Advanced Remuneration and Performance: O'Meara Electronics Case Study

This essay delves into the intricacies of remuneration systems within organizations, exploring the core concepts and their impact on employee performance and organizational success. It begins by defining remuneration and its broader implications, encompassing bonuses, commissions, and benefits, emphasizing its role in attracting and retaining top talent. The essay then contrasts position-based and person-based remuneration systems, detailing their structures, advantages, and disadvantages. Position-based systems, rooted in job roles and responsibilities, are compared to person-based systems, which focus on an employee's knowledge, skills, and competencies. The essay outlines various elements of remuneration, including basic salary, commission, compensation, executive compensation, deferred compensation, employee stock options, employee benefits, and performance-linked incentives. It highlights the significance of a well-designed remuneration system in recruitment, motivation, and retention, while also considering the legal aspects of compensation. The essay concludes with a recommendation for O'Meara Electronics, advocating for a person-based system, and provides a comprehensive overview of the key topics discussed.

Running head: Advanced Remuneration and Performance
Advanced remuneration and performance
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Advanced Remuneration and Performance 1
Introduction
The word remuneration implies pay or compensation. Remuneration system can be defined
as the system which directly affects the success of the organization. From the perspective of
organizations it is a much broader term as it also includes bonuses, commissions, other
payments or rewards and benefits (Bratton & Gold, 2017). The purpose behind having
remuneration system is to attract the top talent. As by having a competitive remuneration
plan, one can attract and retain the top talent towards the organization. Here in the
O’Meara Electronics Company, the purpose behind new remuneration management is to
have participative approach which implies the involvement of everybody in the
organization. The company also want to shift from position based to person based system to
retain the actual capable staff.
Position based remuneration system
Position based remuneration system involves the structure of positions in which roles and
functions is to be defined in the organization, at the time of providing the ability to associate
employees to particular positions. In position based system the position of the applicants
itself become the point of determining base pay. It can be further explained as the
traditional remuneration structure in which jobs are slotted into salary scales (Morris &
Venkatesh, 2010).
The organization can track all of the weak spots in the organization by using information
related to defined position. The employees log in and out of the position but the
information remains as it is (constant). Under this system salary for a job is decided on the
basis of its responsibilities. It has many advantages such as hierarchical organizational
structure, generates the possibilities and paths for promotions. As compare to person based
system, it is much simpler as the person based system involves more work to define
knowledge, skills and competencies. Most of the companies would like to have position
based structures. It also has some disadvantages such as it is less suitable for team based
structures and incentives. The person on the job may not be capable for it. It generates the
compromise of honesty in job descriptions and job valuations.
Person based remuneration system

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Person based structure can be defined as the structure which needs proper understanding
of the task and responsibilities of the jobs. To develop the person based structure one
requires to know the job analysis and job descriptions. In person based remuneration
system, salary and pay is to be decided on the basis of person’s knowledge not on the basis
of position. The difference between both the systems is that; in person based system, the
organization compensates the employees on the basis of their knowledge, skills and
competencies. In position based, they compensate the employees on the basis of their
previous positions (job position) (Bernsten, Andersson, Gariepy, & Simoens, 2010). It has
many advantages such as it plays the role of an incentive for self-development. It also
provides security to the employees by enhancing their skills. It reduces the need of
promotion. It also has some disadvantages such as it reduces the possibilities and paths for
promotions. It reduces the level of motivation for the employees as there is no scope left for
growth.
Elements of different remuneration system
Basic salary
Basic salary can be defined as the amount to be paid to the employees after adding or
deducting any extra amount. Deductions such as any extra leaves and salary sacrifice
schemes and additions such as bonus, overtime, incentives and allowances.
Commission
Commission can be explained as the payment given to the employees for rendering and
selling the goods and services to the consumers. The payment can be calculated on the basis
of the percentage of the sold goods and rendered services.
Compensation
Compensation can be explained as the amount of pay which is to be provided to the
employees in return of some work or performance required. The pay can be in monetary or
non-monetary terms. It can be further explained as the combination of the worth of the
pay, bonuses, health insurance, vacation and any other incentive received by the employees

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for example, free lunches, parking and free events. These elements are generally involved in
case of compensation.
Executive compensation
Executive compensation can be defined as the monetary or non-monetary amount received
by the employees from the organization. It is the combination of salary, bonuses, shares,
incentives and perquisites. This differs substantially from other ordinary pay packages for
hourly workers and salaried professionals. Executive pay aims at rewarding the employee
for actual results. Therefore if the employees underperform in the organization, then they
will be getting the reward as per their performance (Noe, Hollenbeck, Gerhart & Wright,
2003). On the contrary, if the employees meet the target as per the requirement then they
will be getting higher pay as per their good performance
Deferred compensation
Deferred compensation can be explained as the portion of the income of the employee
which will be received by him/her after a particular period. For instance, employee stock
options, pensions and retirement plans.
Employee stock option
Employee stock option can be explained as the stock option given to the employees in which
the employees can have the shares at predetermined cost and can keep them for a specific
period.
Employee benefits
Employee benefits are the benefits which are received by the employees in addition to their
basic salary. For instance, housing facility (furnished or not), health insurance, dental
insurance, life insurance, disability income protection retirement benefits and other
specialized benefits (Milkovich, Newman, & Milkovich, 1999).
Performance-linked incentives

