Disucss about the Advance Remuneration And the Performance.
Remuneration can be viewed as reward or compensation that one gets for work done or service offered to an individual, organization or company. Remuneration or reward normally takes the form of wages, salary or allowance tied to the service or work done. Therefore, remuneration systems can be explained in terms of elements used in determining the reward for the employee. Some of the remuneration systems on the other include position, performance, and skills of employees at the workplace.
Remuneration can be studied in terms of person-based pay or position-based pay systems. Kelly and Cole (2011) define person based pay system as remuneration system involves rewarding or compensating employees based on their skills and qualifications. Position-based pay, on the other hand, refers to remuneration system where employees are rewarded based on their performance in the workplace. As a human resource consultant for O’Meara Electronics Company, understanding the remuneration system serves to identify or develop the alternative pay system for the company that is geared toward the restoration of the declining company’s market position.
Person-based remuneration system is one of the currently available remuneration systems that help many organizations. Some of the important elements or drivers of the person based remuneration system include skills, personal knowledge, and experience. Firstly, personal knowledge as a driver for evaluating person-based compensation system focuses on personal educational background that leads to a qualification. According to Milkovich and Newman (2010a,), personal knowledge also touches on the training that can be attached to compensation of employees. Within person-based remuneration system, promotion is always based on the high education and improved training. Secondly, the experience is another element or driver of compensation that is directly concerned with employee’s experience in the work. Highly experienced employees are highly rewarded as compared to less experienced employees. Thirdly, skill is a central driver for person based remuneration system since it touches on other drivers or elements. Skills as a driver for person-based pay system revolve around factors such as abilities, acquiring new skills and specialization. These factors increase the skills of an individual employee leading to higher compensation. There are many advantages and disadvantages of person-based remuneration system (Canavan 2008, pp18).
Advantages of person-based remuneration include reduction of competition among employees, increase technological skills within the organization and increase in job enlargement within the organization. Firstly, person-based remuneration system reduces competition for positions within the organization since personal qualification and skills are used for promotion. Secondly, Lewis and Podgursky (2013) explain that increase in training and education of employee used in compensation broadens the technological skills of employees leading to high experience. Thirdly, there may job enlargement within O’Meara Electronics Company due to the usage of person-based remuneration system. The person-based remuneration system primarily focuses on skills and training that enlarge job capacity of employees (Zingheim & Schuster 2009, pp 6).
Disadvantages of person-based remuneration system include limited seniority of employees, reduced performance of employees, focuses on the person rather than the performance of the company. Firstly, there may reduce performance since there is an emphasis on person’s knowledge. Companies such as O’Meara Electronics Company required high performance though under person-based remuneration system more emphasis is on the person not the output of that person. This may highly reduce the performance while the payment remains the same (Milkovich, Newman and Gerhart 2010b). Secondly, in the person-based pay system, the seniority is based on personal attributes such as education skills and knowledge and this attracts promotion. Where there are limited skills and education there is limited seniority hence poor organization structure. Thirdly, the person based remuneration is person-centered and may lead to declining performance due to lack of personal commitment to the performance of the organization. This may sacrifice the organization at the expense of the employee compensation (Ledford 2008).
Position-based remuneration system is another remuneration system that also assists in rewarding employees in an organization. Position based remuneration involves evaluating the performance of employees for compensation. As Gazioglu and Tansel (2014, pp 78-78) explains, person-based remuneration system has drivers such as performance, job done and behaviors at work. Firstly, in similar scenario Weibel and Margit (2009, pp 390) explains the performance of employees within the organization that can be evaluated based on the number of products sold at the particular time. Secondly, employee’s talent within the workplace that plays role in the performance of employees determines the compensation of various categories of employees of O’Meara Electronics Company. According to Mausner and Herzberg (2010), compensation and subsequent promotion can also be set based on the self improvement of employees. Similarly, improvement in electronic sales which is clearly improved performance attracts promotion or high reward. Based on the possible application of the position based remuneration system, there are some advantages and disadvantages of the pays system.
There are advantages of position based remuneration system and this includes motivation of employees to perform, improves the budgetary of the company and increases employee’s participation. Firstly, since under position based remuneration system the performance of employees within O’Meara Electronics Company determines the pay, employees are motivated to work harder and hence high performance (Shaw & Gupta pp 22). Secondly, when used in O’Meara Electronics Company remuneration system, budgeting becomes easy since employees compensation is directly linked to their performance in the workplace. Thirdly, position based remuneration system allows employees to form part or participate in their compensation. Employees participate in the compensation management system through their performance which determines their pay. Moreover, the position pays system incorporates the quality of work done by employees to determine their pay (Losey 2010, pp 123).
