The Paradoxes and Tensions of Pay Systems - Thesis Example

the paradoxes and tensions of pay systems and the problems these create for the management of the employment relationship Introduction Financial remuneration is considered as critical aspect of employment. The salary package provided by the employer has to necessarily align with the expectations of the employee and market culture; any deviance from the standard practices will place the employer and employee relationship into jeopardy. The efficiency of the organization can be considerably improved through level and distribution of salary and benefits. The productivity of the manpower and their morale is strongly proportional to the financial remuneration offered by the employers. The expectations relevant to financial remuneration from employee perspective shall be determined from his qualification, previous work experience, and role in the organization, performance and potential assessment by the employer, work load and cost of living (inflation). The employer share a different perspective while accounting for the salary package for the organization, the bench marking is conducted against the local industries, the profits of the company are monitored, the investment plans are verified and lastly the performance and need of the employee. The perspective shared by employer and employee are therefore distinct, and such distinction has in many cases failed to develop appropriate settlement between the parties on this issue (Mahler, 1986). Objectivity of Profession and Remuneration As per Adams Equity Theory, the inputs and putputs of the employee shall maintain equilibrium. The performance of the employee is closely monitored by the employer on the scale of profit-return, productivity, and maintenance and functional cost-cutting. Therefore in many organizations the pay systems are exclusively designed to offer financial rewards to the individuals who have contributed to the organization, instead of offering such deals to all the employees (David, 2000). There are systems where pay system is employee-centric, irrespective of contribution and performance of an individual, however such system has been nightmare for the employers due to the resignations of the high-performance employees, and consider it as unfair system. The employees have simple desire to be based fairly for their performance and achievements, and their salary shall necessarily take into account the cost of living. The employers share similar approach; however its execution is primarily profit margin driven followed by cost-cutting for the launch for new investment plans. This practice is widely common among the employers of South Asia inclusive of China, India, Malaysia and Thailand (Hamel, 2000). The pay system offered by the employers is in some of the cases driven by the economic condition of their respective country. It has been observed that different large corporate within India and China have always failed to comply by the aspiration of the employees in terms of financial remuneration, because the legislation of these countries bound the company to acquire maximum liquidity (John, 2007). Pay Package: An Ideal Motivation As per the Old Management Theory and Employee Motivation, the motivation of the employee is achieved through proper communication of targets with unprecedented rewards. The pay system launched by any company is the main motivation for the employees. On realistic note, the employee educate and work to earn money through legal and ethical means, the profit margins and production targets of the company are regarded as the requirement behind financial remuneration desired by the employees. If at any stage the employer fails to deliver as per the aspirations and expectations of the employee, there is substantial decline in the motivation and performance of the employee which in many cases is evident through their body-language. The failure ultimately results into frustration at work space, the performance declines and both the employee and employer have to face the consequences. From this discussion it is evident that if the employer is reluctant to launch employee-centric financial remuneration system, the company will face financial set-back either ways i.e. either compromise of salary package or face the consequences after de-motivation of the employees (Harris, 2002). The loyalty of the employees can be only secured if their needs are accounted for through devised salary package. In past several pay systems have been initiated by the employers. However majority of such system has collapsed either because the aspirations of the customers were not attained, or because such system affected the company financially. It is important to understand that an employee will always desire for more achievements and credits through financial remuneration schemes, and the employer will always be reluctant to offer as per the demand of the employee; and this difference shall always persist. It is important to achieve equilibrium which shall be successful in satisfying the needs of the employees and reluctance of the employer (Krebs, 1987). The pay system shall be such designed that employee has feeling of getting paid for their contribution; such system shall be acceptable by the employer because the direct beneficiary of such scheme shall be specific class of high-performance employees, and this will restrict profit sharing will all the employees. The pay system launched by the employer should ideally comply by the basic needs of the employee; this shall be captured in the basic payment system devised by the company. Such package will necessarily entertain the concerns of the employee relevant to fundamental need and cost of living. The intent of this pay package is not to classify between the high performance