), no real employee training about use of sophisticated equipments, no or some counseling and tutorial sessions about precautionary measures, violations of employment contract, manipulation and exploitation, coercion and undue influence etc.
Employee Compensation and Benefits
The employees of a company are considered as the most important one of its factors of production. A company with efficient workers is more likely to be successful as the work of the employees has a direct impact over the performance of the entire organization.
In this regard the most important aspect is of fair treatment and organisational justice. There are different rules and regulations regarding the fain treatment of the employees. According to this rules and regulations all employees should be treated equally and there should be no discrimination with any employee on the basis of gender, age, nationality, language, disability, religion, and sexual orientation.
Some motivating factors would be related to material gain and compensation whereas some others are associated with the ease of working, workplace environment or even job satisfaction. Thus a general job satisfaction, work environment, compensation and payments or benefits, work load and schedule, recognition and responsibilities are some of the factors that would motivate employees to work better and improve general company performance.
The author of the essay makes a detailed analysis of such controversial themes as discrimination in employment, recognition of maternity leave as a temporary disability, egalitarianism, racial equality and poverty alleviation as well as the satisfaction of the wants or desires of an individual through the selling of their skills and expertise.
According to the report organizations are finding that they can no longer continue to increase wage rates by a certain percentage each year (a cost-of-living raise), without some comparable increase performance. Subsequently, more organizations are moving to varied theme the pay-far-performance systems.
As such, it is significant to have a documented package and justification for the compensation package.
The above figure gives a rough estimated percentage of the expected components of the total compensation. On average, the
Employees usually contribute towards growth and success of an organization. These contributions have to be recognized appropriately as it helps in motivating team members. Benefit plans are designed by an organization in order to