Internal and external equity compensation essay

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internal equity review

In short. However, at times organizations offer higher compensation packages to attract and retain the best talent in their organizations Delery and Doty, In summary, it appears that employees may look at compensation equity from a different view point than that of their employers.

The advantages of external equity in a compensation plan

Organizations that has the drive to flourish in a market that is very competitive must have a compensation plan that is well designed and inspires its employees, has benefit programs, guarantees equity, and handles compensation costs. Companies go to great length to establish mechanism for accessing pay practices in other companies, while employees are primarily concerned with pay equity in their own company. At times organizations offer higher compensation packages to attract and retain the best talent in their organizations. The impact of the internal and external forces is important when dealing with pay structure. In such a way, organizations using internal equity may offer employees exclusive pay structure but fail to match the average pay in the industry, whereas organizations using external equity use similar pay structure compared to their competitors but fail to offer unique pay structures. It is to your advantage to ensure that your employees are creatively compensated and knowledgeable of their benefits. External Influences Understanding the external influences is just as important as the internal factors. Both internal and external and inequity have serious consequences for the organization. Develop a compensation strategy that includes a risk management plan. In this case, there is a comparison of employees in the same organization and it is called internal equity Hume, This disadvantages of internal equity is that an organization could risk the loss of employees to higher paying competition, and could lose the employees motivation once they realize they are being paid in the internal equity system. It's time for you to submit amazing papers!

At the same time, it is worth mentioning the fact that internal equity is often used by large organizations, which hold the leading position in the industry and which can offer its employees comfortable conditions of work. Delery, J. Organisations cannot easily control the variables that regulate wages.

discuss the internal and external equity in compensation systems

At the same time, organizations can use either pay structure but they have to take into consideration their needs and business environment.

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Pay Structures – Internal and External Equity