human resource management salary

human resource management salary

The Importance of Competitive Salary in Human Resource Management

1. Introduction

A growing area of business concern in the recent years has been pay or compensation. Wages and salaries impact information about the conditions and techniques of workforce, and encourage employees to improve their commitment to their work and the organization. A competitive compensation package with satisfactory level of pay and other benefits has long been seen as a strategy to attract competent and skillful staff to join an organization. Ollukaran suggests that high compensation and benefits help an organization to attract and keep quality employees. Employees want fair pay, but other aspects of work are also important. They want good fringe benefit programs such as employee savings and retirement schemes, health and welfare benefits. They want job security and the ability to balance their work and their life especially for women employees. Employees also value opportunities for paid time-off. These programs are important and can vary per society. Organizations that care about their employees well-being offer these benefits to help them manage their overall quality of life. Employees judging a company as one offering a great place to work has an ability to attract and retain top talent.

The topic is not a new concept in the world of Human Resource Management. There are a wide variety of motivators for employees. Employers have to investigate, analyze and apply these motivators towards employees. It is also a generally accepted thought that dynamic organizations require individuals who are willing to put their best effort towards achieving the goals of the organization. Employers have to identify potential employees and be able to attract them to work in their organization. They also have to find ways to retain mission-critical employees. Preliminary inquiries from employees suggest that many organizations emphasize pay and place less emphasis on other rewarding methods. Consequently, positive behaviors or high performance may or may not be encouraged. These inquisitive concerns lie within the premises of practical relevance to business organizations especially small and medium-sized enterprises and other nongovernmental organizations in an effort to enhance their performance.

2. The Role of Salary in Attracting and Retaining Talent

Competitive remuneration supports the company’s target to be an organization of choice which desires and demonstrates optimizing the potential capabilities of working together. A fair, competitive and performance-related rewards/recognition/incentive system is found in a total compensation system. Employees can be charged with working towards the objectives set for them by mutual respect and meaningful communication with their superiors, a sincere spirit of teamwork combined with the requisite skills. The employees have knowledge about what they must do and what is expected of them. In addition, companies manage the pay system with language that workers feel comfortable discussing. It is understandable, seen to be equitable and realistic. The framework to support the company is aimed at building a climate based on the respect and team-based values of fairness.

In every business, human resource management’s role is of paramount importance in maintaining a high level of efficiency among its employees. A clearly designed compensation package is crucial in achieving such a high level of performance. Employees must have a very clear understanding of their salary structure. Before a job can be advertised, job analysis is undertaken, similar to market research. The organization must then decide how much to pay. An attractive salary and benefits package will promote job applicants’ interest. It will also help the company to retain existing employees by eliminating dissatisfaction relating to pay, complaints about unequal pay for equal work, and high turnover partially attributed to uncalled for pay. Suffice it to say that high salary offers prospective employees the best chance of attracting a highly capable and highly competitive workforce. Valuable staff is retained at the company through competitive remuneration strategy while at the same time reducing the possibility of industrial action.

3. Strategies for Setting Competitive Salaries

In summary, the manager must concern him or herself with the firm’s role in the market and the effect of the firm’s size and location. This basic data must generally be collected from salary surveys. They are common and provide a uniform and non-redundant data source. The corporation’s internal structure, however, determines the wage costs and job levels in relation to each other and corporate profit or bondholder interests. Managers should not subvert this determination unless it is necessary to legally fulfill federal requirements. Empirical research has shown that in fact most of the variation from person to person pay within organizations occurs where it does within groups; where collective determination and union participation is strong.

1. Inter-Firm: This would be the firm following the market and paying the same wage rate as other employers within a particular framework. This is the market-driven system. 2. Intra-Firm: This strategy establishes a salary or wage for employees based on what the employee considers to be fair. Each employee would be rewarded according to his or her relative worth to the company because each employee would feel justified in complaining for higher rewards. 3. Dyadic: The salary or wages paid to persons working in the same job function are studied. In the dyadic approach, jobs are studied to determine their value to the company. 4. Group: Employees are treated as an organization and their rewards are interdependent. Pay differences among individuals are often disregarded. 5. Individual: This approach recognizes that persons are different and to secure their cooperation one must deal with them individually. Individual salaries may best be determined by individually negotiated contracts.

There are essentially five strategies an organization can adopt for setting salaries based on proportional selling prices: inter-firm, intra-firm, dyadic, group, and individual. Each of these incentives is examined in the upcoming text.

4. Evaluating the Impact of Salary on Employee Motivation and Performance

However, the fact is that money still matters. Most workers go to work for the paycheck. They may stay for any other number of reasons, but money is the first and the most important. Workers are frequently left to figure out for themselves which people in the organization make a difference and which people are less important, by virtue of how they’re compensated. In turn, the salary comparison leads employees to make decisions about their career with the company.

Maslow’s hierarchy of needs suggests that money meets the basic needs of every individual. So while money can motivate a person at a certain level, higher order interests such as pride in work performed, as well as the search for new challenges, will motivate individuals at the higher levels.

Empirical research over the years has shown conflicting results about the impact of money on employee performance. Some studies indicated a strong positive correlation between high salary and work effort, while others pointed to an inverse correlation. In real working situations, employee performance depends on several aspects. Employees can be motivated through different means such as career development, challenging assignments, recognition, a sense of belonging, excellent job design, working environment, and leadership. All these considerations are now as or more important than just the monetary rewards.

Impact of Salary on Employee Performance

5. Conclusion and Future Trends

The premise that competitive pay can attract and retain talent is practical. However, should compensation be seen solely as payment for work already done? If employees work hard, perform their duties well, and contribute to enhancing the organization’s capabilities and competitive edge, should they achieve improved performance, talent, and reward increases? The Human Resources report that “there is great support for tying pay to performance”, performance-related pay increases support competitive advantages, were found to motivate employees to achieve enhanced performance. Given the premise that HRs should not merely support a well-balanced system, this opinion warrants further examination.

The company towards the employees through wages will not only meet the employees’ physiological needs but also able to improve the performance of employees in order to create a corporate work environment that is characterized as a happy and safe place. Preparing a fair and equitable pay system, an important factor is that the company can attract and retain employees and create competitive advantages for the company. To achieve pay equity objectives, the company needs to establish a combination of base wages that include market compensation, internal relations, individual requirements, and abilities that could be achieved in the industry.

Nowadays, the needs of employees increasingly show significant changes following the rise in living standards and modernization. They improve consistency, even perfection, for the acquisition of adequate material prosperity. The Special Working Group in the Asian Development Bank Report mentions the importance of wages for employees, especially for workers in rural areas and some petty bourgeois. Pay attention to employees’ requests for “adequate, fair, and equitable levels of compensation”, especially for basic wages, bonuses, and welfare and other allowances that can satisfy their physiological needs.