• Evaluate the concept of market competitiveness in relation to an organization’s pay system, particularly when it is unable to offer its employees market competitive salaries due to a lack of financial resources. 
• Propose at least three alternative approaches for organizations which have limited financial resources. 
• Identify at least three specific steps that could be taken to minimize the impact implementing these alternative approaches could have on the firm’s success. Justify why these steps would be the most appropriate in this situation.

 

Compensation and Benefits

People work in a given company or organization because of various factors such as company stability, working conditions, status, growth opportunities, work relationships, compensation, to mention a few. Compensation is one of the key factors why employees exert effort, invest their time, and sacrifice other things that may offer happiness and satisfaction in life to work for a certain company or organization. Compensation consists of three major components: salary/pay, benefits, and incentives (Fritz, S., & Schneider, 2016). Consequently, organizations often offer attractive salaries, benefits, and incentives in order to attract talent and maintain existing employees. Direct pay comprises salaries and wages; benefits comprise health care, employee compensation, paid leave, social security, and pensions. On the other hand, incentives include bonuses, merit pay, gain sharing, group incentives, and profit-sharing. Thus, companies use compensation to gain a competitive advantage over others. This essay examines market competitiveness regarding an organization's pay system, laying out limited alternatives for when an organization lacks financial resources to implement a competitive pay package.

Market Competitive Pay System

The pay system significantly contributes to an organization's competitiveness through compensation policies that contribute to an organization's competitive advantage, attracting and retaining highly qualified talent (Joseph, 2019). Four key pillars underline market competitive pay systems: strategic analysis, integrating job/work structure, compensation surveys, and compensation policies. Strategic analysis involves an evaluation of an organization's internal factors and external factors. External factors comprise industry profiles, growth prospects, and competitor information. On the other hand, internal factors comprise the financial position and capabilities of the organization that will determine whether it is capable of implementing a competitive pay system. Compensation surveys involve finding out competitor's salaries and wage practices (Joseph, 2019). Compensation surveys involve evaluating elements that include benefits. Understanding competitors' pay policies and practices, including benefits, offered industrywide, gives an organization a realistic picture of what it must offer its employees to remain competitive. This is achieved by integrating external pays/salary/wage/benefits rate with internal job/work structure.

Integration of work structure reflects the organization's internal factors as well as the industry valuation of jobs (Joseph, 2019). Pay policies and practices are key and must align with the organization's competitive strategies (Joseph, 2019). Notably, a balance must be established between costs, attracting talent, and retaining existing talent. Thus, when a company lacks financial resources to implement a competitive pay system, there is a need to implement alternative approaches to attract and retain talent. For organizations with limited financial capability, strategies that control labor costs effectively are important. However, these strategies must be approached without significant pay cuts. In today's competitive business environment, employees can always get better-paying opportunities from other companies within the industry. Particularly, organizations must be cognizant that most employees are motivated by the pay and benefits they receive for their work (Kalyanamitra, Saengchai, & Jermsittiparsert, 2020). Thus, adequate compensation provides employees with sustenance and enhances self-esteem while meeting their materialistic and recreational needs.

Therefore, if the compensation offered by an organization is perceived as inadequate, then the possibility that many leave for better compensation elsewhere is high. Similarly, potential talent would reject joining the organization. Furthermore, existing employees who choose to remain may become less motivated, satisfied, and unproductive. Today's highly global business environment heavily relies on the efficiency and skills of human resources. Thus, such unmotivated, less satisfied, and unproductive employees may adversely affect the organization's competitiveness.

Alternative Approaches

Employee attitudes regarding their pay and benefits affect how they behave at work. As such, employers are required to instill in their employees a positive attitude towards their work. Particularly for organizations with limited financial resources, ensuring a sense of fairness and equity in the organization's compensation policies and practices is key. Employees judge the level of fairness and equity in the organization's compensation policies and practices through the amount of work they perform and compensation received in return. Additionally, employees compare compensation received by others in similar job categories from within the organization. Thus, organizations that have limited financial resources to implement competitive pay systems must ensure that their pay system is fair and equitable in the first place.

