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The internal market influence pay setting based on the local labor markets and the internal wage structures of the firm as well as internal equity. I learnt the importance of international comparison. This was a rather difficult concept to understand at first because I thought the payment determinants were exclusive to each country. While, unique, they are influenced by common trends these include decentralization of collective bargaining that are profoundly influenced by the world economy. From this, I learnt that the global economy has more impacts on the local economics than I had previously imagined.
I discovered that the world was moving away from payment based on seniority and time spent working. Starting the UK and branching out worldwide, the last 3 decades payment has been based more on performance and Varied according to output. I thought that was a particularly astute means of determining payment since it has a fairer way of compensating workers based on their hard work. It confirmed my understanding that compensation to be a way for the employer to give feedback to their staff (NNazir, n.d). This system is gaining favor with employers since it will be based on performance of an employee not merely his/her seniority, the profitability and performance of the company.
Therefore, companies will not be disadvantaged incase of non-performing employees and this system will serve to motivate the employees perform, which will serve to reduce the burden on the HR department of companies. I had thought the concept was American but discovered it was originated from the UK. Moreover, I learnt how trade unions together with employers association determine the type of payment. Some unions have opposed this system while most employer association and government have encouraged profit sharing schemes between companies and employees.
It was disappointing to learn there are not any definitive figure on this available as it makes it hard to authenticate the conclusion. However, by the figures presented, I learnt that incentive systems have been there since 1998 and 58% of work places had some sort of incentive system. By 2004, 9% had merit based pay and the most recent figure showed that a non-union workplace is more likely to use incentive pay (Kersley et al. 2006). In addition, from the lecture, I learnt the many different forms of payment methods.
However, there is still no conclusive evidence of improvements, and all schemes have different goals. This is because despite the current adoption of performance based payment systems by many companies it has its own challenges, as it calls for close monitoring of quality and training for customer service and quality of employees. Moreover, companies must have in place good operating procedures, should be ready to handle and manage lax and non-performing employees and in order to motivate employees to perform the pay package must be appealing.
In addition, it is also taxing during the changeover process and again this changeover is associated with employees’ turnover. This system often fails since most employees tend to abuse it by aiming to earn much at the expense of offering quality customer service leading to loss of clientele. Variable pay is a rather confusing and the pay systems are dependent on a wide range of factors. In my opinion, the lecture was highly enlightening came out with a lot of knowledge about the various payment compensation systems.
Lecture 7 –
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