<< Chapter < Page Chapter >> Page >

Combining internal and external equity

A company that has performed appropriate research has two sets of data. The first is pay structure , the output from the job evaluation. The second is market data , the output from the market survey. The next step will be to combine these two sets of data, to create a pay policy line . The pay policy line can be drawn freehand, by graphing actual salaries and connecting the dots. Alternatively, statistical techniques such as regression analysis are used to create a pay policy line. Regression generates a straight line that best fits the data by minimizing the variance around the line. In other words, the straight line generated by the regression analysis will be the line that best combines the internal value of a job (from job evaluation points) and the external value of a job (from the market survey). You can also enact a policy of “leading” the market by raising the line, and the policy of “lagging” the market by lowering the line.

How do companies decide the pay associated with each job? First, they analyze the content of each job. Second, they assess the value each job contributes to the company. Third, they price each job in the market. Finally, they look at the relationship between what they value internally and what the market values externally. By following each of these steps, a company will have a fair base pay system, which will lead to attracting and retaining the best employees.

Benefits and non-monetary compensation

By Julie Wells

In order for most businesses to function, employees must be provided with a payment in exchange for their services. Cash is one way to compensate employees, but cash alone is rarely enough payment. “Compensation is becoming more variable as companies base a greater proportion of it on stock options and bonuses and a smaller proportion on base salary, not only for executives but also for people further and further down the hierarchy” (Pfeffer, Six Dangerous Myths About Pay, 2000). Benefits and other forms of non-monetary compensation are becoming more appropriate forms of compensation for employees in today’s workplace.

A benefit is a “general, indirect and non-cash compensation paid to an employee” that is offered to at least 80 per cent of staff (Employee Benefits Definition). On average, 40 per cent of payroll is dedicated to non-cash benefits (Kulik, 2004). In order to attract, retain, and motivate the best employees, benefits and other sources of non-monetary compensation should be considered. There are three things a company must fully consider before determining if and how they will issue employee benefits: the industry structure, the strengths of the company and its competitors, and the wage structure. A company should not issue benefits to employees if they have not considered the implications of these factors, specifically the wage structure. If a company offers employees extremely high wages compared to other businesses in the industry in addition to non-monetary compensation, costs may increase at a faster rate than profit. Benefits are also related to the type of industry in which the company does business. If the company has an understanding of what they can offer to employees and how those offerings will be received in the industry, benefits can increase a company’s workforce quality and general happiness of employees.

Questions & Answers

a perfect square v²+2v+_
Dearan Reply
kkk nice
Abdirahman Reply
algebra 2 Inequalities:If equation 2 = 0 it is an open set?
Kim Reply
or infinite solutions?
Kim
y=10×
Embra Reply
if |A| not equal to 0 and order of A is n prove that adj (adj A = |A|
Nancy Reply
rolling four fair dice and getting an even number an all four dice
ramon Reply
Kristine 2*2*2=8
Bridget Reply
Differences Between Laspeyres and Paasche Indices
Emedobi Reply
No. 7x -4y is simplified from 4x + (3y + 3x) -7y
Mary Reply
is it 3×y ?
Joan Reply
J, combine like terms 7x-4y
Bridget Reply
im not good at math so would this help me
Rachael Reply
how did I we'll learn this
Noor Reply
f(x)= 2|x+5| find f(-6)
Prince Reply
f(n)= 2n + 1
Samantha Reply
Need to simplify the expresin. 3/7 (x+y)-1/7 (x-1)=
Crystal Reply
. After 3 months on a diet, Lisa had lost 12% of her original weight. She lost 21 pounds. What was Lisa's original weight?
Chris Reply
preparation of nanomaterial
Victor Reply
Yes, Nanotechnology has a very fast field of applications and their is always something new to do with it...
Himanshu Reply
can nanotechnology change the direction of the face of the world
Prasenjit Reply
At high concentrations (>0.01 M), the relation between absorptivity coefficient and absorbance is no longer linear. This is due to the electrostatic interactions between the quantum dots in close proximity. If the concentration of the solution is high, another effect that is seen is the scattering of light from the large number of quantum dots. This assumption only works at low concentrations of the analyte. Presence of stray light.
Ali Reply
the Beer law works very well for dilute solutions but fails for very high concentrations. why?
bamidele Reply
how did you get the value of 2000N.What calculations are needed to arrive at it
Smarajit Reply
vikash rawat
jagvir Reply
entrepreneurial mobility
Manish Reply

Get the best Business fundamentals course in your pocket!





Source:  OpenStax, Business fundamentals. OpenStax CNX. Oct 08, 2010 Download for free at http://cnx.org/content/col11227/1.4
Google Play and the Google Play logo are trademarks of Google Inc.

Notification Switch

Would you like to follow the 'Business fundamentals' conversation and receive update notifications?

Ask