Comprehensive Analysis and Redesign of O'Meara's Remuneration System

This report provides a detailed analysis of the remuneration system at O’Meara Electronics, an Australian-based multinational company. The report begins with a case background, outlining the company's operations, challenges, and the need for a revised remuneration strategy. It defines and differentiates between various remuneration systems, specifically job-based and person-based pay. The core of the report focuses on the issues within O’Meara’s current position-based remuneration system, including its impact on employee motivation, performance management, and market competitiveness. The report then proposes a redesigned remuneration system, advocating for a shift towards a person-based approach, emphasizing skills and knowledge. It discusses the benefits of such a system, such as increased employee engagement, improved product quality, and enhanced competitiveness. The report also acknowledges potential drawbacks and suggests a hybrid approach combining elements of both job-based and person-based systems. Finally, the report concludes by emphasizing the importance of aligning the remuneration system with performance management to achieve organizational goals and maintain a competitive edge. The report provides recommendations for the company to improve its remuneration system to drive employee motivation and organizational performance.

REMUNERATION SYSTEM FOR
O’MEARA COMPANY – 616684

Table of Contents
Case Background................................................................................................................3
Remuneration Systems......................................................................................................3
Job-Based Pay............................................................................................................................3
Person-Based pay.......................................................................................................................3
O’Meara Electronics Company’s Remuneration System......................................................4
Designing A Remuneration System for O’Meara Electronics...............................................5
Shifting to a new remuneration system......................................................................................5
Conclusion.........................................................................................................................6
References.........................................................................................................................7

Case Background
O’Meara is an Australian based multinational company that has been operating in the general
electronics market for more than 20 years. It was not more than 10 years ago when the
company started expanding its operations in certain parts of South-East Asia and also in
Germany. The company employs electronic engineers and electronic technicians who design
different electronic equipment in the factories, most of which are semi-automated. The
company has different operational units, such as research and development, production,
storage and dispatch, human resources, marketing, etc. The company has an estimated
workforce of 1000 employees while in Melbourne, there are a total of 250 employees.
In one of the meetings, that took place in August 2016, the president of the company – David
O’Meara, talked about the declining performance and market position of the company. He
also stressed upon the need to bring about changes in the company’s existing remuneration
and performance management strategies. O’Meara suggested that he would like the human
resource management department of the company to redesign its remuneration and
performance management strategies for the Melbourne office and later on extend it to all the
other offices located in different countries. To meet these objectives, the company also
decided that they would appoint a new human resource consultant for a contract period of six
months. Therefore, in this report, we will conduct a detailed analysis of the existing
remuneration system in the O’Meara Electronic company and device a new system instead of
the older one.
Remuneration Systems
Remuneration, in simple words, defines the way in which the employees of a company are
paid or on what basis are their salaries define. Remuneration is often confused with pay and
salaries but in a broader context, it also covers the benefits or bonuses that are paid to the
employees of a company under the employment contract. Therefore, a remuneration
system is a set of guidelines that help a company in deciding the way and the factors on
which the salary and bonus of its employees would depend.
Remuneration systems can have a great impact on the long term success and performance
of a company and every company can have a different remuneration system. Some
companies can even use a mixture of remuneration systems to become more competitive
and to keep the workforce motivated. Some of the common remuneration systems
observed in the present day are job-based pay and knowledge based pay systems (D.Ittner,
F.Larcker, & Pizzinic, 2007).
Job-Based Pay  in a job-based pay system, all jobs in an organisation are slotted into
salary schedules. All job positions are assigned a pay scale on the basis of the roles and
responsibilities that one will have to fulfil in a particular job role while the variance in pay is
based on the qualification of the employee or seniority (Shields & Dolle-Samuel, 2015).
Person-Based pay  It is another common system of remuneration where the
employees are paid in accordance with their knowledge, competencies and skills instead of
their position in the organisational hierarchy. This type of system is also known as skill based
pay structure, competency based pay structure or knowledge based pay structure (Devers,
Cannella, & Reilly, 2007).

O’Meara Electronics Company’s Remuneration System
O’Meara Electronics company has identified certain issues with its remuneration system,
which was pointed out by the President of the company in a meeting. Sarah Jones, the
director of human resource management at O’Meara, also pointed out in a meeting that the
company has been using a position-based remuneration system whereas the company
needs to shift to a person based system in order to meet its performance objectives. In
successive meetings, it was also discovered that the company’s performance management
system is inefficient in achieving the desired objectives, which was a prime reason for
employee dissatisfaction and reducing productivity.
In order to design a new remuneration system for O’Meara Electronics, it is first of all
necessary to talk about the issues that are pertaining within its current system. Some of
these issues are discussed below:
First of all, at O’Meara Electronics, organisational performance is just about the customers
and the number of contracts while individual performance levels are completely neglected
by the management of the company. Further, the individual performance is nowhere linked
with the organisational performance, which makes it difficult for the employees to actually
realise the roles that they are playing towards the achievement of organisational goals and
objectives (Calvin, 2017). The lack of a proper performance management system has made
it difficult for the company to actually identify the areas where it lacks competitiveness,
which is ultimately having a negative position on the market position of the company
(Cadsby, Song, & Tapon, 2007).
Secondly, the company has not introduced any changes in its human resource management
policies, specifically performance management policies and remuneration systems since the
very beginning. The staff has developed a comfort zone of its own and will offer resistance
to any kind of a change that would interrupt their routine (Bach, 2015). The staff has no
clear idea about what a performance management system is and how it can be beneficial
for the employer as well as for themselves. Some of the employees in O’Meara Electronics
reacted in a very negative manner when the leaders talked about bringing about changes in
the performance management system of the company.
Thirdly, being totally dependent on a position based system of remuneration has not proven
to be much beneficial for the company. In the present day scenario, the business world is
rapidly changing and a greater priority is being given to the skills and knowledge of an
employee rather than the position that he or she holds in an organisation (Colvina &
Boswellb, 2007). Following a position based approach of remuneration results in increased
discrepancies and it becomes difficult to keep the employees motivated and engaged in
their jobs because of the lack of decent incentives and career development opportunities.
(Boeri, Lucifora, & Murphy, 2013).
Such issues can have a great deal of impact on the human resources of a company and can
bring down the performance and productivity levels of an organisation on the whole.
Therefore, David O’Meara has taken a correct decision to revise the remuneration system as