and average performance employees. No significant discrimination shall be executed under this system of Basic Salary Package (Hampton, 1987). Pay Package: Constituents As per Adams theory, the employees desire minimum equality among them, and struggle to ensure equity among the team. The pay system shall be such devised that it is able to offer financial remuneration to specific class under Incentive Scheme. The productivity and efficiency of the employee shall be covered under this head. The employee shall be facilitated and appreciated for their services and performance, and this ward shall be distinct. Such placement if religiously followed has been successful in achieving employee satisfaction within companies of South Asia and Pacific region. The pay system has to devise which shall be able to inculcate the needs of the employee to achieve or maintain quality living standard. Such system can be materialised through the initiations of schemes inclusive of "additional payments, non-contributory pension schemes, and non-cash benefits such as cars, life insurance, and assistance towards child care etc" (Ellen, 2007). The objective of the employment is not to be rich, but to maintain standard of life through which needs and aspirations of the employee and their family can be achieved. The employer has to ensure that all these concerns of the employee are resolved through launch of employee need-centric schemes. The pay system shall be devised which shall make an impression towards employee as contributing force in the companys achievements. Profit-sharing schemes shall be launched, and shall be applicable on employees have long-length of service and major achievement in their credit. The intent of all such schemes shall be to develop long-interest of the employee with the affairs and progress of the company (Elliot 2005). Concept of Performance Centric Appraisal and Payment As per Frederick Herzberg, the employer shall secure motivation of the employee than his interest. The theory of Frederick Herzberg has outlined the fact that motivation of the employee can be attained by offering intangible incentives to the employee; the employee eventually seeks mental relaxation and good time with family. The performance based system incorporate the services of the professionals and their team leaders, and the assessment of the professionals is conducted primarily based upon personal motivation and initiatives of the professionals, therefore professional pay is a reform proposal to ensure that quality of professional services is attained, the employers are therefore required to offer financial rewards by review of the responsibilities undertaken by the professionals and their involvement. It is on record that previously such performance driven schemes have failed because these schemes never secured the support of the stakeholders who are most closely involved in the processes (Doug, 2002). The performance based scheme has been also adapted to halt the exodus from the offices and attract highly capable and motivated young people to the profession, there is growing interest among stakeholders in pay systems that provide incentives for highly accomplished achievements. The consequences of the service driven scheme were severe, and was responsible for the staff dissatisfaction and dissension, and professionals were concerned that it eroded the collegiate and team based nature and encouraged favouritism and cronyism. In comparison with the performance based scheme, the merit based scheme emerged as failed policy; therefore the execution of the performance based scheme was evident which has demonstrated improvements in professional practices. The performance based scheme is expected to influence the professional capabilities of positively. The scheme has led to the participation of the professionals for the development of the standards and revision of the assessment standards, therefore positive changes are expected after incorporation of the system. The only concern with reference to the implementation of the performance based scheme has been in the determination of the extent of the professional expertise, and level of the recognition of the highly qualified professionals. Presently, the companies have no certification system which can support and assist the professionals in identification of the gray areas where extreme focus has to be done. The success rate of the practices adopted by the professionals qualified on the performance based scheme is positive, which is because the professionals are content with the substantial and valued recognition secured through performance based scheme, based on the ‘evidence of professional development to high professional standards’ (Douglas, 2006). Reforming Human Resource It has been realised that institutions have to reform, and human resource management shall be major constituent of the reforms within the organization. The motivation of the employee is driven as per the injunctions of Theory X and Theory Y. The dynamic work system can be materialised through implementation of benefits system. Such system has been acknowledged as source of "enhanced management and leadership, rewarded competence and performance" for the employees. The employers have to brainstorm to develop "simpler and more flexible classification system" for the employees. The performance of the employee shall be directly proportional with the salary package, and any variance shall be avoided. It is important to revise the performance evaluation schemes by the company, and more transparent system shall be in-place for the performance assessment. It is generally complained by the employees that their achievements are never given appropriate credit and ignored due to their short span of service. It is important to develop a system in which