A Comparative Analysis of Remuneration Systems for O'Meara Electronics

This essay provides a comprehensive analysis of remuneration systems, focusing on the contrast between position-based and person-based approaches. It begins with an introduction defining remuneration and its importance, referencing key literature. The essay then delves into a detailed examination of both position-based and person-based systems, outlining their advantages and disadvantages. The position-based system, common in many organizations, is analyzed for its reliance on job responsibilities and hierarchical structures. The person-based system, also known as skill-based or competency-based, is examined for its focus on individual employee skills and performance. The essay then argues for the superiority of the person-based system, highlighting its ability to promote employee flexibility, reduce the need for supervision, and potentially lower labor costs. The essay concludes with a recommendation for O'Meara Electronics to adopt a person-based remuneration system, citing its potential to improve employee motivation and organizational performance. References are provided at the end of the document.

Running head: REMUNERATION SYSTEM
REMUNERATION SYSTEM
Name of the Student
Name of the University
Author Note

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Introduction
According to Armstrong & Murlis (2007) remuneration means a pay or bonus that is
given to an employee and is exclusive of the basic salary of the individual. It is the
compensation or extra benefits that an employee receives due to good performance and
contribution to the organization. Every organization have their own remuneration system
which should always be in compliance with the federal and state laws (Smith, 2010). It is the
job of every organization that they treat each one of their employees in the same manner
irrespective of their colour, creed and race. Every employee is entitled to a certain
remuneration because of the contribution that he or she gives to the organization and this also
increases the working performance in the employees (Gabčanová, 2011). In the case of
O’Meara Electronics Company, the system of remuneration that had been followed since
their inception was the position-based remuneration system which was not found to be
effective for their organization. This essay will highlight the different remuneration systems
and elucidate on the perfect remuneration system for the organization which will be chosen
by a consultant that had been hired by them. The further paragraphs will analyse the position-
based and person-based remuneration system and shed light on the recommendations of the
consultant about chosen remuneration system.
Analysis of position-based and person-based remuneration systems
Position-based remuneration system is focused on the responsibilities that comes with
the position of an employee and the tasks that needs to be performed to fulfil those
responsibilities (Shields et al., 2015). This kind of remuneration system is very common is
every organization since many years and this is used for all of those employees who are in the
same position. An extensive analysis of the job is performed and all the duties and
responsibilities of the employee is segregated into different categories and then various tasks

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are assigned under those categories which needs to be fulfilled by the employee. In this
system the remuneration is decided according to the responsibilities that the employee needs
to perform and the working conditions of the employee as well (Main et al., 2008). The
advantages of this kind of system is that is first of all based on hierarch, seniority and
specialization. The system depends on the knowledge base, experience and the expertise of
the person in the position that he is working in. Position-based remuneration system also
motivates the employees into putting more effort in their tasks so that they can climb the
organizational ladder faster. As the position changes, so does the remuneration. Hence, the
more an employee can increase his job performance, the more he will be paid. This system is
easier to analyse and evaluate as it just concentrates on position of the person and decides the
pay according to that. However, there are also many disadvantages to this system. Since this
system is based on hierarchy, it can create issues when an organization formulates any team
structure (Westacott, 2010). There can be conflict within the team if the members are of
different position in the organization. It can also happen that an employee with a junior
position than other is more deserving but receives less remuneration that his senior. This
could be cause for demotivation and unwillingness to work. This also stops people from
developing themselves as they realise that their present competency would be enough to stay
in the position. On the contrary, person-based remuneration system takes into account the
performance of each individual employee (Daley, 2012). He pay is decided on the skills and
abilities of each employee separately irrespective of the position that he is appointed in. This
helps the employees to get the pay that he deserves and the amount of productivity that he
gives to the organization. The pay is not decided according to the duties and responsibilities
of the position that he is working in but according to the skills that he uses for acquiring the
objectives that he has set. Having a good skill is very important for the employee in a person-
based remuneration system, as the only way to climb up in the organization is to continually

