Compensation is a well-defined systematic way of providing monetary remuneration to employees for work done. Compensation includes job description, job performance, qualification and quality of work. There are a variety of advantages of utilizing a Web-based compensation tool compared to a client-server based or stand-alone PC-based system. One of the advantages is the fact that there is automated approach instead of tedious manual processes, which makes any compensation program easy to manage and virtually error-free. Web-based compensation tools are easy to start up because they do not require complicated installation and updating procedures. Easy installation makes administration work easy and also saves the time taken in system installation and update. In addition to easy setup, Web-based compensation tools are accessible from anywhere in the world as long as there is internet connection.
The information contained in Web-based compensation tools occupies little drive space because all the data is stored remotely and not on one particular drive. This is cheaper as compared to stand alone PC system. Another advantage of Web-based compensation tools is that they can operate on different platforms; hence, they are considered as cross platform in nature. This is advantageous to users because they can work with multiple operating systems. The possibility of using Web-based Compensation tools in different operating systems makes it easier for an organization intending to integrate it into normal daily operations as it does not require massive restructuring. Client-server based or stand alone PC based system requires an administrator to take care of administering, developing, maintaining, and implementation of procedures and policies that are necessary for ensuring integrity of the entire system and resolution of any arising issues. In contrast, the Web-based Compensation tools do not need an administrator, hence saving both monetary and labor costs. Web-based compensation tools have certain limitations that should be considered before utilizing it as a compensation mode. The most critical limitation is the low and poor performance because of browsers with limitations. However, due to exponential growth in computer processing systems and improvement in browser performance, this is no longer a major problem. Another key disadvantage is the exposure to leakage of private information because of storage on a remote server. The need for internet connection can also pose a challenge. Despite the limitations, Web-based Compensation tools are the best option for a progressive organization focused on upward mobility.
It is essential that every employee who productively works for an organization gets fair remuneration as this will create a peaceful work environment. To establish what accepted fair remuneration is, it is extremely important to conduct an extensive and in-depth job evaluation exercise. Job evaluation is an indispensable way of evaluating the quality and worth of each and every job in an organization. It involves assessment of three key aspects of a job: job content, job value and the productive contribution of every employee to the organization. Currently, most organizations have adopted e-Compensation to evaluate jobs. The reason for this is the fact that it ensures that there are no errors made as most of the work done is accurate. Web Compensation tools are used by Human Resource Department in preparation of salaries and generation of automatic reports that illustrate cash flow. The automation Establishes internal equity that gives each employee a sense of belonging to the firm because they feel like they are justly awarded for the work that they do.
From the management perspective, e-Compensation makes job evaluation a smooth running exercise as communication to the employees can be done on an open platform. Therefore, the managers are able to cut costs spent on tiresome administration by having direct contact with all employees, both senior and junior. Through open communication, there is a clear clarification of how remuneration is awarded, complaints are openly made by employees and addressed on an open platform. This fosters job satisfaction among employees and also creates a sense of belonging that raises loyalty among employees thereby potentially increasing their productivity. In addition, it helps the management monitor feedback from the employees and assists the Human Resource Management department in understanding how to better manage employee needs and complaints to create a productive and profitable work environment.
Merit pay is an emerging system of compensation that rewards employees who perform highly with extra additional pay or incentive payment. Merit pay is the most effective way of remuneration as it ensures that the most productive employees are motivated and appreciated hence given a reason and incentive to work even harder and be more productive. There are two forms of merit pay programs, namely centralized merit pay programs and decentralized merit pay programs. The centralized benefits pay has several advantages over the decentralized merit pay approach, and these benefits include the fact that the established pay grade systems in a centralized approach encourage employee productivity and boost workforce morale. The reason for this is the fact that remuneration is not only monetary but also includes other benefits such as paid leaves, insurance, and employee discounts. This gives employees more motivation to work hard and be more productive so as to rise to a higher pay grade. Centralized merit pay decisions are made by the management and are not influenced by any views or opinions of the employees fraternity hence eliminating the feeling of favoritism.
