Pay Equity: Internal and External Considerations

Romanoff, Kent; Boehm, Ken; Benson, Edward

doi:10.1177/088636878601800602

Cited by 23 publications

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“…Hence, even organizations that strongly prefer to do otherwise, recognize the importance of jobs' market rates in compensation decision-making. However, this recognition is often assumed to indicate the willingness of organizations to weigh the market values of jobs more heavily than other components of job value (Romanoff, Boehm, & Benson, 1986). These results indicate this may not be the case.…”

Section: Relative Influence Of Market Ratesmentioning

confidence: 95%

“…As a corollary of the recognition typically given the market value of jobs in compensation planning, internal job value is often regarded as secondary to organizations' need to compete effectively in the appropriate labor markets (Romanoff, Boehm, & Benson, 1986). However, the results of both the partial F test and analysis of Extra Sum of Squares indicate that, when the definition of internal value is tailored to the organization's definition, and effectively discriminates among the internal values of the organization's jobs, internal job value dramatically increases the amount of explained variance in employees' pay competitiveness.…”

Section: Relative Influence Of Internal Valuementioning

confidence: 99%

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The Relative Impact of Market, Internal, and Overall Job Values on Pay Competitiveness

Liccione

2019

IJHRS

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As a practical imperative, organizations must be able to attract, retain, and motivate qualified employees to remain going concerns. Those that adopt a market-based strategy that focuses on paying market-competitive wages may effectively attract and retain employees and, depending upon their compensation planning process, encourage employees' belief in the distributive justice of their organizations' pay decisions. Alternatively, organizations that adopt an internal equity strategy that focuses on pay decisions that reflect the internal value of employees' jobs to their organization may effectively retain employees and, depending upon the process used to determine internal job values, encourage employees' belief in the equity or procedural justice of that process. Compared to these strategies, organizations that rely on measures of overall job value are focusing on neither the market values, nor their internal values of jobs, alone. Instead, they are focusing on the jobs' overall values, or their amended market values given the influence of the jobs' internal values to the organization. As such, overall job value impacts, at once, the organizations' need to attract, retain and motivate employees.This article evaluates the relative impact of market, internal, and overall job value on the competitiveness of 88 employees' pay in 41 jobs in a nonprofit organization in the US health care sector. The organization's pay decisions were made prior to this study and without benefit of a formal salary management plan. Hence, this study represents a retrospective analysis of the relative impact of jobs' market, internal, and overall value on pay competitiveness.

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Section: Relative Influence Of Market Ratesmentioning

confidence: 95%

Section: Relative Influence Of Internal Valuementioning

confidence: 99%

The Relative Impact of Market, Internal, and Overall Job Values on Pay Competitiveness

Liccione

2019

IJHRS

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“…Taking an entirely job evaluation-based approach to base pay has a number of downsides, and in fact may be so foolish that almost no companies use this approach alone (Romanoff, Boehm, and Benson, 1986). The primary problem is that job evaluation alone ignores the labor market associated with work.…”

Section: Pitfallsmentioning

confidence: 99%

Setting base pay rates: integrating compensation practice with human capital value creation and value capture

