1. Explain why some businesses are pay “leaders”, while others are pay “laggards”, with regard to employee base pay. What considerations go into decisions regarding pay philosophy? Explain, with reference to current events involving the workplace.
The main reason why majority of people look for employment is to get a paycheck to settle their bills. The pay practices of a firm determines its success or failure since this is what determines the kind of employees the firm will attract. Everyone wants to feel that the pay they are getting is fair depending on their level of education, skills and experience and when this is not the case, the employee will leave a firm in search of greener pastures and even if the employee does not quit, he or she will not achieve full productivity. The pay rates set by a firm should be appropriate. They should not be too low as to cause a firm turnover and recruitment problems and they should not be too high to cause a firm budgetary problems (Kleiman, 2010). Though most of the firms do pay at the market rate, there are those who pay above the market rate and these are called the market leaders. On the other hand there are those who pay below the market rate and these are called the market laggards. There are several reasons why firms are either market laggards or market leaders and these are related to the pay philosophy of a firm to some extent.
Each firm has the factors it considers when designing its pay policy. Market leaders pay above the market rates because their budget allows them to do so (Kleiman, 2010). They are usually the well performing firms in the market and thus can afford to pay well without experiencing budgetary problems which may force them to raise their prices. Another reason why such firms pay their employees above the market rate is that they desire to attract the best employees in the market as they know that this translates into higher productivity (Kleiman, 2010). In addition, by paying above the market rates such firms are able to retain their employees since their employees would not get better offers in the market and this saves the firms the costs and problems associated with employee turnovers. On the other hand, market laggards pay their employees below the market rate because their budgets do not allow them to pay their employees higher salaries (Kleiman, 2010). If they were to pay their employees at the market rate, they would either have to lay off some of the employees or raise their prices which would definitely cost them. Another reason why the market laggards pay below the market rate is that they desire to increase profitability of the company and so they pay their employees depending on the profits made (Kleiman, 2010). This way they motivate their employees to work hard to increase the profits.
Several factors should be considered before making decisions regarding pay philosophy in the workplace. These factors are both internal and external. One of the internal factors is equity. Employee’s pay should fairly reflect their contribution to a firm and to effect this a firm should establish pay grades where they will place employees depending on their contribution to the firm (Kleiman, 2010). For example new employees should be paid less than their counterparts with the same level of skills who have been with the firm for long. Consideration of external factors involves keeping in mind the market pay rates when making decisions regarding pay policy in a firm. This is because a firm is usually competing for employees with other firms in the labor market and thus if a firm does not offer an attractive pay package it will have problems attracting and retaining employees (Kleiman, 2010). If employees feel that they are being paid less than they are worth compared to their counterparts in other firms, they will leave a firm.
2. How can Human Resource professionals justify their value to the organization? Explain.
Human resource professionals are an important part of a firm. This is because they are the ones who develop and implement policies that ensure that maximum productivity from the employees is achieved. This is usually for the benefit of both the organization and the employees. The human resource professionals can justify their value to the organization in various ways.
The human resource professionals should closely watch the job market. They should keep a tab on changing market trends especially regarding pay rates (Banfield & Kay, 2008). They should carry out annual salary surveys as well as obtain information regarding the salary scales for employees in other firms. They should compare the rates the employees in their firm are getting with those of their counterparts with the same level of education and experience in the other firms. If there is a disparity, the human resource professionals should consider reviewing the salaries if the budget allows (Banfield & Kay, 2008). This will ensure that a firm stays competitive in the labor market by paying market rates. This way, the human resource professionals will save their firms extra costs that come with employee turnover and low productivity of employees due to dissatisfaction.
Human resource professionals should design strategies to motivate the employees in an organization. This is important because a motivated and happy workforce translates into productivity which means increased profits. This way, the human resource professionals will have added value to the organization by increasing the profits of an organization. There are several ways that the human resource professionals in an organization can motivate the workforce. One of this is competitive pay package, recognition of good performance for example by promotions, and fulfilling the personal needs of employees for example by offering medical cover for the employees and their families (Banfield & Kay, 2008). These things make employees feel valued as human beings and thus are motivated to work even harder. This usually benefits the organization greatly as it avoids the stress associated with employee turnover.
The human resource professionals can add value to their organization by recruiting suitably qualified candidates into the organization. To do this, they should come up with strategies on how to attract the best candidates for job openings. This involves designing job descriptions, and stipulating the required qualities for a given job position (Banfield & Kay, 2008). The human resources personnel should also come up with creative ways of getting the best and the most talented individuals in the job market and this calls for methods such as visiting institutions to carry out recruitment drives. These steps helps to ensure that an organization gets the best workforce and this means that the organization’s performance will improve. When this happens, the improved performance of the organization will be attributed to the efforts of the human resources personnel and this way they will have justified their value in the organization.
It is clear that there are several ways in which the human resources professionals in an organization can justify their value to the organization. Generally, for them to justify their value, they would have to work extra hard in ensuring that an organization has a capable workforce and a workforce that is motivated enough to achieve maximum productivity. This is because human resources are the greatest asset an organization has and it is the human resources that determine the performance of an organization.
Banfield, P. & Kay, R. (2008). Introduction to human resource management. New York, NY:
Oxford University Press.
Kleiman, L. S. (2010). Employee compensation. Retrieved 13 August, 2010 from