Compensation and Pay System in Organizations: Analysis and Report

This report examines various aspects of compensation and pay systems within organizations. It begins with a case study analysis, exploring how to address employee concerns about pay discrepancies and suggests methods for reviewing and restructuring pay policies. The report then delves into controlling labor costs, offering strategies such as reviewing compensation levels, reducing employee turnover, and outsourcing. It also discusses how pay system management affects pay objectives, including motivation, cost control, recruitment, and market position. The importance of the compensation function's structure is highlighted, emphasizing its role in attracting talent and fostering employee loyalty and job satisfaction. Furthermore, the report provides examples of inherent controls used by employers and explores the outsourcing of pay system activities. Finally, it explains how research on individual decision-making can be applied to improve pay communication within an organization, using Exhibit 18.14 as a reference.

Running head: COMPENSATION
Compensation
Name of the University:
Name of the Student:
Author Note:

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Pg.669
If I had been in place of Ms. Deb Allen, I would also have been very much depressed
to know that some of the employees who are not competent enough and are not having
enough experience as the rest of the members, but instead of continuing to be depressed and
finally leaving the job, I would have inquired the whole situation, and would have tried to
know what are the factors that are making these employees to get more, than the rest. There
sure can be other factors contributing for these employees to get paid more. We must always
look at situations objectively, and if I had actually learnt the fact that there are no such
reasons for these people to get paid more, then I would have reviewed the whole payroll
process and would have alter the payroll system so that should be a fair pay structure for all
(Gupta & Shaw, 2014).
According to the pay compensation model, the compensation process is influenced by
the economic, political, psychological and certain social factors of compensation, and these
concepts guide the pay structure of an organization. Along with these, there are certain other
factors that affect the pay structure model, and these are the law, the influence of the labor
union, and the culture or the organization and the people who are joining or have joined
(Gomez-Mejia, Berrone, & Franco-Santos, 2014). In certain cases, with the compassing
structure of the organizations, it is also seen that the organizations are bound to pay a certain
amount to the students whom they are directly hiring from the universities or colleges, in
those cases the pay policy varies.
If I had been the director of the company., and I was faced with the question of why
someone is being paid more than they deserve, then firstly, I would have cross- checked the
information, that whether Ms. Deb Allen had been come across the correct file, or there is a
glitch. It could be possible, that Ms. Deb Allen had not come across the correct file, and if she

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actually had come across the correct file, then I would have reviewed the performances of last
six months of the employees, and would also have viewed the agreement files of these
employees, as the whole pay process is taken care by the HR of the organizations, therefore I
would have to have invested some time in order to get the correct information, regarding the
pay structure of these people, and as per the information that I would come across, after
having spoken to the senior HR manager of my organization, I would have provided either
explanation to Ms. Deb Allen, or I would have reviewed and restructured the whole pay
policy of the organization with proper explanation (Rahim & Daud, 2013). Even one
unsatisfied employee having doubts regarding the organizational conducts can become a
liability for the organization as a whole, ands at the same time, it should be understood that a
proper and fair pay structure is always beneficial for any organization (Newman, Gerhart &
Milkovich, 2016).
Pg. 670
Q.1. How can employers control labor costs?
Labor cost is the largest business cost, and, in order to reduce the labor cost, the
employers can undergo the following steps. Firstly, the labors can review the levels of
compensation provided to the employees, secondly, the companies can also focus on reducing
the employee turnover and also must focus on including the approaches of cross training thee
employees, which will enable the organizations to employ less and use the same employees
in various roles. The organizations can also change their operation timings in order to reduce
their expenses. Another important tool for lowering the budget is incorporating the system of
outsourcing into the business process (Noe et al., 2017). The organizations can also reduce
their prerequisites, for example, the health insurances, pension policies or the medical
policies. The organizations should also focus reducing the inter-departmental activities or

