Describe the reasons a company would choose below-market or above-market compensation policy and the advantages and disadvantages of open versus secret pay policies.
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The firm recognizes that the workforce is a crucial element in the attainment of the objectives of the organization particularly those associated with profit maximization. Therefore, it is the responsibility of the human resource management department to ensure that the employees’ welfare is given priority during the decision making process. Compensation is one of the areas that the management has to put much emphasizes on considering that pay dissatisfaction has been linked to the increase in staff turnover within companies. On the other hand, the firm is concerned with attracting the best personnel from the current marketplace while at the same time retaining those already employed (Gómez-Mejia, et al. 297). This will require the incorporation of the necessary compensation philosophies to implement policies such as above-market or below market payment strategies to keep the workforce motivated.
In most instances, companies are prone to market forces that determine price and the costs of production that will be inclusive of the wages and other incentives given to the employees. Furthermore, the stiff competition in the industry has contributed to the management attaching lucrative pay packages to attract labor from the market. Firms operating in labor competitive sectors are forced to incorporate above-market compensation policies to retain their workforce. By adopting the str…
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