length of service or seniority shall be considered at equivalent with the performance of the new recruits, such policy statement will resolve the concerns marked by the new recruits (Patrick, 2000). The human resource departments of different companies have focused upon development of group incentive plans which come in three packages. First being the concept of gain-sharing, the concept is a kind of compensation system wherein employer and employee divides the profit arrived at as a result of improved performance and better use of human resource. Sharing is arrived at upon a pre-conditioned formula. In order to attract qualified workers, the tendency now is to increase a mix of fringe benefits, which are cash and non-cash items to the basic pay. Second incentive is the popular profit sharing wherein employees receive a share of the profit of the company, and the third type of incentive is the employee stock ownership plan, wherein they are given stock certificates of shares in the company. In some private companies, bonuses are given to employees based on appraisal of performance. There are some instances wherein company provides group incentives, depending on established criteria. The implementation of such system has motivated the employees to work together to gain better incentives. It is through this that the employees are able to find better ways to research possible procedures to enhance their performance as a team to be able to gain more incentives. Hence, as a result, employers become much compensated through the profit that they receive from such hard work. Understandably, it is through this that the employers also become highly motivated to pay their employees well as they are able to bring in the needed profit for the business to exist within the industry (Leslie, 2001). Employer – Employee Relationship: Motivational Benefits The management development process has been adopted in the public and private sectors for the enhancement and development of the new managers and professionals. The enhancement program was adopted and implemented in the Internal Revenue Service which is a public sector agency. The agency has implemented the principles of Total Quality Management, in this regard, the Richmond District enhanced the program that was conducted in other offices by using the Myers-Briggs Type Indicator and The Adjective Check List. The process adopted by the Internal Revenue Service was fabricated to identify those interested in managerial positions, not every staff has the potential to be the manager, therefore the experience factor was given dilute consideration against the motivation and leadership qualities of the interested professionals. The objective of such exercise was to provide an opportunity for non-managerial employees to learn about themselves and about the organizations expectations for managers (Leslie, 2001). The programs initiated by the organization focused on the personal capabilities of the participant, and the methodology was adopted so as to explore the suitable and diversified background and mentalities of the professionals. The question relevant to the personal information, experience, objective, development of the organization, and several case studies were offered to brainstorm the participants. The focus of the exercise was to ensure the enhancement of the managerial and professional expertise of the participants, for that purpose, the exercises enabled the participants to assess their values, managerial styles and attitudes, and career interests’ (Leslie, 2001). The management oriented sessions and seminars have undoubtedly led the potential participants to realize their potential and capabilities to the fullest, and for that purpose the attribute of decision making was focused, and the evaluation and discussion process was narrowed to that spectrum. The employees of the organization is the major investment which the management can avail without insecurity or capital, it is the employees who generate momentum towards the functioning of the organization and the profitability of the organization can be protected and ascertained through strong employee relations. The relationship between the employers and employees, and employees and employees are crucial, and contribute massively towards the smooth and stable functioning of the organization. The relationship between these associates can be fostered through different schemes, initially the management should provide good opportunities to these parties to discuss, and this will eventually create a bridge of understanding, which will alter facilitate their professional expertise and concerns, which in return will lure stability for the company. The improvement of the employee relation can be achieved at different platforms within an organization, for any small issue which although can be resolved easily, should be sorted out by arranging a mutual forum of discussion between the employees, to be monitored by the employers, such a platform will bridge harmony and understanding among the workforce. The competitive schemes of financial rewards and benefits should be launched to encourage active participation of the employees in these exercises, therefore simultaneously not only the focus of the employees can be achieved, but focus of the entire workforce can be gathered, which will result in the ultimate and timely increase of their motivational level. The organization should ensure that either on quarter or annual basis the employees and organization are able to share a table, and discuss their mutual needs and the measures required for the resolution of the grievances of each party. It is important for the organization to ascertain that the employees are conveyed their respective assignments and the expectation associated with the task are brought into