Human Resource Management
Introduction
Determining what an organization will pay for the employees’ wages and salaries puts greater importance to the understanding of factors that influence its calculation. The discussion on compensation and salary highlights factors affecting calculation. Furthermore, the Human Resources department’s involvement in salary determination will be examined. In addition, the related issues regarding perceptions of equity pertaining to base salaries will be determined. The importance of dissecting the aforementioned subjects of discussion encompasses the understanding of salaries in consideration to making decisions as to what to pay an employee. It can be assumed that compensation considers the job-relevant skills and experience that impact an employee’s placement in the salary range.
Factors Influencing the Calculation of the Base Salaries
Calculating an employee’s base salaries encompasses a consideration to a number of factors internal and external. In terms of internal factors base salaries are calculated based on the organization’s ability to pay, employee performance, experience, potential, job requirements, and potential (whatishumanresource.com, N.D.). For example, an entry-level employee that has been with the company for two years is getting $25,000 a year. However, a new hire employee in the same position was offered with $30,000 annual salary and still subject to increase after evaluation. There are several questions that may arise in the salary differential between the new hire and the existing employee as to why the former is getting more than the latter. Such question can be answered by looking at the potential factor and level of experience in the same job position. It is possible that the new hire already has more work experience than the existing employee, which shortens the time needed by the new hire to be trained.
It is the same with potential factor; the new hire might have shown to have other skill sets that are considerably beneficial for the organization. For example, the existing employee is proficient in typing, but the new hire shows high proficiency in management, logistics, and marketing. This means that the company is paying the new hire because it considers the new employee as a valuable asset that may be instrumental for organization’s future growth. External factors on the other hand also influence base salary such as economic condition, statutory laws, labor market, economy, inflation, academic institutions, and technological changes (Dickel and Watkins, 2008). For instance, when an economic crash affects the economy of a certain industry/organization, it is likely that the organization will either cut jobs or offer lower base salary. Economic condition is also synonymous to inflation and when the currency value declines, the company will have to spend more of its money towards keeping the operations going.
The Human Resources Involvement in Salary Determination
Salary determination constitutes a consideration to the involvement of the Human Resources Department. New trends in compensation take emphasis on market volatility, drivers of long-term economic value, performance reassessment, and realignment variables to financial and strategic measures rather than relying on the metrics such as earnings (Mercer, 2008). On the other hand, internal strategies developed by human resources departments are also taking involvement in salary determination. Human resources department takes the front line role in employee assessment of skills and relevant qualities for job placement. For example, when a new employee was hired by the organization, the HR department examines the job responsibilities assigned to the new employee. After which, the salary is determined through a salary band. Titles do not determine salary range, but the salary band assignment, which reflects the market value of the job, knowledge, competencies, and job complexity (McNamara, 1999).
Issues Related to Perceptions of Equity Regarding Base Salaries
The changing economic environment constitutes the several challenging issues facing the field of salary and compensation today. The encompassing result of the challenges includes the varying perceptions of equity or fairness regarding base salaries. One of the issues concerning perception of equity is the fact that employees tend to make a comparison their salary with those of other employees. For example, employees working as an office clerk believe that they are being paid less in their own organization as compared to employees in other organizations with the similar job (Zingheim and Schuster, 2007). Most people believe that their pay should be uniform in every organization to demonstrate equity in base salaries. For example, a pilot’s salary should be the same across the entire aviation industry.
However, several factors influence the level of pay rate, which creates the base salary differentials (PR Newswire Association LLC, 2009). In situations where the employee feels that the pay differential is significantly high, actions are being taken such as reducing work effort, ask for a raise, leave the company, and/or ascertain pay reduction of others through administrative complaints. Such action encompasses negative effect toward the organization’s productivity and most importantly the bottom line. In real life organizational setting, conflict arises between the staff and the management when employees realize that is a huge differential in their salary. However, such issues can be address by ensuring that employees understand the factors affecting the calculation of base salary.
Conclusion
Salary as a form of compensation is a critical area of concern for most organizations because of the varying perception about it. On the other hand, calculating salaries considers the job-relevant skills and experience that impact an employee’s placement in the salary range.
References
Dickel, T., & Watkins, C. (2008). Hiring and Compensation Trends. China Business Review, 35(4), 20. Retrieved from http://connection.ebscohost.com/c/articles/32779850/hiring-compensation-trends
McNamara, C. (1999). Employee Benefits and Compensation (Employee Pay). Retrieved from http://managementhelp.org/payandbenefits/
Mercer. (2008, May 15). Mercer Issues Study of US CEO Compensation Trends | Business Wire. Retrieved from http://www.businesswire.com/news/home/20080515005920/en/Mercer-Issues-Study-CEO-Compensation-Trends#.VEk8r4uUfzY
PR Newswire Association LLC. (2009). Corporate Compensation Strategies Driven By Past Pessimism Rather Than Future Optimism: Deloitte Study. Retrieved from http://www.thefreelibrary.com/Corporate+Compensation+Strategies+Driven+By+Past+Pessimism+Rather-a0215058457
Whatishumanresource.com. (n.d.). Factors Influencing Employee Compensation - what is human resource ? Retrieved from http://www.whatishumanresource.com/factors-influencing-employee-compensation
Zingheim, P. K., & Schuster, J. R. (2007). What are key pay issues right now?Compensation & Benefits Review, 39(3), 51-55. Retrieved from http://www.schuster-zingheim.com/docs/What_Are_Key_Pay_Issues_Right_Now.pdf
