Essay Sample on Position-Based vs Person-Based Remuneration: O'Meara Electronics' Pay Strategies

Introduction

The essay discusses the position-based and person-based remuneration system and applies them to O'Meara Electronics. Employee compensation is the obligation of every employer. Since the labor environment is changing, human resource managers face serious challenges when it comes to developing an equitable remuneration strategy that would meet the diversified needs and expectations of all employees. A remuneration system is a compensation method an organization follows when compensating its employees (Jaime & Celia, 2017). Person-based remuneration system is the concept where human resource managers compensate their employees based on the roles and responsibilities they perform in the organization. Factors considered in a person-based system include knowledge, skills, and competencies. It is also referred to as a competency-based remuneration system (Alwaki, 2018). A position-based remuneration system is the management strategy where employers compensate employees based on the position they hold in the organization regardless of their skills and knowledge. It is evident from the case study that the company uses position-based because the production manager argues that Joe is paid according to the award while the supervisor gets a better pay doing nothing since the employee does most of the work. In this regard, the essay critically discusses and distinguishes a person-based and position-based remuneration system and their primary drivers and then recommends the most effective compensation framework for O'Meara Electronics.

Is your time best spent reading someone else’s essay? Get a 100% original essay FROM A CERTIFIED WRITER!

Save 25%

Analysis

Employee compensation is an essential element that influences the success of an organization by determining employee motivation. Regarding the person-based remuneration system, an employer compensates individuals based on who they are in the organization rather than the position they occupy. The first driver of this system is the competency and capability of the employee to turn things around. Some skills are unique and special and the human resource manager cannot afford to lose them (Martono, Khoiruddin & Wulansari, 2018). Notably, some employees have unique talents and capacities regardless of their skills and positions. In this situation, it is critical for the employer to develop a person-based compensation plan to meet the expectations of the employer to retain them and skills. However, it will be complex to develop a payment structure that meets the needs of the employees since it is not easy to assess the contribution of each employee in the workplace (Jaime & Celia, 2017). Also, there is no framework to measure the uniqueness of each employee and this may affect the motivation of other employees since they may feel discriminated against. Therefore, unique skills and knowledge among employees influence the development of the person-centered approach.

The second driver of a person-centered remuneration system is the supply and demand of the particular skills the individual holds. Besides work environment practices, potential employees consider the compensation system before accepting an employment offer. The shortage of skills in the labor market requires managers to develop an effective compensation plan to attract and retain employees based on demand and supply (Al-Nasser, 2016). In a tight job market, it is wise for employers to adopt a person-based compensation plan to attract and retain existing employees with unique skills and talents. However, in a tight labor market, employees can disappoint because of their demand and may demand huge benefits that would affect the company's financial results. As a result, it could be wise to develop a standardized compensation system and this would help to have the right employees with the right skills (Bana, 2019). Also, dissatisfied employees can leave the organizations and this creates room to nurture internal talents and prepare the company for a smooth succession. For example, O'Meara Electronics can develop training opportunities for employees to have adequate software engineers because of the shortage in the market.

The other consideration is the employment objectives. Some employers want to maximize employee potential and encourage individual efforts. The best way to maximize their performance is by developing policies and frameworks that encourage every employee to work hard for their good and organizational success. It means that even employees at a lower-management level can earn more than their supervisors based on their productivity (Gupta & Shaw, 2014). For example, O'Meara Electronics has some challenges affecting employee performance because supervisors and managers earn more because of their positions instead of their productivity. It is evident from the performance meeting that employees are not happy since they do a lot of work while supervisors do little but earn more. Therefore, the objectives of the company influence the management decision to adopt a person-based remuneration system. However, there is no standard framework to measure the performance of employees and the entire process can be cumbersome, making it difficult to develop a standardized remuneration structure.

Another driver is the prevailing trends in the labor market. Although every human resource manager wants to develop a unique compensation structure to attract and retain skilled and talented employees, it should surpass expectations in the labor market (Onuorah, Okeke, & Ikechukwu, 2019). For example, if many employers are compensating employees based on who they are and what they do for the organizations, it is critical to adopt the system so that the company can attract and retain its workforce. It is critical to note that it will lose its influential workforce if the human resource manager fails to create a compensation system that meets their expectations and market trends. However, the company should be unique by offering better packages than the competitors in the electronic industry and in the process, the company will become an employer of choice; thus, attracting a more talented workforce (Yamoah, 2014). As much as there is a need to compensate employees based on the prevailing market trends, human resource managers should devise better ways of motivating employees, like better compensation.

