Banded or Tiered Pay Systems: Relevance with Fairness and Motivation of Employees

Running head: HUMAM RESOURCE MANAGEMENT
HUMAM RESOURCE MANAGEMENT
Name of Student
Name of University
Author’s Note

HUMAM RESOURCE MANAGEMENT1
Table of Contents
Introduction................................................................................................................................2
Discussion..................................................................................................................................3
Banded or tiered pay systems.................................................................................................3
Effectiveness of the system....................................................................................................3
Relevance of this system with fairness and motivation of employees...................................5
Conclusion..................................................................................................................................8
Recommendations......................................................................................................................8
References................................................................................................................................10

HUMAM RESOURCE MANAGEMENT2
Introduction
A two-tire structure for payment occurs when the newly joined employees get low
payment compared to the ones who are more seasoned. Usually, these employees perform the
same kind of work (Jiang and Hao 2016). This pay structure helps the small business firm in
saving money that is required to be invested in the process of new hiring. Besides this, it can
also cause a lack of motivation and encouragement among numerous workers who tend to
earn lower wages compared to other co-workers. This payment system had been introduced at
the time of economic recession which had started in the year of 2008 (Hua, Chen and Zhang
2016). This is because most of the employees aimed in reducing numerous costs including
the costs incurred in the labour, these costs were represented by wages as well as benefits.
The organizations faced continuous concern regarding the increase in inequality in society
with a certain amount of focus on numerous precarious activities.
A specific group which has been affected by this change in the economic conditions,
as well as labour markets, are the individuals belonging to the young generation. This is
because, they are paid less whereas they perform the same amount of activities to that of
senior employees (Chen, Zhang and Hua 2015). This had been an issue because the younger
generation faces a very high unemployment rate along with the spectre of reduced benefits
that are funded by the state at the end of the working lives. The two tire payment structure
which had resulted in reducing the wages, as well as benefits in which various employees
who have been newly hired had been entitled, tend to rise various issues among the young
workers and the old workers (Mita, Ito and Ohsawa 2019). They also tend to rise numerous
concerns regarding subjecting the newly recruited workers to the basic terms of the
employment process where they had no or minimum say. This report consists of the

HUMAM RESOURCE MANAGEMENT3
explanation of the concept of a tiered payment system and their relevance with the concept of
motivation and fairness of the employees.
Discussion
Banded or tiered pay systems
Tiered Pay can be defined as a wage that is needed for distinguishing salary based on
at the time of hire and their work performance. The mere focus is all about controlling the
labour cost of various manufacturer in the year 1980. Some of the firms signed up a labour
contract that mainly locks in new worker at minimum rates. In some other cases, it allowed
new hires so that it can escalate full wages over the period of time. Most of the union leaders
highlighted the fact that tired pay system aims to hurt the morale of the workplace as it
creates two classes of workers. Banded pay can be defined as a range of compensation which
is given certain roles. The range is completely based on variables like location, experience
and seniority.
Effectiveness of the system
Within the two-tier payment method, the owner of a certain business tends to
negotiate along with the union for the purpose of installing two different structure of wages.
These are categorized into two parts, one is meant for the existing workers and another is for
the new workers. present members of a union are provided with payments, benefits as well as
wage increase as per the agreement that had been made previously, various new workers who
would join this union will be provided with a low initial wage, low peak wage along with a
package of benefits that is less substantive. Below provided are some advantages that are
provided by this particular payment system.
The two-tier payment system has numerous positive as well as negative effects. In the
times when the economy of the organization has turned down to relatively low, this pay