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A performance linked incentive is an incentive which is totally based on the performance of
the employees. It varies with the performance given by the employees. It is generally being
included in the employment contract (Armstrong, 2010).
Significance of remuneration system at workplace
Remuneration includes financial and non-financial components. It often includes an
executives basic salary and additional benefits for instance, health insurance, retirement
plans and performance related bonuses. The remuneration packages that offers by the
organization to the employees influence the rate of recruitment, retention and employee
satisfaction. Many federal laws also influence the compensation under the remuneration
system offered by the business. The owner of the organization must understand the
significance of having a good remuneration system in the organization (Tzafestas, 2013).
Recruitment:
The compensation packages in the remuneration system offered by the business play
significant role in the organization’s capability to attract the top talent. Employees who
performed well can create great impact on the competitiveness and productivity of the
small business organizations. The particular factors of an attractive compensation package
differ per employee. High packages may attract the top talented job candidates. From the
point of view of John Rossheim of Monster.com, managers should recruit a candidate after
researching about the previous salary and benefits so that they can get the idea of what is
more essential for the candidate (Altbach, 2012).
Motivation
Compensation packages in the remuneration system often influence the motivation and job
satisfaction of the employees. From the point of view of Mae Lon Ding of Personnel Systems
Associates, compensation systems positively influence the performance of the large number
of workers. If the employer distributes and share the profits with the employees working in
the organization, the employees will feel motivated and help the organization in achieving
the desired goals and objectives (Kwenin, Muathe & Nzulwa, 2013). The biggest impact of
funds is on the efficiency and performance in jobs. Performance is directly linked with
compensation. For instance, the sales person will likely to get motivated by receiving the

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bonus after accomplishing the desired sales quota and it will further increase the
productivity.
Retention
For running a successful organization it is necessary to sustain the productive employees.
Sustaining the productive employees implies less cost on training and efficient and effective
workforce. Most of the employees desire for health insurance and retirement packages
from their employers. To retain the employees for long period of time, the organization
should offer these kinds of benefits. There are also some other ways to sustain the
employees in the organization such as regular promotions, which will provide the high basic
salary as well as the capability to take more of responsibilities in the organization (Epstein &
Buhovac, 2014)
Laws of Compensation
Several laws govern the compensation and wages offered to employees at small firms. The
act called Fair Labour Standards governs the federal minimum wage, child labour, equal pay
and overtime wages. The act called Equal Pay forbids the discrimination on gender basis.
Under this act, an organization may still base compensation in the case of seniority or merit.
If the organization fails to follow the laws of compensation, it will definitely result into
different penalties against the organization (Gerhart & Bretz 1994).
Therefore it is very important to have the good remuneration system in the organization.
Recommendation
Person based system is recommended for O’Meara Electronics Company as it provides
several advantages to the company’s remuneration system. The person based system can
be defined as the system in which organization compensates the employees on the basis of
their knowledge, skills and competencies. In the position based system there are many
disadvantages for the organization. It is less suitable for team based structures and
incentives. It may be possible that the person on the job may not be capable for it
(Nankervis, Baird, Coffey & Shields, 2013). It also generates the compromise of honesty in

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job descriptions and job valuations. Sometimes the candidates come with the fake
experience as to have the high salary package in the organization but they do not have the
desired knowledge for that post (Bratton & Gold, 2017). In the person based system, people
get employed on the basis of their knowledge and knowledge can be checked by preparing
specific test paper as per the jobs. So it is more fair system then the position based system.
Person based system is the right system for the company called O’Meara Electronics as it
serves many advantages to the company. It helps in recruiting the top talented staff for the
company. It also plays the role of an incentive for self-development. It provides security to
the employees by enhancing their skills (Armstrong, 2010). In addition to this it also reduces
the need of promotion. Salary increment will be done on the basis of increase or decrease in
knowledge of the person.
Therefore in every way it is the fairest system for the company and employees.
For example, John and Dan go for an interview. John has the experience of 2 years as junior
manager in some company and Dan has excessive knowledge for the post of senior
manager. As compared to John, Dan has more knowledge for the post therefore he is more
capable for the job because he has excessive knowledge and he can justify the
remuneration paid to him by handling the responsibilities properly (Frydman & Saks, 2010).
Conclusion
The essay includes about the system of remuneration in the organization. Point of view of
organizations has also been discussed in the essay. So from the point of view of organization
remuneration is a much broader term as it includes bonuses, commissions, other payments
or rewards and benefits. In this essay I have also explained two different system that are
position based and person based system. Analysis of the same also has been included in the
essay. In addition to this, elements of remuneration system is also explained and in the last I
have recommended the person based system for O’Meara Electronics Company.

Advanced Remuneration and Performance 7
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