Undoubtedly, people are the most costly, valuable and important resource of any organisation and the management of this resource can have a direct impact on their individual performance and the enterprise as a whole. When changes in the structure of an organisation take place, there is requirement for additional people to fill the new position. The job responsibilities of the existing employees also change; thus, it is vital to change the current pay model of being used. Since the electronics manufacturing services (EMS) company conducted a process for business transformation, various functions were reorganised and there was requirement of new people to fulfil new positions that required special competencies.
After these changes, it has become imperative to reorganise the existing salary structure so that internal equity is maintained and no employee gets more or less than what is deserved. The learner has analysed the new internal pay structure that the EMS Company can adopt so that payment is done fairly. This analysis has been done by evaluating the job roles and responsibilities of the operations manager, design engineer and business unit manager of the company.
Pay or salary is vital for attaining the strategic goals of an organisation and the behaviours and attitudes of an employee are impacted because of it (Armstrong, 2010). A proper structure and policy for pay should be in place because if there is fairness in the level of pay, then the employees are motivated to work, otherwise their efficiency gets affected. The pay model is created by taking into account all the goals and objectives of the business organisation, and strategic thinking should be applied to ensure that the strategy is successful and both the employees as well as the organisation benefits from it.
Deciding on the level of pay is based on several things; and three main building blocks are present in the framework, which includes the:
Objectives of the pay structure – The pay structure has to be created in such a manner that certain basic objectives are achieved, which includes complying with the laws and legislation, fairness and efficiency. Efficiency includes controlling the cost of labour, making the stockholders and customers happy, enhancing quality and improving performance (Shields et al. 2015). The main motive of the EMS Company is to provide exceptional service to its customers by undertaking services in design work and providing technical support activities for the products of their clients. Thus, the compensation objective should emphasise its dedication towards its consumers, success of the business, and its performance. The salary for all positions will be competitive with various other enterprises that are at the same level with the organisation. Fairness is a primary objective of the pay system, and this company emphasises on understanding and being open to its employees and treating them fairly.
Thus, the pay will be decided treating all the employees fairly and recognising their needs and performance. For example, employees having higher training, experience or performance will receive higher pay. The design of the pay system will be guided by the objectives, mission and vision of the company (Till and Karren, 2011, p.42). This model has been adopted by keeping the vision and mission of the company in mind. The vision of the company is to create value for its consumers by providing efficient and innovative solutions and services for electronic manufacturing. The mission of the company is to excel in on-time deliver, cost minimisation, value addition, and quality and innovation implementation. This EMS Company also wants to ensure that the employees have high level of commitment, motivation and morale, by efficiently defining its training, recognition and reward policies.
Since the main objectives of the company are to increase the satisfaction of customers as well as employees, a reward or incentive system will be introduced (Weibel et al. 2010, p.387). The salary of the employees will be fixed and additional or merit pay will be provided to them according to their performance for the month. Thus, the pay system for the EMS Company, which has been aligned with the objectives of the organisation include paying salaries that are equal to or slightly more than that of the competitors and increasing it according to the knowledge and skill of the employees.
Policies that are used for formulating the compensation system – There are various policy decisions that have to be taken into consideration while the pay structure is being prepared, which incorporates (Ntim et al. 2017, p.40):
These policies constitute the basis of creating the structure of pay of the EMS Company, and act as a guideline with the help of which pay will be managed in the future to ensure that all the objectives of the system and organisation are accomplished (Moynihan and Pandey, 2010, p.849).
Techniques for building the compensation system – Proper techniques for analysing the work done and the number of people required to do it will be used for designing the pay structure (Güngör, 2011, p.1514). Surveys of the pay of other employers will be done for determining the pay structure of the EMS Company.
The pay of the existing employees and subsequent increase in it will be determined according to the basis of their past performance. There are four methods of evaluating job performance of individual employees – job comparison or ranking method, job classification or grading method, points rating and factor comparison method. The employees at the EMS Company will be evaluated by using the grading method, which was popularised by the U.S. Civil Service Commission (Ferguson and Reio Jr, 2010, p.471). It is also known as the classification method and classes or job grades will be established. Diverse jobs that require similar skills for performing them or are of the same difficulty level will be categorised together. Analysis will be done on these job grades and according to their job type and performance, all employees will be put in different grades according to which their new salaries will be decided.
