Conducting an analysis and interpretation of the external job market will help in determining where the organization stands as far as their pay policies are in comparison to other organizations within the same industry.
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When an employee goes from an hourly to a salary position, this becomes more difficult to get to the base minimum pay of that pay range, depending on when they were hired and how long they were in their positions.
Internal and External Equity Comparison Autor: A company focusing on external equity for its compensation plan is Yum Brands. Internal equity will help the organization in keeping the best employees on board as well as bringing in the best applicants.
Next factor being the skill level required, any education required for any single position, and a thorough understanding of how to perform each job within the organization. In short, internal is within and external is outside of the organization. Conclusion Whether a company decides to create a compensation plan focused on internal equity or external competitiveness, it is important to research the advantages and disadvantages.
According to Milkovichexternal market comparisons are still important to research, as employees assess the fairness of their pay with internal structures and external markets p.
Compensation fluctuations can occur which causes problems with budget forecasting and cost control issues, which can result in lost revenue and a low or negative return on the investment.
Therefore, it is important to consider how the compensation plan and pay structure affects the company financially.
The external pay structure also creates a competitive advantage for companies as long as it is constantly researching the market. ADT then uses another piece of internal equity; equity increases.
As well, compensation fluctuations cause problems with budget forecasting and create cost control issues, which negatively affects the company financially. Internal equity will aid the organization by helping them in being transparent. Also, the employee may want to negotiate their wage based on an offer from another company, which can create a higher cost to the organization if it wanted to retain them.
For example, there could be multiple management positions within that organization that are all similar and essentially handle the same duties; therefore making them the same pay range "Hr Council " n.
External equity is a system in which employees compare the rate of pay they are receiving to employees in comparable positions at other organizations "Hr Council " n.
When preparing a compensation plan based on internal equity, it is important to take into consideration a few of the basic factors.
Our salary exempt positions are managed the same way, using an E2-E4 scale which is very comparable to the system used for hourly non-exempt employees.
Some disadvantages include a higher cost to the company to remain competitive, which is why it is important for companies to research the competition. Advantages and Disadvantages of Internal and External Equity There are several advantages and disadvantages to both the internal and external equity for organizations.
If the company is to produce consistently high returns and growth for shareholders, then the external competiveness focus may prove to be advantageous. Internal equity is when the employees are being provided with fair wages relative to the value of their jobs within the organization. When employees feel treated respectfully it only increases their morale.
Hourly positions at ADT are all assigned non-exempt pay ranges. For any organization to be successful in that market they have to take a substantial stand toward equity. There is always a downside and with internal equity there come disadvantages. Advantages and Disadvantages of External Equity Some advantages of external equity focus are that for more productive workers, the market pricing allows the company to entice skilled workers and retain them in a motivating work environment.
Here again, the employee remains with the organization because they know changing jobs will not necessarily bring with it more money.Write a word paper in third person voice in which you design a total compensation plan for an organization focused on internal equity and a total compensation plan for an organization focused on external equity.
View Essay - Internal and External Equity Comparison from ETHICS at University of Phoenix. In todays competitive globalized economy, a companys approach to equity and how it values equity. Internal and External Equity Comparison Annette Gurulé HRM/ - Total Compensation August 4, Jerry Davis Internal and External Equity Comparison A solid and well put together compensation package is a valuable tool for an organization.
Read this essay on Internal and External Equity Comparison. Come browse our large digital warehouse of free sample essays. Get the knowledge you need in order to pass your classes and more. Only at ultimedescente.com". View Essay - Internal and External Equity Comparison from HRM at University of Phoenix.
1 Internal and External Equity Comparison Karrieb Shelton HRM/ December 12, Terry. Internal and External Equity Comparison This Essay Internal and External Equity Comparison and other 64,+ term papers, college essay examples and free essays are available now on ultimedescente.com Autor: dcphotodesign • January 30, • Essay • Words (3 Pages) • Views4/4(1).Download