well as the performance management system of the company so that the company can
regain its market position and can also implement the same policies in its foreign
subsidiaries.
Designing A Remuneration System for O’Meara
Electronics
The business world is rapidly changing and so are the internal and external environmental
factors, which are forcing business organisations throughout the world to introduce changes
in their work practices and operations, in order to remain competitive and outperform their
competitors. In such a condition, O’Meara Electronics, which is a multinational firm, has
shaped its remuneration system on a traditional approach since the time when the company
was founded. As a result, its productivity has declined and it has become crucial to
introduce certain changes in its performance management system and remuneration
system. Following are some of the points that would act as guidelines for the human
resource management of the company in designing a new remuneration system for the
employees:
Shifting to a new remuneration system  The existing system of remuneration
in the company has not proven its worth in the long run because of which, the company is
becoming less productive and is also losing its market share. As a result, the management of
the company needs to make a gradual shift from position based remuneration system to a
person based remuneration system, where the salary and the bonus for a job position will
be decided by considering the knowledge and skills of a person rather than his or her
position (Paik, Parboteeah, & Shim, 2007). A person based remuneration system will be
helpful to the company in a number of ways. First of all, when the employees will receive a
remuneration that will be dependent on the level of their skills and capabilities, they would
feel the need of developing themselves in order to achieve their needs (Kessler, 2005). The
work environment would become more competitive and every employee would try to polish
his or her own skills and knowledge.
In a research carried out by Murray and Gerhart, it was found that even if there is a slight
increase in the hourly wages of the employees under a person based remuneration system,
the quality of the final product is considerably high and the overall labour costs also
decreases in the longer run (Murray & Gerhart, 1998). Secondly, an increase in the skills and
knowledge of the entire workforce will definitely bring about a great increase in the
company’s overall competitiveness and efficiency. With better products and reduced labour
prices, the company will be able to tap a greater market share and increase its profitability.
Thirdly, having a person based remuneration system will help the company in strengthening
its human resource policies and market statistics as an employer. Fresh talent in the market
will obviously be inclined towards working with a company that provides a greater value to
the skills and knowledge of an employee rather than the position that he or she holds in
company (Chung, Steenburgh, & Sudhir, 2013). Furthermore, it will also assist the company
in retaining its talented pool of employees as a person based remuneration system will keep
them motivated and engaged in their jobs. Ultimately, the company will emerge as an
employer of choice in the market while it will also be able to dominate its competitors in
terms of profitability, product quality and customer satisfaction (Eldridge & Palmer, 2009).

A major point to be considered in a person based remuneration system is that sometimes it
can have a negative impact on the workplace environment. Some people are of the belief
that if an employee is not paid adequately for demonstrating poor performance than a star
performer should have a scope of becoming rich because of his abilities. A person based
remuneration system can also cause conflicts among colleagues and co-workers as they
might feel demotivated if a person performing similar tasks is being paid higher than them
(Barnes, Reb, & Ang, 2012). To avoid such a scenario, the management at O’Meara
Electronics can implement a combination of two remuneration systems. The management
can fix a basic wage for different job positions and can offer them incentives, bonus and
promotion opportunities on the basis of their skills and knowledge (Burnett, Cushing, &
Bivona, 2012). Such a system can prove to be the best of both worlds as it will help the
company in enjoying the benefits of a person based remuneration system while also dealing
with the issues that come with it.
Conclusion
O’Meara Electronics has been a tough competitor in the market since its foundation. Its
ability to expand into international markets and to continue on its path to success solely
depends on its ability to introduce changes in its remuneration system and link them with
performance management. The company has failed to change with the changing market
trends and is still following a position based remuneration approach, which is a traditional
approach and is not much effective in motivating and engaging the employees.
The human resource management of the company can look into the above
recommendations and can design a system that can use the best of a position based
remuneration system as well as a person based remuneration system, which will not only
help in keeping the employees engaged and motivated, but also in increasing the overall
productivity of the organisation and making it more profitable in the longer run.
Furthermore, the ability of the remuneration system to strengthen the performance
management system of the company can also foster a competitive work environment in the
workplace, which would ultimately beneficial for the company as well as for the employees.
Thus, this is a necessary change that the company needs to implement as soon as it can.

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