Conroy¹

2019

Handbook of Research on Strategic Human Capital Resources

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Compensating employees is one of the costliest activities for an organization. In fact, the average employee compensation cost is approximately 36 dollars per hour worked; wages and salaries alone account for 68 percent of the money spent on employee compensation (Bureau of Labor Statistics, 2017). Beyond cost, compensation matters to employees. Voluntary turnover has a relationship of r = −0.15 with pay satisfaction according to meta-analysis findings (Williams et al., 2006), and the economic status of most individuals is tied to their compensation. The human capital literature has acknowledged the importance of compensation (e.g., Harris and Helfat, 1997), and compensation has figured prominently in frameworks on human resource configurations (Lepak and Snell, 2002). For example, internally equitable pay, externally equitable pay, and various pay bases have been central factors in empirical work on human resource configurations (Toh et al., 2008). Coff (1997) noted that focusing on employee pay perceptions, such as pay satisfaction and internal comparisons, is a potential human capital retention strategy. Yet, the nuances of compensation relevant to compensation researchers have rarely been sufficiently integrated with the nuances of the strategic human capital literature. Compensation design involves many strategic choices, such as decisions about job evaluation, merit pay, and market matching (Balkin and Gomez-Mejia, 1987; Gerhart and Rynes, 2003). One strategy of practical importance often neglected by compensation researchers is base compensation determination, i.e., the approaches used to designate "the cash compensation that an employer pays for the work performed" (non-contingent pay; Milkovich et al., 2014: 14). This neglect is in spite of base pay being one of the largest components of compensation for many jobs, especially those jobs of most employees (i.e., non-executives; Bureau of Labor Statistics, 2017). Perhaps this lack of attention is due to a myth that base pay is determined completely by market forces, and thus cannot be a source of competitive advantage (i.e., above average performance, as defined by Barney and Wright, 1998). Research over the last two decades on strategic human capital militates against the myth that base pay is not relevant to competitive advantage. For example, Coff examined firm coping strategies for human capital management dilemmas. Within this investigation, Coff explained, "pay differentials within the firm may be more important than the pay relative to the labor market. This, in turn, implies that firms can increase pay satisfaction without competing with other employers" (1997: 383). Decisions around base pay are not simply market and cost concerns, and these decisions may relate to competitive advantage through human capital value creation and capture (i.e., respectively, increased use value and decreased costs associated with human capital, as defined by Chadwick, 2017).

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“…The formulation of the salary structure model in this research utilizes several parameters as formulated by Poels (1997), which include: (1) number of grades; (2) the range of values of each grade, usually indicated by the value of the results of the job evaluation; (3) the range of the salary of each grade, including the differences in the amount of salary from the highest to the lowest; and (4) the remuneration policy line of the "Pay Policy Line" or commonly called the "Salary Line." By using these various parameters are then implemented by the researchers in the form of exercises based on the database consisting of: (1) There are 17 grades which will be used in the formulation, considering that: a) the guidelines of the civil servant job evaluation are still considered relevant and in accordance with the current ASN management perspective; b) the lack of research and scientific research that answers the question of the number of ideal/optimum grades, especially for governmental organizations because, basically, there are no obvious factors (to make the grade) which are universal (Risher, 1989); c) most job evaluation factors are factors defined in the Guidelines for Job Evaluation applicable to civil servants today which already cover a wide range of factors that can be used as a reference to establish equity internally as stated by Romanoff, Boehm, and Benson (1986) or Armstrong ( 2007).…”

Section: Advances In Social Science Education and Humanities Researcmentioning

confidence: 99%

The Analysis of the Civil Servant Payroll System from the State Civil Apparatus Management Perspective (A Study within the National Civil Service Agency)

Triyogo¹,

Soeling²

2017

Proceedings of the International Conference on Ethics in Governance (ICONEG 2016)

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Abstract-This research aims to analyze equity aspects of the pay system of civil servants (PNS) in the State Personnel Agency (BKN) and to formulate a payroll system that meets the equity principles in accordance with the management perspective of the Civil State Apparatus (ASN). The research utilizes the postpositivist approach and descriptive research. The results shows that the content of the equity value in the goals/targets of the civil servant payroll system in the ASN Act is limited to the efforts to comply with the internal and external equity. Meanwhile, the content of the individual equity values becomes incoherent because of the separation between the salary and the administration of the employee performance benefits. The equity value content of the implementation of the civil servant pay system has not been able to be fulfilled until now. This can be viewed from several aspects: a) alignment, the class base and the current working period are considered to be irrelevant because they do not reflect the relative value of a position, b ) competitiveness, the salary scale is less competitive than the market rate, c) contributions, the lack of appreciation of the performance and competence of employees, d) management, the lack of transparency, especially related to the data and information on the financial ability of the State for the allocation of salary. This research results in the formulation of civil servant payroll by using a job-based pay approach, using parameters including the number of grades, the value range, salary range, and the pay policy line.

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Pay Equity: Internal and External Considerations

Abstract: When setting pay rates, compensation managers must take into consideration the employees' perception of fair, equitable compensation.

Cited by 23 publications

References 0 publications

The Relative Impact of Market, Internal, and Overall Job Values on Pay Competitiveness

The Relative Impact of Market, Internal, and Overall Job Values on Pay Competitiveness

Setting base pay rates: integrating compensation practice with human capital value creation and value capture

The Analysis of the Civil Servant Payroll System from the State Civil Apparatus Management Perspective (A Study within the National Civil Service Agency)

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