Disadvantages of position-based remuneration system include inapplicability within team-based work, downward salary evaluation, results in poor organization structure and unhealthy compensation of employees. Firstly, as presented in Ducharme and Mark (2007), evaluation of employees based on their performance as in position-based can distort the organization structure of O’Meara Electronics Company since highly performing employees are set above others. According to Dan, Uri, and Mazar (2012, pp 120-345), the hierarchy within position-based remuneration system is also determined based the performance employees resulting in the weaker organization structure. Secondly, application of position-based within an organization is most likely to result in high competition among employees as each employee tries to outdo others in performance. Thirdly, downward salary evaluation that characterizes position-based remuneration system resulting from underperformance of employee may cause demoralization employees. For instance, when O’Meara Electronics Company employees who underperform are evaluated downward and the compensation reduces hence low morale. Finally, as explained by Bernd & Gabrele (2008, pp 123-127) it remains challenging to evaluate employees’ team performance.
The current remuneration system used in O’Meara Electronics Company is position-based pay where employees are rewarded based performance. This is evidenced by O’Meara explaining the ever declining market position of O’Meara Electronics Company despite using position-based remuneration system. O’Meara suggested the need to migrate to person-based pays system though person-based pay system also has some other disadvantages. Disadvantages of position-based remuneration system include focuses on performance despite lack of skills. Person-based remuneration system, on the other hand, focuses on the person at the expense of organization’s performance. Therefore, there is a need for a more advantageous remuneration system that will solidify both employee’s need and company’s performance (Lewis & Podgursky 2013).
Based on the person-based and position based remuneration systems, the best remuneration system that can be adopted in O’Meara Electronics Company is the hybrid of the two systems. There are many different reasons why the hybrid remuneration system can be the best remuneration system for the organization. Firstly, a hybrid of the person-based pay system and position based pay system can serve to based on personal compensational and organization’s performance (Perry, Trent & Yun 2009, pp 45-56). Secondly, the hybrid remuneration system incorporates the company’s goals with the individual’s attributes to determine compensation. For instance, one characteristic of the person-based remuneration system that will form part of the new pay system includes employee’s qualification or skill. Position-based pay system, on the other hand, gives the performance of the organization or the goal of the organization as a recipe for rewarding employees. Combining personal performance and qualification can result in benefits for both employee and the company (Gruman & Saks 2016, pp123-136). Thirdly, the hybrid will help solve the argument of O’Meara Electronics Company employees that they work hard for the company while at the same time company also performs hence improving its position in the international market (RaN & Gerhart 2010, pp 333).
Conclusion
In conclusion, remuneration system determines the position of organization within the market. Two most important compensation management systems include person-based and position-based pay system. These remuneration systems have both advantages and disadvantages when applied to an organization that is at performance crossroad such as O’Meara Electronics Company. Position-based remuneration has been used in the organization and performance keeps on declining and despite the suggestion by management for application of the person-based pays system. There is a need for a more incorporative remuneration system that will benefit both employees and the company. Therefore, the recommended compensation system includes a hybrid that combines both person-based pay and position based pay system.
References
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Canavan, J, (2008) Overcoming the challenge of aligning skill?based pay levels to the external market. World at Work Journal, vol.17, no.1, pp18.
Dan, A, Uri, G, & Mazar, N, 2012, Large stakes and big mistakes, Working Paper. Federal Reserve Bank of Boston, Working Papers pp 120-345
Ducharme, J, & Mark, P, (2007) Exploring performance appraisals and pay satisfaction. California, USA: SAGE Publication.
Gazioglu, S, & Tansel, A, (2014) Applied economics: Job satisfaction in Britain. Journal of Economics, vol. 10, no.3, pp 78-78.
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Losey, S, (2010) Dod ends pay for performance system for most Intel workers. Federal Times: Communication Paper. Pg 123
Milkovich, T, & Newman. (2010a) Compensation: Skill-based remuneration. New York. USA: McGraw-HillS.
Milkovich, GT, Newman, JM, & Gerhart, B, (2010b) Compensation. Boston: McGraw-Hill/Irwin.
Muchinsky, P. M. (2012) Psychology applied to work. Summerfield, NC: Hypergraphic Press Ltd.
Mausner, B, & Herzberg, F, (2010) Human motivation to work. New Brunswick: Transaction Publishers.
Perry, J, Trent, AE, & Yun J, (2009) Back to the future? Performance –related pay, empirical research and the perils of persistence. Journal of Theory to Practice, vol.34, no.3, pp 45-56.
RaN, HM, & Gerhart, W, (2010) Human resources management : Gaining a competitive advantage. Journal of Economics, vol.5, no.5, pp 333.
Shaw, JD, & Gupta, N, (2012) Success and survival of skill?based pay plans. Journal of Management, vol.31, no.10, pp 22.
Weilbel, A K, & Margit O, (2009) Pay for performance in the public sector-benefits and cost. Journal of Public Administration Research and Theory, vol.15, no.2, pp 390.
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