Help to rewrite or paraphrase with similar wordcount and meaning Traditional Com
ID: 428345 • Letter: H
Question
Help to rewrite or paraphrase with similar wordcount and meaning
Traditional Compensation
For the most part, traditional methods of compensation involve set pay levels (wage or salary) with regular increases. Increases can be given for a variety of reasons, but are typically given for promotions, merit increases, or cost of living increases. The Hay Group points out that there is less distinction today between merit increases and cost of living increases: "Because of the low levels (3 to 4 percent) of salary budget funding, most merit raises are perceived as little more than cost of living increases. Employees have come to expect them." This "base pay" system is one that most people are familiar with. Often, it includes a set salary or wage, a set schedule for merit increases, and a set benefits package.
Advantages and Disadvantages of Traditional Compensation
Traditional compensation is subject to centralized control, which supports standardization of pay scales. This standardization contributes to the predictability of salary expenditures that, in turn, simplifies budgeting processes. The system uniformity also becomes a tool with which the equity of pay within an organization can be evaluated. In addition, this compensation system allows pay levels to be based in part on results of market testing. This system is consistent and at least appears to provide objective measures of employee performance.
The administrative overhead associated with the annual pay grades review and revision is a disadvantage of the system. In addition, parameters by which employees are judged, such as budget responsibility and staff size, can be manipulated by individual employees. The system also rewards overly inclusive job descriptions which can lead to excessive pay. The individual can also benefit from the transfer to a new position with a higher job grade rather than performing existing responsibilities in an exceptional fashion. This model also encourages vertical career moves and therefore does little to motivate technical staff. Traditional pay practices reinforce bureaucracy in that they assign a value to the relative position of individual jobs in the corporate hierarchy.
Explanation / Answer
Traditional Compensation
Usually, the traditional methods of compensation involve predetermined pay levels (wage or salary) with regular increase in salary. Salary hike can be provided for several reasons. However, the most common reasons are for promotions, merit increases or cost of living increases. The Hay Group observed that there is less distinction today between merit increases and cost of living increases: “Since the salary budget funding allows just 3 to 4 percent for increases, most of the merit raises are often considered by employees to be little than the cost of living increases”. This “base pay” system is popular among the people. Often times, there is a pre-defined scale for salary or wage, schedule or merit increases and benefits package.
Advantages and Disadvantages of Traditional Compensation
Traditional compensation has a centralized control system which sets standards for pay scales. This standardization helps to predict the salary expenditure which is used for budgeting. This system also provides uniformity across the organization wherein there is equal opportunity for pay for employees. Additionally, this traditional compensation system allows the pay levels to be divided into different variables based on the market testing. This system provides consistency and seems to provide objective measures of employee performance.
One of the disadvantages of the system is that the administrative overhead associated with the annual pay grades review and revises the pay scale. Additionally, employees’ competency is evaluated based on budget responsibility and the staff size and the same is manipulated by individual employees. This system rewards extensive job descriptions which require excessive pay. This system allows an employee to be promoted to a newer position with a higher job grade rather than just performing the existing responsibilities exceptionally well. This model also encourages employees to have vertical career moves which do little to motivate the technical staff. Finally, the traditional pay practices reinforce bureaucracy because they assign a value to the relative position of individual jobs in the corporate hierarchy.
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