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communications and create more independent chains. Also, the organization can plan for
including overtime policies instead of hiring more employees.
Q.2. How does the management of the pay system affect pay objectives?
The basic objectives of the pay structure are creating a system of motivation among the
employees; controlling the costs, by making a proper and planned budget structure; including
a wide recruitment procedure into the system, as good pay attract more people; and lastly to
gain a position and prestige in the market. A good pay enables the organizations to acquire a
god position in the market, therefore, all these aspects or objectives are influenced by a good
and proper pay structure upheld by the organizations (Bremer, Farley, & Lopez-Carr, 2014).
Q.3. Why is the structure of the compensation function important?
The structure of the compensation function of an organization is important as a lot of
factors are related to the compensation structure of the organization. A good compensation
structure enables the organizations to attract the top talents. It further enables the
organizations to increase and create a motivational atmosphere within the organization. It
also helps the organizations to create and enhance the employee loyalty to gain a position in
the market (Ghosh et al., 2013). As the employees get motivated, they achieve a job
satisfaction, which is directly related to the productivity of the organization. A motivated and
satisfied work force will help the organization to increase its output and productivity.
Q.4. Give some examples of how employers use inherent controls.
Examples of employers using inherent controls are, firstly, inherent controls are used by
establishing different departments within the organizational set up and employing different
for the positions providing them with individual targets. Secondly, the inherent controls can
be checked by cross checking the financial accounting of an enterprise. This not only helps in

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making sound financial investments, but also, helps the organizations to prevent loss and
fight with the fraud cases. Thirdly, the organizations can also employ official person in order
to establish the laws and regulations within the organizational set up (Gerhart & Fang, 2015).
Q.5. Why activities in managing the pay system are likely candidates to be outsourced?
Many of the organization are nose focusing on outsourcing the employees, and it is
especially true in case of the big business houses. The management of the organization are
focusing upon outsourcing the employees, as it is effective in a number of ways, firstly, it
save time of the organizations, secondly, the outsourced employees are paid much less, as
they are not under the direct payroll of the organizations and therefore, need not be paid as
much as the organizational employees and thirdly, this enables the organizations to include a
number of employees with various backgrounds and skill, which in turn increase the
productivity of the organizations (Yanadori & Cui, 2013).
Q.6. Use exhibit 18.14 to explain how the research on individual decision making can be
used in pay communication?
The exhibit 18.14 shows the structured pay communications system in order to show how
the communication pattern of an organizations can improve or affect the payroll process of an
organization. The exhibit shows that the information or the knowledge of the prior pay
structure and pay process can influence the notions related to the current pay structure or pay
process and the existing belief system related to a organizations also influence the pay
structure pf an organization, as changing the belief process requires of the organization to
actively employ its members (Newman, Gerhart & Milkovich, 2016).

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Bremer, L. L., Farley, K. A., & Lopez-Carr, D. (2014). What factors influence participation
in payment for ecosystem services programs? An evaluation of Ecuador's
SocioPáramo program. Land Use Policy, 36, 122-133.
Gerhart, B., & Fang, M. (2015). Pay, intrinsic motivation, extrinsic motivation, performance,
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Psychol. Organ. Behav., 2(1), 489-521.
Ghosh, P., Satyawadi, R., Prasad Joshi, J., & Shadman, M. (2013). Who stays with you?
Factors predicting employees' intention to stay. International Journal of
Organizational Analysis, 21(3), 288-312.
Gomez-Mejia, L. R., Berrone, P., & Franco-Santos, M. (2014). Compensation and
organizational performance: Theory, research, and practice. Routledge.
Gupta, N., & Shaw, J. D. (2014). Employee compensation: The neglected area of HRM
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Newman, J. M., Gerhart, B., & Milkovich, G. T. (2016). Compensation. McGraw-Hill Higher
Education.
Noe, R. A., Hollenbeck, J. R., Gerhart, B., & Wright, P. M. (2017). Human resource
management: Gaining a competitive advantage. New York, NY: McGraw-Hill
Education.

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Rahim, M. A., & Daud, W. N. W. (2013). Rewards and motivation among administrators of
Universiti Sultan Zainal Abidin (UNISZA): An empirical study. International
Journal of Business and Society, 14(2), 265.
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