Types of Remuneration System
Remuneration is one of the principle motivators when working in an organization and which clearly affects the performance of the employees in a directly proportional manner (Van Dijk et al. 2013). The remuneration as a term is defined as the amount of money paid to the person doing a particular task with or without the contract. The case study stated in the assignment is about the remuneration system that is being followed in The O’Meara Electronics Company and the type and analysis of the system in the company.
The purpose of the essay is to analyse the plan on remuneration system in the organization and the type of system that is evident in the case study. The preferred remuneration system is also being considered in the analysis along with the elements of the remuneration system. The purpose of the report is to analyse the category of remuneration system that is evident in the organization as well as make recommendations on the change that is required in the same scenario and stating the reason for the same.
The approach of the essay is argumentative based which gives a sharp critical analysis on the case study provided and states the type of recommendations system that is being followed and if any changes are required in the same scene with proper justification.
According to the cocepts of Van Dijk et al. (2013) the term remuneration is defined as the compensation that is paid to the employees of an organization for the work that is being rendered by them to the company for the profit making of the firm. The system of remuneration that is being conducted in any organization based upon the process of giving and maintaining the system of remuneration is termed as the remuneration system. Given by the views of Cherkesova et al. (2015), it can be stated that the system of remuneration is based on the present objectives of the company and should be directly proportional to the performance level of the employee. The organization which is being mentioned here namely The O’Meara Electronics Company has also an efficient remuneration management system which is to be analysed in the essay and suggestions are also provided to the areas that need it.
There are two types of remuneration system in the organizational level namely the position based and person based remuneration system (Cherkesova et al. 2015). The position based remuneration system is based on the hierarchy of jobs and the key responsibilities that the position has and is not related to the performance of the employee in any matter. The type of remuneration is dependent on the type of work conditions that the employee is through and is evident in most of the companies in the global arena. The organization The O’Meara Electronics Company used to follow the position based remuneration system in the past which has evoked a lot of issues and the managers are thinking to change it due to the emphasis of the other type of system.
Elements of Remuneration System
According to the definition of Lee (2009) the person based remuneration system is defined as the system of remuneration in which the salary of the employees is based upon the performance of the employee and their understanding and capabilities to conduct the work. The salary is paid according to the skills, competencies and the knowledge of the employee and not merely on the position of the employee. This is the type of remuneration system that is supposed to be followed in the organization which means that the salary of the employees will be given according to the skills and knowledge of the employees and not merely on the post of work (Shields et al. 2015).
There are a number of elements that drive the remuneration system of the employees and also makes sure to have the basis of the remuneration system. The drivers or the elements of the remuneration system are –
One of the principle elements for the remuneration system is the issue of compensation where the employees get something more than just mere salary like profit share or some money for the management mistake. According to the case study provided, The O’Meara Electronics Company had no such compensation system for their employees which was demotivating.
According to Shields et al. (2015), the employee of the organization are to be given ample benefits for their work other than the basic salary provided. The benefits for the work included transportation and other facilities which The O’Meara Electronics Company lacked creating a negative aspect. This part of the salary structure should be handled with amount.
Main et al. (2008) states that without the development of the work and the professional approach towards it, the people would not find interest to work with all their zeal. However, in the case study provided, The O’Meara Electronics Company lacked any form of development of remuneration based on the professional development which created a havoc in the employees. It is to be made according to the development that the employee has in terms of work.
Filatotchev and Allcock (2010) states that recognition is important in an organization for the employees to have full faith in the process of remuneration. However, in the given case study of The O’Meara Electronics Company, the organization had no scope for recognition and for this reason, they vouched on the performance management plan for their employees and also made them aware of the remuneration benefits for the process.
Recommendation for The O’Meara Electronics Company
The O’Meara Electronics Company always focussed on the position based remuneration system in the whole process and made the salary structure according to the method which is followed by the majority of the people all over the world. In the opinions of Bach (2009), the kind of remuneration system though segregates one of the position of work from the other, the difference in the remuneration system in the whole matter can create discrimination in the minds of thr employees working in the organization. According to the opinions of Liu and Taylor (2008), the system though is simpler than the person based system to be executed as it does not need the intricate details of the knowledge and skills, however, it can create bureaucracy among the employees which also compromises on the skills and quality of the work being done (Bach 2009). It does not encourage honesty and betterment of the employees to have the monetary benefits.
The executives of The O’Meara Electronics Company suggest the application of the person based remuneration system which means that the pay scale will be determined by the knowledge and skills of the employees. This will enable the employees to enhance their knowledge and skills in the process of work and will also employ the amount of skills and honestly among the people of the organization. According to the views of Kulich et al. (2015), the person based system would not be based on discrimination and will foster the sense of appreciation to the people who are deserving to get higher pay in the employee. According to the experts and the HR consultant of the enterprise, this will make sure that each of the employees are equally treated and the best goes to the most deserving one.
However, in reality, the person based remuneration system will create problem among the different kinds of employees and also will make the employees against one another based on the monetary benefits that they have. According to the views stated by Stachová, Stacho and Bartáková (2015), the type of model is quite difficult to execute as that requires the authorities to have a steady check on the amount of performance that the employee is doing. In addition, if the employee suddenly deteriorates in the performance, then the salary has to be affected which is again very demotivating for the employees working in the organization (Stachová, Stacho and Bartáková 2015). As a result of the following cases, the person based remuneration system, though advocated to be followed by the executives of the remuneration system, the system proves to be a hassle for the practical based work that is to be implemented by the people of the organization.
Challenges with Person Based Remuneration System
According to the executives of the Remuneration system, The O’Meara Electronics Company should shift from the position based system to the person based system as in the position based remuneration system, the people who are working in the organization do not get the motivation to work when they see their seniors get major hike or salary in spite of them not contributing much to the organization whereas there are efficient employees who work or take responsibilities much greater and are still lacking behind due to their position being low.
However, analysing both the points and the ways of the remuneration system being conducted, direct application of both the system can prove detrimental to the company and the employees working in it. Both the system have their own set of positives and negatives to the application and have to be in compliance to the organization in which it is being implemented (Liu and Taylor 2008). The O’Meara Electronics Company is an organization in which the shares and the position of the company is declining at a fast pace which needs to be sorted according to the facts discussed in the meeting for which the organization has to implement practical changes in the matter. The implementation of a single system of remuneration is not practical in the case and certain recommendations are stated below.
At the end of the analysis, it can be stated that the remuneration system is one of the principle system that motivates the employees of on organization to work for the enterprise in a better fashion. The lack of proper remuneration system means that the employees would not get sufficient motivation and honesty to work for the organization in a better fashion which will ultimately affect the profit and the business of the organization in a negative manner. For the better working of the employees a hybrid system of remuneration should be implemented though the executives of the remuneration committee advocated for the person based remuneration system. There should be a difference in the salary for the people according to their position but amongst those employees, there should be incentives and benefits for the employees who are better at their work. This will make sure that the organization has the goodness and the positive aspects of both the system of remuneration and they do not clash with the people and have proper suggestions for the employees in the organization.
Participation based remuneration system is to be established in the organization to make sure that each of the employees in the organization have the level of participation to make sure that the remuneration process in the organization is to be assessed based on the both the job based and knowledge based structure. The combination of the both the systems will make sure that all the employees are given fair chance of getting promoted and also having the best of their capabilities in the work and the skills they apply. Therefore, according to the analysis of The O’Meara Electronics Company it can be stated that hybrid remuneration system should be implemented to benefit both the employees and the organization.
Reference and Bibliography
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