Compensation
Identify the social structure and income levels of the social classes in the United States.
In the United States, social class is purely based on economic and educational factors such wealth, income, and job related factors, which associate with the socioeconomic status (Chingos, 2002).
The super-Rich: These are the multimillionaires estimated to be 0.9% of the population. Most often, their income exceeds $350,000. They include powerful executives, celebrities, and politicians. Ivy League education is common among the super-rich (Chingos, 2002).
The rich: Estimated to be 5% of the population and have a household net worth $1 million or more. The household net is in the form of home equity, and they usually have college degrees (Chingos, 2002).
Middle class: These include the college-educated workers approximately 46% of the general population. They have an incomes and compensations considerably above average. A woman making $40,000 and a man making $57,000 may fall under this category (Chingos, 2002).
Working class: Form 40%-45%) of the population. They include the blue-collar workers and those that have highly reutilized jobs with low monetary security. A woman making $26,000 and a man making $57,000 fall under this category. They usually have a high school education (Chingos, 2002).
The poor: They form 12 % of the population and live below the poverty line. They have partial or no participation in the work force. A person with a household income of $18,000 is typical of this category. They usually have some high school education (Chingos, 2002).
Describe why a compensation specialist needs to understand this structure
Compensation specialists accurately need to understand this structure in order to assess the design and job duties compensation packages, which are useful in retaining and attracting top talent (Chingos, 2002).
Describe why base pay rates vary between employees performing different assignments in the same organization and why pay rates vary for people doing similar work in different organizations
Base pay rates may vary based on the performance reviews of employees. An employee may decide to work overtime, and a different wage is usually available for such an employee. This wage will be higher than the normal wage than the normal rate. Another factor is the overall importance of the job. This factor bases its foundation on job evaluation. This evaluation is found on things such as the effort needed to do a job, the amount of skill, the job difficulty and the amount of responsibility that the jobholder assumes. These factors lead to base pay rate variance within the same organisation (Chingos, 2002).
Pay rates for people doing similar work in diverse organizations may vary due to the geographic location and employment settings. Certain regions have a high cost of living and this factor makes organisations pay workers higher wages than those in regions with a low living cost. For example, if one earns $40,000 in Texarkana, he/she will have to make $87,885 in Honolulu in order to maintain the same living standard, which represents a difference of 120% in pay. The other factor is the employment setting. There are always unique situations that determine salary linked decision-making in various settings. For example, teachers union negotiate contracts that highly affect school setting compensations. The philosophies behind these agreements influence salary decisions all over entire organisation (Chingos, 2002).
Determine and discuss what you consider are the biggest issues that influence compensation factors in the United States.
Factors affecting compensation falls into the internal and external factors. The internal factors include the ability to pay and factors related to the employee. The ability to pay is the most influential factor that affects employee compensation. A wealthy and successful firm is capable of paying more than the competitive rate. Through this, it attracts an advanced calibre of people. Factors relating to employee include performance, experience, and potential. Companies reward performance with a pay increase and this motivates the workers. Experience provides a valuable insight and makes a person perfect thus rewarding. Firms pay employees based on their potential (Chingos, 2002).
The external factors include laws and regulations affecting compensation of employees in areas such as overtime, minimum wage and compulsory bonuses. Technological changes, which affect the, level of fixation wage, the labour market and inflation. Inflation entails fall in currency value, stagnation in economy development, rising cost and the government raising taxes. For example, in 2012, almost 22 listed companies in India increased their employee’s salary ranging from 20% to 27% compared to the previous year (Chingos, 2002).
Why is the role of a compensation specialist so important to employers?
Compensation specialists are responsible for carrying out research and helping in the development of the system. These systems are responsible for organisation of pay salaries, provision of competitive and equitable benefits, which allow the organisation to attract and, sustain competent employees. Compensation specialists perform research on comparable jobs salaries and the benefit options that other firms offer. This helps them to identify the benefit packages and optimal pay structures for their organisation. They evaluate existing jobs within an organisation in order to classify them properly according to their importance and level of responsibility to the organisation. For example in larger organisations, this specialist focuses on areas such as the employee benefit program of an organisation. They ensure that the company observes the state and federal laws and work with insurance brokers to implement employee pension, insurance and savings plan (Chingos, 2002).
Discuss the differences between a reward system, a compensation system, and a no compensation system
A compensation system determines the amount of pay given the many persons in an organization. This form of compensation entails many different guidelines, rules and processes that determine the pay structure, pay level and pay form. Pay structure is the comparative pay disparity among different jobs within the organization and the way the organisation determines this structure. Pay level is the amount of pay an organisation assigns to each job in comparison to the job market. The pay makeup that an individual receives is the Pay form (Chingos, 2002).
A reward system is part of Compensation. This process assists an organisation in the reinforcement of employee’s behaviour. It can be monetary or non-monetary recognition an employer gives to an employee in lieu of good performance. Reward systems focus on the attention of workers and if they are to be stimulating, they should meet the employee’s demands (Chingos, 2002).
Non – Compensation systems are situation-related rewards, and they are not part of the compensation packages. Any activity that affects the emotional, physical and intellectual well-being of an employee, but the compensation system fails to cover is part of the non-compensation reward system. There is a close link between compensation and non-compensation reward systems (Chingos, 2002).
Explain which system is more important to an employer and why. Use specific examples to support your answer. Explain which system is more important to an employee and why
The reward system is critical to employers as they can use rewards to retain and attract those with the required skills, knowledge, attitudes and aptitudes. For example, rewards will lead to job satisfaction in that employees will be happy with their jobs and will feel motivated to work if they get reasonable rewards in exchange to their services. These will in turn boost productivity and high returns for the organisation (Chingos, 2002).
Both the compensation and reward systems are essential to employees. This is since, in today’s environment employees expect something extra, as they are not willing to work only for money. For example, this system increases the self-confidence of employees since the organisation acknowledges their efforts. As a result, their level of performance shoots up (Chingos, 2002).
References
Chingos, P. T. (2002). Paying for Performance: A Guide to Compensation Management. New York: John Wiley & Sons.
