Evolution of Remuneration System - Case Study Example

Remuneration Name Date Introduction Organizations may utilize either a person based remuneration system or even adopt the position based remuneration system depending on the systems in place. However, both remuneration systems may be perceived differently since they may affect the individual performances in the long run. However, performance management is importance since it helps in establishing the right balance between the employee's performance and the remuneration system in place. In this case, O'Meara Electronics is seeking to change from position based remuneration system to person based remuneration system. While relying on the position based remuneration system, employees may often feel overlooked especially given that the have the responsibility of executing certain tasks and at the same time their superiors may not be willing to participate in the execution of various organization activities. However, the person based remuneration system considers the employee's skills and their individual performances when determining the type of remuneration system to be used by the organization. Even though the position based remuneration system may be fundamental to ensure that the management is adequately motivated, their directions are needed to ensure that the organization is successful. Therefore, the O'Meara Electronics should adopt the person based remuneration system to ensure that they are remunerated based on their set of skills and the performances in the organization. Position based remuneration system The position based remuneration helps in offering the remuneration system based on the responsibilities that individual hold in the organization. This remuneration system helps in rewarding the employees based on the pay depending on the value that individually has on the company (Abelsen, and Olsen, 2012). Organizations have the responsibilities of protecting the employees who have the highest value to their operations, and through this, they mainly utilize the position based remuneration system. Fairness and equity is an important part of the position based remuneration system, and they may help in protecting some of the most vulnerable groups in the organization such as women and the disabled. The disabled may not be able to execute certain responsibilities like other employees, and this remuneration system helps in establishing the right balance within the organization by protecting them. According to Grecu, and Grecu, (2011) the position based remuneration system can contribute in establishing a platform where the pay comparisons can be made and through this ensure that the remuneration is standard across the industry. This may assist in eliminating cases of employees turnover based on pay since their value is well protected within the organization (Grecu, and Grecu, 2011). Promotions within the organizations lay the foundation where people are awarded higher pay rise due to various promotions. Even though this is the case, this system may be detrimental to the company organization in the long run. The position based remuneration system can link job positions to the pay structure available, but it fails to consider other performance-based factors that may be used to determine their remuneration system (Smithers, 2016). Therefore, this may affect the employee's motivation especially those who work hard and may feel that they are alienated by the system in place since other measures can be used to determine if the employees are working in the right manner. As a result, this payment system may lead to increase in employees' turnover especially in regards to the low-level employees who may feel that their work is not appreciated by the company (Abelsen, and Olsen, 2012). Remuneration, in this case, follows a hierarchical system, but this may not signify that a position holder can execute certain responsibilities but may rely on the subordinates to execute the job. Person based remuneration system This remuneration system helps in rewarding employees based on their individual's strengths, abilities and the knowledge they have while executing various operations. This type of remunerations helps in establishing a platform where skills and career development are practiced, and this is important for their long-term success and in reducing the rate of employee turnover. Through this, it helps in promoting the rewards systems where employees are rewarded based on the skills set they possess and their motivation to obtain knowledge to succeed in their activities. Furthermore, this also helps in promoting the self-motivation given that various aspects of individual employees are evaluated effectively, and there are rewarded depending on their individual effectors as well as their outputs towards the organization. Lavy, (2007) indicates that employees who are mostly self-motivated often favors person based remuneration especially given that it helps them to achieve individual development which is important to them. Employees who often execute their duties in the right manner. However, this enables the organization to establish the limits that should be achieved depending on the individual performances. Even though the person based remuneration is important, it may increase conflicts within the organization. Personnel's within the organization may focus on the individual targets, and the team structures in the organization may be compromised. If a person in the same level within the organization is remunerated more, hostility may emanate thereby leading to conflicts within the organization. Case study analysis Person based remuneration structure may structure to minor either the skills remuneration or the competencies remuneration systems or both. Skill based structures are established to remunerate the employees based on the skills that they possess, and this depends on either the breadth or the depth of the employee's skills. However, this should be related to the responsibilities that individual have in the company (Stanhope, Pond III, and Surface, 2013.). Through this, the employees are remunerated based on either the base pay or the bonus pay. In this case, the company can either use the breadth base remuneration system where they mainly focus on the general knowledge on a particular subject including finance and accounting. The depth based remuneration is structured to identify the needs of the employees based on their expertise such as Auditors, Engineers or the lawyers in the company. Zingheim and Schuster, (2009) indicates that the skill level can then be used to measure the performance of the individuals in the comparison to the output that the individuals have achieved in the process. In this case, the company has multiple departments where different knowledge is required for them to succeed and therefore the skill level is necessary when determining the mode of payment to be used. This will help in establishing the required standards which the employees are supposed to follow and through this encourage them to be responsible when undertaking various activities as well as the set goals (Hon, 2012). However, the motivation that arises from this arrangement is crucial especially given that supervisors role