Contemporary Compensation Practice

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A pay system must be structured to maintain a healthy relationship between a firm, its employees, and all stakeholders in order to create an effective incentive scheme within a company or organization. A pay schedule serves as the foundation for determining how much an employee of a company must receive. The decision takes into account a variety of internal and external considerations, as well as employee input. These factors include; employee’s level of qualification, one's position within the organization, work experience as per the length of time one has worked in the organization, working conditions of an employee, government policies on minimum salary allocations, and the general attributes of an employee. Salary structures, therefore, ensures that different job groups are reasonable in comparison to those of other organization regarding wage allocation. The structure also provides equitability in salary distribution within the organization.

Salary structures need to be balanced to satisfy all the stakeholders within an organization or a company. The traditional form of salary structures is made with several layers and range structures leaving a tiny gap in between the ranges. This method achieves maximum output when well designed. It is clear that it will be easy to come up with varied rates of pay thus enabling a good control over salary-related expenditure within the organization or company. In broadband salary structures, there are more extensive ranges between salary allocation and job groups thus considered more flexible for incorporating fewer structures compared to the traditional salary structure (Shields). Some firms have adopted market-based salary structures which are said to be more efficient. A small number of organizations preferred the use of step salary structure which is the least used.

The use of specific salary structures has different implications for the organizations. It is, therefore, necessary to adopt a structure that will benefit both the company and the employee. A poor salary structure will result in underperformance of some of the employees who feel they are not well compensated for their work leading to low productivity in the company (Osborn). An employer may also incur losses in cases where the salary structure is not well managed. An employer, therefore, might be paying so much to a worker who does not deserve it thus creating a crisis with other workers who serve right.

An employee, for instance, will suffer from a weak salary structure by being paid poorly for a job that requires good pay may be due to the working conditions or the nature of the job itself. This will lower the employee’s motivation to working resulting in low productivity and even loss of the job. For other stakeholders, a poor salary structure will, in the long run, affect them since as the profits go down, economic growth will also slow which will negatively impact the nation and other companies relating to that organization.

To create a good society and working environment we need to look into different salary structures and apply those that will favor all stakeholders in an organization. An excellent salary structure will ensure both employees and employers are satisfied which is of importance to the organization. Happy employees tend to work efficiently resulting in maximum output. For instance, incentives and tips to hardworking employees from their employer create a sense of competitiveness where every worker will be striving to be better than the other leading to good performance. Workers should be monitored in their fields and be paid according to the amount of work they do. It is also relevant to promote those workers who show effort in their area to make one's colleagues work hard too. Evaluation of an employee’s qualifications should be mandatory so that one is assigned in a field and paid according to how they are qualified.


Osborn, T. D., & Baros, Y. A. Salary Structure Optimization Using JMP® Scripting. Albuquerque, New Mexico: Sandia National Laboratories, 2013.

Shields, J., Brown, M., Kaine, S., Dolle-Samuel, C., North-Samardzic, A., McLean, P., ... & Plimmer, G. Managing Employee Performance & Reward: Concepts, Practices,. Cambridge University Press., 2015.

December 15, 2022

Government Economics

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