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Own Reaction
Instead of quitting, I could have requested a meeting with the relevant HR representative to seek an explanation on the issue of compensation inequalities. It is important for employees to have an in-depth understanding of the compensation model used to quantify their financial rewards as such knowledge will assist them in making a determination on whether they are being fairly and competitively remunerated (Gittleman & Pierce, 2015). Consequently, it is important to seek information from a competent professional with the view to developing a comprehensive understanding of the compensation model used.
Explanations for Allen’s Observations
There exist several business- and work-related explanations for Allen’s observations on the entrenched differences in compensation between workers. First, it could be that the company employs a bonus mechanism to reward workers, hence making it possible for new employees to earn more than experienced workers. The available literature on bonus pay reinforces the capacity of financial allowances (bonuses) to enhance compensation inequalities irrespective of performance considerations as not all bonuses fall under the tenets of pay for performance (Gittleman & Pierce, 2015).
Another explanation is that the company could be using a compensation model that assigns jobs to a work level using ordinal factors such as knowledge (skills emanating from educational level, training, and experience), job controls, and complexity (e.g., direction and complexity of work), and physical environment (nature of risk and the quantity of physical demand in a job). Using these compensation parameters, it is possible for new employees to earn more than their experienced counterparts. Additionally, it is possible for employees perceived as nonperformers to earn more than performers due to job-related risks and physical demands (Weber & Rynes, 2001).
The third explanation is embedded in the fact that the company could be using a competency-based approach to reward its workers, hence making it easier for new employees with market-oriented competencies to earn more than experienced workers. Available literature demonstrates that the competency-based compensation model “calls for base pay to be determined based on competencies instead of duties and responsibilities” (Giancola, 2009, p. 14). This explanation is effective in highlighting why Allen receives low pay even after working for more hours than the new employees. The last explanation is based on the dynamics of the labor market, where it is highly likely for employers to experience an external market value that increases at a faster rate than organizational salary levels do (Gittleman & Pierce, 2015). In such a situation, the company is forced to offer more to recruit new employees as demonstrated in Allen’s case.
Action
For the compensation director, it is important to use an effective communication strategy to explain the rationales and justifications used by the company to arrive at its pay structure. It is also important to develop and implement a comprehensive policy on how sensitive personnel information is handled by employees. Such a policy needs to develop a framework that establishes the levels of access to sensitive HR information and the role of employees in dealing with such materials (Vaitkus, 2004). Lastly, to avoid other challenges of similar nature in the future, it is important for the compensation director to conduct sensitization meetings with employees to enhance their understanding of the compensation process used by the company. The sensitization meetings can also be used to create awareness on how to handle employee compensation information with utmost confidentiality owing to the fact that pay disclosures are emotive issues that have the capacity to affect employees’ job satisfaction and motivation.
References
Giancola. F.L. (2009). A framework for understanding new concepts in compensation management. Benefits & Compensation Digest, 46(9), 1-16.
Gittleman, M., & Pierce, B. (2015). Pay for performance and compensation inequality: Evidence from the ECEC. Industrial & Labor Relations Review, 68(1), 28-52.
Vaitkus, L. (2004). Tips for designing an effective compensation communications strategy. Report on Salary Surveys, 4(9), 1-15
Weber, C.L., & Rynes, S.L. (2001). Effects of compensation strategy on job pay decisions. Academy of Management Journal, 34(1), 86-109.
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