in this structure may not be needed for the employees to succeed since they are more responsible in all their undertakings. Therefore, this helps in motivating the employees and through this control their actions within the organization. According to Giancola, (2007) the person based skills systems encourages the employees to further their career development and at the same time helps in improving their performances which are the important concept for the O'Meara Electronics (Xueyan, 2015). This will all assist in assisting in establishing the right flow in the organization since the structures that are based on skills are fully set. Furthermore, relying on the skills based remuneration system will help in giving employees of the O'Meara Electronics the control they need to succeed in their working environment. Furthermore, by utilizing the persona based skill remuneration structures will help the management in collecting the information that they need in the decision-making process especially given that they can monitor the skills at their disposal. If the O'Meara Electronics adopts the skills based remuneration system, the employees will feel that they are remunerated according to their expertise, and therefore it will eliminate the feeling that some superiors are remunerated more than they deserve (Zaim, 2007). The competencies remuneration structures can also be used as a part of the person based remuneration system. In this case, employees are remunerated depending on core competencies of the individuals. However, self-concepts such as the self-image, values attitudes, knowledge that individuals have and the skills that they possess are used to characterize the competencies that individuals have, and this can be used as a remuneration system (Mitra, Gupta, and Shaw, 2011). However, remuneration based on competencies is a complicated structure given that employees may portray different characteristics which may be difficult to link to their individual output in the long run. One of the major challenges that face the organization in utilizing competencies as a way of remunerating employees is the inability to measure various elements in the organization (Pate, Morgan‐Thomas, and Beaumont, 2012). Conclusion Person based remuneration system is different from the position based system given that it is not a single system rather than it incorporates various elements when determining the remuneration of the individuals in the organization. Different types of the person based remuneration can be used by the O'Meara Electronics to ensure that employees are satisfied and well-motivated. However, the person based remuneration system should be based on the employee's ability to master various skills that help them to achieve the set targets and at the same time improve their individual performances. Therefore, the remuneration should be based on the merit which means that the remuneration of the individual is based on their output. Dierdorff, and Surface, (2008) when implementing the person based remuneration system it is important to ensure that various elements that affect the employee's output are evaluated before determining the remuneration of such a person. The remuneration may emanate from the bonus type of remuneration or at the same time the organization can also adopt the base pay reward (Léné, 2014). However, this depends on the skills and the knowledge that individuals possess to execute their duties. However, for the person based remuneration system to succeed, it is important for the organization to ensure that there are measures in place to comprehensively train the employees for time to time to make sure that they have the required skills to succeed. Recommendation O'Meara Electronics should adopt the person based remuneration system. It is important to ensure that the organization has the measures in place to eliminate the conflicts that may emanate from the existing remuneration system. Remuneration has in the past negatively affected the employee's motivation of O'Meara Electronics and at the same time has affected their individual output. In this case, it is important to shift from position based remuneration to the person based remuneration on ensuring that employees are remunerated depending on their output and the skills they possess in the organization. In this case, the O'Meara Electronics should adopt the skills based remuneration system as this will help in promoting the employees motivation and at the same time ensure that conflicts are eliminated entirely. Furthermore, by focusing on the skills bases remuneration systems, it will be beneficial to the long-term success of the O'Meara Electronics and in making sure that employees are evaluated depending in their contribution to the organization goals instead of the position they hold in the society. Reference Abelsen, B. and Olsen, J.A., 2012. Does an activity based remuneration system attract young doctors to general practice?. BMC health services research, 12(1), p.68. Abelsen, B. and Olsen, J.A., 2012. Does an activity based remuneration system attract young doctors to general practice?. BMC health services research, 12(1), p.68. Dierdorff, E.C. and Surface, E.A., 2008. If you pay for skills, will they learn? Skill change and maintenance under a skill-based pay system. Journal of Management, 34(4), pp.721-743. Giancola, F., 2007. Skill-Based Pay–Issues for Consideration. Benefits and Compensation Digest, 44(5), pp.11-15. Grecu, I. and Grecu, G., 2011. Evolution of remuneration system. Economics, Management, and Financial Markets, (1), pp.502-511. Grecu, I. and Grecu, G., 2011. Evolution of remuneration system. Economics, Management, and Financial Markets, (1), pp.502-511. Hon, A.H., 2012. When competency-based pay relates to creative performance: The moderating role of employee psychological need. International Journal of Hospitality Management, 31(1), pp.130-138. Lavy, V., 2007. Using performance-based pay to improve the quality of teachers. The future of children, pp.87-109. Léné, A., 2014. Skill-based pay in practice: An interactional justice perspective. European Journal of Training and Development, 38(7), pp.628-641. Mitra, A., Gupta, N. and Shaw, J.D., 2011. A comparative examination of traditional and skill-based pay plans. Journal of Managerial Psychology, 26(4), pp.278-296. Pate, J., Morgan‐Thomas, A. and Beaumont, P., 2012. Trust restoration: an examination of senior managers' attempt to rebuild employee trust. Human Resource Management Journal, 22(2), pp.148-164. Smithers, A., 2016. How Managerial Incentives Affect Economic Performance. World Economics, 17(1), pp.127-146. Stanhope, D.S., Pond III, S.B. and Surface, E.A., 2013. Core self-evaluations and training effectiveness: Prediction through motivational intervening mechanisms. Journal of Applied Psychology, 98(5), p.820. Xueyan, X., 2015. Chinese Academics under the Reformed Remuneration System: A Case Study. Chinese Education & Society, 48(4), pp.280-296. Zaim, H., 2007. Competency Based Pay, A New Approach to Compensation Policy. Akademik Araştırmalar Dergisi, 9(32), pp.115-133. Zingheim, P.K., and Schuster, J.R., 2009. Competencies replacing jobs as the compensation/HR foundation. World at Work Journal, 18(3), pp.6-20. Read More