The use of pay differentials is common in both the private and public sectors. E
ID: 352886 • Letter: T
Question
The use of pay differentials is common in both the private and public sectors. Employers use this extra pay to recognize working on weekends, late at night, in locations with high costs of living, etc.
One of the downsides to pay differentials is the fact that including them for some positions may push their pay far above the established pay range for positions that it is grouped with. This can cause concerns over equity and fairness in the pay structure.
If you were a head of HR that faced this dilemma, how would you address the issue of fairness and equity?
Explanation / Answer
The issue of fairness and equity in pay structure can be addressed as below -
1. Being transparent in highlighting the cases when the additional pay is applicable and how it creates a difference in pay structures to set the right expectations to the employees
2. Though pay structure includes the common components for employees, it varies on case-by-case basis and hence it should not be very common to ensure employees feel the difference.
3. Normalization of pay structure every year reduces the disparity to an extent.
4. Pay satisfaction needs to be ensured though pay differential exists as an employee can be retained if he/she is satisfied with the pay.
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