the notice of the subordinates. The performance review are helpful for supervisor, as the periodic evaluation proceedings make the concern authorities more honest in their relationships with their subordinates (Carter, 2007), and make them more responsible towards their supervisory role. Through such period evaluation, the employees are judge their personal strengths and areas of development (Carter, 2007). The professional commitment gets a renewal once such evaluations are undertaken, and it has been observed that the participation of the employees into party affairs also get concentrated, therefore it ultimately improves morale, improves credibility of management, improves the organizations overall effectiveness and prevents wastage of managements time towards auditing and monitoring of proceedings (Carter, 2007). The fair proceedings of the performance appraisal of the employees can carried ,if prior to its execution, the management design a legally valid performance review process, and introduce standard form for the performance appraisals (Carter, 2007), it is also important for the management to conduct such exercises on quarter basis, instead of annual basis. The employees should be informed about the launch of the plan, so that the employees are able to perform with preparedness and cautious, such an attitude will improve the overall working and productivity of the organization. The employees are to be informed so that they should consider any of the action by the management as offensive or secretive, it is important that every employee is part of activities within the organization. Prior to the execution of the performance appraisal, it is important for the management to offer an opportunity to the employees to contribute and suggest any recommendation to the employers with reference to their task and responsibilities, the employees should be requested to add credentials in their services towards the organization, where applicable. The employee performance appraisal should be conducted without any discriminatory attitude, and no preference should be given to any of the employees on the basis of their sex, race, and religious affiliation. Conclusion It has been discussed at forums that the employer should never develop illusion among his team related to the new payment system, the expectations of the employees shall never inflated to level that its burst can be outrageous for the company, rather the aspirations and motivation of the employees shall be based upon realistic approach, and translation of any impression out of interpretation shall be avoided. It is important for the employer to increase the efficiency of the system through announcement of rewards for high-performance individuals. A specific model was conceived by local group under which the employees were offered "broad range of pay combined with personnel evaluation" (Carter, 2007). This system was placed to ensure smooth transition from traditional payment model to performance-centric model. It is claimed that the intent of such system was to devise "economical system of pay and allowances for the common system". It is important to "evolve from a conceptual framework to something more concrete", and success of such system is conditional and is strongly based upon execution of job evaluation on schedule (Michaels, 2001). The various studies reviewed showed weaknesses in the relation of the pay system to the employees and employers as well. The respective interfaces agreed on the effectiveness of the pay scale but have difference of opinion on the pay level. There are strong recommendations that the companies should overhaul their pay scale, and the system shall be linked with merit system. South Asia is region where performance driven salary system is implemented. The implementation of this system has been successful, and rate of attrition has significantly reduced. There are several performance pay incentives which add value to the basic pay; they are not uniformly adopted by the company. The pay system, in order to be beneficial to labour and capitalists should be based on various circumstances relevant to the policies and objectives of the company, and these should be made known to employees concerned. The success of pay system may differ from one environment to another. The implementation of payment system includes many technical issues; management has to consider the attitude of unions and collective bargaining in introducing a pay system and strategies of human resource. It is important for the company to develop comprehensive system, and apply business strategies for the promotion of higher performance. Under reward and performance driven system, the intent of the employer is that every payment proceedings should aim to deliver best incentives to the employees, with suitable return to the employers. It is through this that the relationship between the said parties are rather established for the sake of better performance and better profit returns that works best for the parties involved in the exchange of values in the field of business operations (McKinsey, 1997). References 1. Hampton, D. R., Summer, C. E., and Webber, R. A. Organizational Behavior and the Practice of Management. New York: Harper Collins Publisher. 1987. 2. Hirsh, Sandra Krebs, and Kummerow, Jean M. Introduction to Type in Organizational Settings. Palo Alto, California: Consulting Psychologists Press. 1987. 3. 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The Human Side of Enterprise. 2006. McGraw-Hill Professional. pp. 187. 21. Carter McNamara. Basics of Conducting Employee Performance Appraisals. Authenticity Consulting Publication. 2007. pp. 21 22. Carter McNamara. Basics of Conducting Employee Performance Appraisals. Authenticity Consulting Publication. 2007. pp. 21 Read More