This can be achieved through compensation schemes that are fair and equitable. Any compensation scheme, including salaries and bonuses, must be administered fairly while focusing on performance. First, compensation amounts must be determined honestly, impartially, and objectively without prejudice or favor and based on merit. For instance, if compensation is based on performance. There must be a thorough analysis of performance results instead of subjective evaluation by a manager or supervisor. Besides, the organization must ensure internal and external equity. Internal equity ensures that the compensation comparable is within the appropriate range compared to other employees in the same job category, taking into consideration differences in performance. On the other hand, external equity ensures that compensation is comparable to employees in similar work within the relevant industry.

Secondly, flexible work scheduling is a benefit employees value, which cash-strapped organizations can leverage (Heathfield, 2017). Flexible work scheduling means that employees can work the most flexible hours that align with their preferences rather than the rigid normal business working hours. Flexible work scheduling can enhance employees' morale, commitment, and engagement at the workplace, increasing employee productivity (Heathfield, 2017). Moreover, through flexible work scheduling, employees can work the most preferred hours, reducing absenteeism, unpunctuality, sluggishness, and turnover (Heathfield, 2017). Moreover, flexible work schedules can be designed to increase working hours, increasing productivity for the organization at the same labor cost.

Thirdly, companies that want to retain competitive advantage despite limited financial capability to compensate their employees competitively must implement programs that recognize and appreciate employees through non-monetary incentives (Jyothi, 2016). When employees' work and effort for the organization are recognized and appreciated, their level of satisfaction, morale, motivation, and productivity increases (Jyothi, 2016). For instance, creative recognition and rewards such as personalized thank you email or handwritten notes, praising good performance during meetings, and recognizing excellent performers on the official company website or social media page make employees feel that their work is valued (Jyothi, 2016). Non-monetary rewards and recognition increase teamwork and create a feedback loop, enhancing retention.

Steps to Minimize Impact of Alternative Approaches

The first step is clear and concise communication. Employees are more open to alternative compensation approaches when the employer is upfront and openly communicates the organization's position to the employees. Communication involves having discussions with employees, making them understand the organization's financial position. Consequently, employees become tolerant of changes in compensation. The communication must involve the organization's top-level management to be effective. Secondly, the organization must take considerable effort to demonstrate how effective the alternative approaches are for the employee and the organization. For instance, through flexible work scheduling, an employee in training can have fewer working hours while an employee with young children can work from home. Lastly, the organization must be creative in how they initiate alternative approaches. For instance, initiating non-monetary recognition and rewards can begin with a special lunch for employees through which excellent performers are recognized and praised. While there are limited options for organizations with a limited financial capacity to maintain a competitive pay system, cutting compensation must be followed by clear communication and alternative approaches to keep employees satisfied, motivated, and productive.       

OUTLINE

Title: Compensation and Benefits

Thesis Statement: The essay examines market competitiveness regarding an organization’s pay system, laying out alternatives for when an organization lacks financial resources to implement a competitive pay package

1. Introduction

1. Outlines factors why people work for a given organization.
2. Outlines the components of employee compensation
3. Outline the role of compensation in attracting and retaining employees.

2. Market Competitive Pay System

1. Introduces and defines the competitive pay system
2. Pillars of Competitive pay system
3. Impact of pay system competitiveness on organization’s competitive advantage
4. Need for alternative approaches for Organizations with the limited financial capacity to implement a competitive pay system

3. Alternative Approaches

1. Ensuring fairness and equity in the existing pay system
2. Flexible work schedules
3. Recognizing and appreciating employees through non-monetary incentives

4. Steps to Minimize Impact of Alternative Approaches

1. Ensure clear and concise communication
2. Demonstrate the effectiveness of alternative approaches
3. Initiate alternative approaches creatively

5. References