E-compensation is an extremely effective method of compensation planning that can be adequately used by the human resource department to ensure effective and sufficient ways in compensation. E-compensation assists in designing adequate compensation planning strategies by giving a conclusive report on all activities undertaken by each and every employee in the organization. It provides essential tools to the finance department in charge of salary implementation a conclusive and extensive report on what every employee contributes in terms of profitability and productivity to the organization. This helps the finance department estimate how to introduce models for noncash and cash remuneration in accordance with the level of productivity and profitability to the firm in question.
There are three main types of integrated analytic features that are needed for compensation planning and decision support in e-Compensation systems. These are timely Compensation alerts, which notify supervisors and top managers every time the compensation cycle is complete. Another feature is the complete assessment of employee job history and work performance. This ensures there is an insight into how to productively evaluate employees and how to effectively remunerate them as well as whether they deserve to be promoted. This ensures that top management has a plan for each and every employee. Another analytic feature is having the collective compensation budget weighed against productivity, which is accomplished to ensure that compensation is always equivalent to the productivity and at no time does compensation exceed the productivity level.
According to Flannery, Hofrichter and Platten (1996), there are some barriers that can prevent an organization from optimally realizing the vast potential of Web-based internal equity tools. Without being sorted, these barriers will eventually prevent an organization from enjoying the advantages of e-Compensation. Some of these barriers include the huge communication gaps that exist between the Human Resource Manager and employees. This creates mistrust between top management and employees as employees wrongly view the web-based tool as a way of reducing staff and lowering remuneration. Another barrier is the genuine self-interest among top management and those in positions of power. This can prevent an organization from fully reaping the benefits of web-based equity tools as there are those who selfishly care for their personal interest, without considering others. These individuals ignore inequity for self profit. Finally, there is a breed of managers and supervisors who look at web based internal equity tools apprehensively and do not trust them and hence do not put them to practical use.
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According to Tropman (2001,) necessary approaches can be involved to ensure that these barriers of web-based internal equity are eliminated so that firms can optimally benefit from internal equity. These approaches include liquidating the apprehensive feeling among managers and supervisors who do not trust web-based internal equity. This is done by educating them extensively on this important aspect and illustrating the practical benefits of including web-based internal equity into their management style. Another way of eliminating this barrier is by creating an efficient channel of communication between the Human Resource Managers and other employees so that they can fully understand the role of adopting this important concept. This will also eliminate all misconceptions that employees have in regard to web-based internal equity. Finally, all individuals focused on their own self-interest other than the good of the firm should be identified and instructed sternly to act in a way that will foster internal equity to promote productivity.
The meaning of quality data is information that is accurate, acquired legally and comprises substantial details about the subject at hand. Quality data is taken as real and applicable information that can be used to make accurate decisions that affect organizations daily activities. Therefore, it is extremely important to have strategies set in place that can accurately judge data to ascertain whether all the information it has is feasible (Risher, 1999). To judge data appropriately, an organization has to take into consideration that the information obtained from the data will have a lasting impact on all current and future running of the company. Rock and Berger (1991) suggests that it is from data gathered that an organization conducts analysis and creates plans for the future. Thus, it goes without saying that collection of poor quality data will have diverse effects on the profitability and productivity of an organization. In such a way, it is extremely necessary for the human resource department to introduce proper strategies that ensure collection of quality market data.
The most important strategy is ensuring that data collected is always complete and no gaps or pieces of information are left to ensure that data collected is conclusive (Rubino & American Compensation Association, 1992). This can be done by keenly cross checking whether there is any missing information. In addition to crosschecking, proven statistical smoothing techniques can be utilized to ensure that no data is left out. Another strategy is ensuring that all the data collected is accurate. To guarantee the accuracy of data, it has to be collected legally from channels that are ascertained and known, as well as trusted by the organization. Accurate data is cross-checked with already existent data to confirm truthfulness in content. Finally, the most important strategy for ensuring that the data collected is of high quality is to ascertain the reliability of the source of the data. Knowing where data is sourced from is an indispensable strategy for determining the reliability of the data. A trusted source of data that always delivers quality information and can be held accountable for all the data is the most reliable and trustful provider of information. Human Resource Managers have to trace consistently and be aware of who provides the data and how credible the data provider is (Risher, 1999).