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develop the skills that he possess and provide new and better results to the organization. The
person-based remuneration system is also known as knowledge-based remuneration system,
competency-based remuneration system and even skills-based remuneration system
(Carpenter et al., 2010). The advantages of this system is that it pushes the employees to give
more productivity and also quality work. People are satisfied with their work and hence helps
in creating a good career path for the employees. However, just like in other systems, this
system also has certain disadvantages. The most common disadvantage is that the
organization has to incur high training costs to help the employees to learn better skills and
develop better abilities to perform any kind of task within the specialization of the employee
(Foss, Laursen & Pedersen, 2011). The increase in skill set would also mean the increase in
the wages of the employees and this can become difficult for the organization to incur after a
certain time as the employees will always try to improve themselves with time to get more
pay.
Argument for most appropriate person-based remuneration system
Person-based remuneration system or skill-based remuneration system rewards the
employees according to the kind of skill that they have. The person-based remuneration
system is much different from the traditional pay system of position-based (Houle, 2012).
The use of this system is slowly replacing the person-based system because of its ability to
satisfy more employees and get more organizational performance. It has been seen that
person-based pay structure can contribute to organizational effectiveness in three ways.
Firstly, this remuneration system gives flexibility to the employees by giving them the
opportunity to learn many new kinds of tasks and jobs. Having flexible employees is very
important for an organization as they can help each other out in case of unavoidable
circumstances where an individual might not be able to present and they could also help with
urgent production situations (Lee, 2009). Employees would also be interested in learning new

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things as they would be able to develop themselves and every person is always motivated to
help himself grow in the organization. Secondly, person-based remuneration system can lead
to less supervision among the employees as they will be skilled and attentive enough to
manage themselves and concentrate on their work at hand (Vegas, 2007). This can help the
organization to appoint less managers to supervise the employees and hence they can save
many managerial costs. Person-based system teaches the aspect of self-management to all the
employees and gives them a much greater view of the production and delivery system of an
organization. Every employee would always be inclined to complete their given tasks as they
realise that with the completion of the task and by producing good results they will receive
more benefits and compensation from the organization (Armstrong & Taylor, 2014). No one
would be interested in lacking in their work as there will be an air of healthy competition in
the organization with the aim to receive more remuneration in the organization. Lastly, if the
organization is able to mix the person-based remuneration system to a good compensation
strategy for the employees then it can lessen the labour cost to a great deal. It can be
beneficial for the organization if an employee joins the organization at a less pay structure.
This means that as the skills of the employee increases, his pay structure also increases.
However, the organization can manage this pay structure and also retain the employee
thereby keeping him happy and motivated with his work conditions. If an employee joins an
organization, especially a start up with a high pay structure then with time the organization
might not be able to manage and provide the deserved pay to the employee as the skill of the
employee will be further developed (Lavy, 2007). These three causal factors contribute to the
effectiveness of an organization and if this is maintained can provide for a good remuneration
system of the organization. It can be derived that these factors can lead to better and much
more productivity in the organization, less absence from the employees and better relations
with the employees. These factors are what makes the person-based remuneration system a

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much better option than the position-based remuneration system. The position-based system
only looks at the designation and position of the employee rather than looking at their skill
set. This can disappoint many employees who can be lower in designation but much better at
work than their seniors. They could be demotivated to work and hence not perform according
to their talent and ability (Namazie & Frame, 2007). This could lead to a decrease in
performance of the organization as a whole as the performance of each employee counts in
the development of the organization. Hence, it is very important to choose a kind of
remuneration system in the organization that would make the employees happy and keep
them motivated to do their job and also is ethically and legally compliant. A good
remuneration system contributes to a good organizational performance system.
Conclusion
Hence, as a consultant, it can be concluded by reviewing the above essay that both
position-based remuneration system and person-based remuneration system has their own
pros and cons. However, the position-based remuneration system is a traditional and old
system of remuneration which could not be effective enough in recent organizational
scenarios. People are more skill based in recent times and could get motivated when their
skills are not appreciated by the organization. That is why to increase the performance of the
organization it is very important to increase the performance of the performance of the
employees. This can be done if the appraisal and benefits are offered deservedly to the
employees. This is where the system of person-based remuneration comes into the scenario.
This system concentrates on the ability of the employees are not biased towards the
employees and does not take into account the designation of the employee. This provides a
great chance of improvement for the employees and help them to prove themselves better
within the organization. Hence, it can be derived from the above points that the person-based
remuneration system is a much better choice than person-based system.

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Recommendation
Considering the following strategies and analysing them, it can be recommended that
the best system for remuneration that can be incorporated by O’Meara Electronics is the
person-based remuneration system. As discussed above, the three main factors are the reason
for choosing this system. It has been seen that the company has no self-management
techniques and there is no proper measurement of individual employee performance.
Implementing this remuneration system will also help in incorporating the performance goal
of the organizations which says that the goals of the organization should always influence the
goals and performance of every employee. The skills of the employees should be evaluated
based on certain tasks that they would have to perform. Based on the results of the
performance the remuneration should be decided forgetting the designation of those
employees. The implementation of this system should be done immediately so as to avoid
further demotivation and mismanagement within the organization. Therefore, after a detailed
analysis it can be said that a person-based pay structure is the best choice for the
organization.

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