Hrm 324 - Internal and External Equity Comparison
Autor: Maryam • December 28, 2017 • 815 Words (4 Pages) • 614 Views
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To build an effective total compensation plan it’s important to consider a few key components such as the roles of the organization and the skill level and experience required to perform the jobs successfully. These factors help determine the salary ranges for each position. Evaluating the pay structures of the external market will aid in deciding whether or not the organization’s pay grades are comparable to those in their industry. Something important to remember is that if a company’s financial situation doesn’t have the budget to accommodate external equity, they may consider increasing their internal equity for employee retention.
Advantages and Disadvantages of Internal and External Equity
There are pros and cons of both internal and external equity. Internal equity portrays a perception of fairness. If employees feel that their pay is fair, it could promote respect for the leadership of the organization. A disadvantage of internal equity could be that an employee feels they are performing at the same level or better than someone in a similar role, but is being paid the same. Another disadvantage of internal equity is the risk of losing an employee to a higher paying job for another company. Like internal equity, there are advantages and disadvantages to external equity also. One advantage is that it allows companies to remain competitive in their market for specific positions. A large disadvantage is the cost of retaining and remaining competitive in the market.
Above all else, the external and internal compensation should meet the goals and culture of the organization. A well- balanced compensation plan will not only meet the needs the employer, but will also meet the needs and desires of the employee. Once the plan is established, it’s beneficial to periodically review to identify any areas of improvement or enhancement.
References
External Equity Law and Legal Definition. (n.d.). Retrieved from http://definitions.uslegal.com/e/external-equity/
Working Here. (n.d.). Retrieved from http://careers.walmart.com/about-us/working-here/
Rewarding Our People—AIR’s Commitment to You. (n.d.). Retrieved from http://www.air.org/sites/defauly/files/1000_117
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