This method will be perfect for this company as it is a simple and easy method, and since the company has several employees, judging them on any other basis will be very difficult (Kutlu et al. 2013, p.659). The positions of an operations manager, design engineer and assistant manager can be efficiently evaluated by using the grading method or job classification method.
All these jobs are significantly different from each other and will fall under different categories. The grading criteria will be formulated according to the responsibilities and level of difficulty of each job. There are various assistant managers in the company; and since these different employees fall under the same category, they will be graded by considering the same criteria (Judge et al. 2010, p.157). This will help in understanding whether all the assistant managers are performing efficiently or not, and the ones who are doing extra than what their job responsibility is, will get rewards or incentives accordingly.
A proper reward strategy will be developed for creating a standard process or practice to be followed within the organisation (Carraher, 2011, p.50). The reward strategy will be used used to achieve various objectives of the business along with its rationale, which include:
The pay system that has been formulated for the EMS Company ensures that its pay structure is aligned with the objectives of the organisation. Fairness will be ensured while deciding the salary so that the behaviour and attitude of the employees are affected in a positive manner. The pay structure will be formulated by setting the level of pay on comparison to that which has been set by the competitors of the same level. Additionally, the salary of the new employees as well as the existing employees will be based on their performance. Grading method will be used for analysing the performance of the employees and a proper reward system will be used on the basis of business rationale for encouraging the employees.
Armstrong, M., 2010. Armstrong's handbook of reward management practice: Improving performance through reward. Kogan Page Publishers.
Shields, J., Brown, M., Kaine, S., Dolle-Samuel, C., North-Samardzic, A., McLean, P., Johns, R., Robinson, J., O'Leary, P. and Plimmer, G., 2015. Managing Employee Performance & Reward: Concepts, Practices, Strategies. Cambridge University Press.
Aziri, B., 2011. Job satisfaction: A literature review. Management research and practice, 3(4), pp.77-86.
Carraher, S.M., 2011. Turnover prediction using attitudes towards benefits, pay, and pay satisfaction among employees and entrepreneurs in Estonia, Latvia, and Lithuania. Baltic Journal of Management, 6(1), pp.25-52.
Ferguson, K.L. and Reio Jr, T.G., 2010. Human resource management systems and firm performance. Journal of Management Development, 29(5), pp.471-494.
Güngör, P., 2011. The relationship between reward management system and employee performance with the mediating role of motivation: A quantitative study on global banks. Procedia-Social and Behavioral Sciences, 24, pp.1510-1520.
Judge, T.A., Piccolo, R.F., Podsakoff, N.P., Shaw, J.C. and Rich, B.L., 2010. The relationship between pay and job satisfaction: A meta-analysis of the literature. Journal of Vocational Behavior, 77(2), pp.157-167.
Kutlu, A.C., Ekmekçio?lu, M. and Kahraman, C., 2013. A fuzzy multi-criteria approach to point-factor method for job evaluation. Journal of Intelligent & Fuzzy Systems, 25(3), pp.659-671.
Moynihan, D.P. and Pandey, S.K., 2010. The big question for performance management: Why do managers use performance information?. Journal of public administration research and theory, 20(4), pp.849-866.
Ntim, C.G., Lindop, S., Thomas, D.A., Abdou, H. and Opong, K.K., 2017. Executive pay and performance: The moderating effect of CEO power and governance structure. The International Journal of Human Resource Management, pp.1-43.
Till, R.E. and Karren, R., 2011. Organizational justice perceptions and pay level satisfaction. Journal of Managerial Psychology, 26(1), pp.42-57.
Weibel, A., Rost, K. and Osterloh, M., 2010. Pay for performance in the public sector—Benefits and (hidden) costs. Journal of Public Administration Research and Theory, 20(2), pp.387-412.
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