The other remuneration system available for companies is position-based. It is regarded as the traditional compensation strategy because it isolates positions into various levels based on the education and experience of the employees. The system is hierarchical and this defines the number of employees supposed to report to the position (Abelsen & Olsen, 2012). The payment structure is based on the rank of every employee regardless of their performance. For example, heads of departments earn more than all employees reporting to the position while a supervisor earns more than all employees under the individual. Although it is regarded as a traditional system, many organizations adopt the system since it facilitates control and easy of command.

In this regard, the first element to consider when adopting the system is the organizational structure. The structure of an organization recognizes various ranks and how the management style of the company. The system is mostly applied in hierarchical organizations whereby top managers earn the highest income while entry-level employees earn the least. Heads of department head each function; hence, they earn more than anyone in the same department courtesy of the positions they hold. Although the system is easy to implement in a hierarchical organization, it is a source of dissatisfaction in many organizations many senior managers do little to their organizations but earn more while employees do a lot of work but earn little (Patnaik & Padhil, 2012). By virtue of the position, an individual hold does not mean that the individual is better and performs better than others. The system lowers employee morale since it does not recognize and reward their individual efforts rather than their positions. Therefore, the system can work better when combined with other policies to enhance the efficiency of the system.

Furthermore, the human resource manager should consider the salary structure in the company. A salary structure comprises of various job grades that determine compensation structures. It is through these job grades that human resource managers determine the extent of compensation for each employee. Individuals falling in the same category earn almost the same salary (Derek, Panu, Takao & Mikko, 2012). However, variations exist because of their skills and knowledge and the position. In this context, an employee cannot be promoted to the next rank without meeting job grade requirements. It means that being a manager does not mean that the individual performed better than the other employees but it is because they reached the required job grade to be promoted (Mitra, Gupta & Shaw, 2011). The system works systematically but it has disadvantages in the sense that an employee can be promoted to be ahead of the department but they lack critical skills that would improve organizational success. Promotion is not based on merit but job group; thus, affecting the morale of better-qualified employees.

Recommendations

Based on the above analysis, the best remuneration system for O'Meara Electronics is a hybrid of position-based and person-based systems. From the case study, there are mixed reactions regarding the compensation strategy. For example, the production manager argued that one of the employees worked like to be paid while the supervisor did nothing (Mehmood, Awais, Afzal, Shahzadi & Khalid, 2017). A majority of employees have raised these discrepancies since they were not happy with the practice. Additionally, the research and development managers supported the idea that it is time for the company to review its compensation plan that accommodates the needs of all employees (Park & Sturman, 2012). In this regard, a hybrid system is essential because it helps to compensate employees based on their positions and person-based, depending on what they do for the organization.

Establishing a hybrid system requires the involvement of all employees since they give their views about the remuneration strategy. For example, there will be an open discussion where heads of departments engage their employees and discuss more regarding the remuneration package. In this regard, a person-based approach would help to enhance self-management since employees understand that they will be paid based on their contributions to the organization (Mura, Gontkovicova, Dulova Spisakova & Hajduova, 2019). Additionally, teams in the organization comprise of different individuals with different skills. As a result, the implementation of a hybrid system contributes to balancing individual goals with organizational requirements. Secondly, adopting the system will help the company to meet the diversified requirements of the employees; thus, improving organizational success.

Conclusion

Employee compensation is the obligation of every employer. When developing a remuneration policy, it is crucial for employers and human resource managers to consider prevailing contexts, as well as the changes in the labor market. The remuneration systems companies use include person-based and position-based. The report recommends that a hybrid system is the most appropriate compensation strategy because it helps to develop a pay system that meets the diversified needs of employees, as well as balancing the interests of employees and the employer.

References

Abelsen, B., & Olsen, J.A. (2012). Does an activity based remuneration system attract young doctors to general practice?. BMC Health Services Research