Compensation is an important function of the human resource department. The human resource employees continue to evolve along with changes in the mode of conducting business. Companies adopt technologies and tools that negate the use of spreadsheets, which are prone to errors. Advances, such as web-based tools, stand-alone PC-based system, and client-server based system have all transformed the process of compensation.
The web-based compensation tool is an online system that organizations use to gather, store, manipulate, analyze, utilize, and distribute compensation data. It integrates a company’s Benefit Plans with human resource information and payrolls. The principle advantage of this methodology is that it replaces the tedious manual processes and is almost free of errors. The system requires neither installation nor periodic updates, saving on extra costs. It is convenient for use because it can be accessed from anywhere, as long as one has an internet connection. The data is stored remotely, which means that minimal space will be consumed. It is important to note that the web-based compensation tools can be integrated into most operating systems, making it available on many platforms. Finally, it improves the effectiveness of the compensation process, since it allows the end-users to share critical information. It also comes with additional features, such as the ability to create reports.
However, the web-based compensation tool is marred with a few disadvantages. Firstly, the approach relies greatly on internet connection. Slow internet speed or a lack of it hinders the operation processes. Additionally, it has a poor user experience, as most people are not familiar with the method and do not have the knowledge regarding its usage. The system also has browser limitations, which cause restrictions of use. The remote server compromises a company’s security data because it could be easily hacked, leading to information leakage.
The client-server system is a computing framework that establishes a network of computers, in which many clients are administered from a single point of command. The Human Resource department makes use of this advancement in technology, to transform the efficiency and quality of the department’s performance; more specifically, regarding the disbursement of compensations. This method merits the data sharing between various workstations within the network. Clients can access the data that is stored in the server. It also promotes transparency in the procedure. There is also an integration of services between computers in the network because everyone with an authorized access can access the corporate information through the desktop. It also eliminates the need to log into a terminal mode or another processor. Additionally, it can operate within various software platforms, ensuring an open computing environment. This approach also transforms the compensation process from a machine-centered system to a user-centered interface. It means that the user can access and manipulate the data at any time, location notwithstanding. This model provides an opportunity to back up the information, which guarantees the recovery of information when the network crashes. Data security is also guaranteed because the access is only authorized by the pre-determined rules set during the adoption of client-server compensation tool.
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Nevertheless, the model has certain weaknesses. The most profound demerit is the fact that the system could potentially crash due to an overload of requests from the clients within the network. The delivery of many requests simultaneously to the server risks a congestion that could either slow the processes significantly or lead to its break down. The centralization of the network also causes certain administrative problems. The failure of a critical server shuts down the system, since the requests are not accomplished. The compensation process is, therefore, halted. Lastly, it requires a high level of IT expertise to maintain the system, which leads to extra administrative costs.
Summarily, the human resource department must ensure they have the appropriate skills and align the organizational goals with the Benefit Plans. The client-server model is inadmissible in small-scale environments, where security is not a big issue. This system is also limiting in the sense of inadequacy of the space available on computers, as compared to the web-based compensation tool, where information is stored remotely. In as much as the web-based model relies on Internet connection, it enables information access from anywhere. This merit contrasts with the client-server approach in which information is only accessible from a particular geographic point, such as an office. The web-based compensation tool is, therefore, a more strategic choice of an organization’s stakeholders.
Job evaluation is a system of drawing comparisons among various jobs with the aim of determining appropriate compensation levels for individual work elements (Eargle, 2013).
Compensations are simply the rewards employees get for the services they render to an organization, including the direct wages and salaries, the retirement plans, and non-financial methods, such as career development and advancement opportunities. There is a direct implication on the productivity, hence, the success of the organization because it affects employees’ contentment, as well as the ability of a company to achieve its objectives. There are four main job evaluation techniques: ranking, classification, factor comparison, and point method (Aswathappa, 2013). The e-compensation tools are designed to strike a balance between internal equity and external competitiveness. They make it easy to achieve workplace equity, since all employees are able to access the data regarding the payment of their contemporaries. It creates the perception that all of them are being treated fairly. Similarly, it enables the workers to make comparisons with what employees of other organizations in the same positions are earning. Compensation tools also aid in the alignment of compensation systems with the organizational strategy, it helps in building the desired work culture in a company without compromising the goals. Furthermore, the tools allow the corporation to relate market competitiveness by creating a platform on which they can all compare their compensation components. Finally, E-compensation makes it possible for the management to be consistent with the legal regulations, pertaining to labor standards, employment insurance, pension, human rights, occupational safety and health, and labor relations.
The means of management of the merit pay systems can be through two methods: the centralized approach or the decentralized approach. In the former, salary budgets are initially determined from an administrative point of view based on the ability to pay, standards of living, turnover, competitive market pressures, and the average labor market rate increments. A consideration of individual differences in productivity and merit is made and an equitable pay structure is composed for each person. The Human Resource managers exercise greater command in this instance, rather than the operational managers. In the decentralized method, managers in the corporation assess the annual wage increment that is expected to retain their key employees and remain competitive. The resultant data becomes the salary budget.
A centralized approach creates a top-down decision-making relationship, which clearly defines employees’ roles in a company. Additionally, this type of leadership levels the workforce in the sense that they all subscribe to the same line of command. Therefore, there is no competition among the workforce. Furthermore, it establishes a uniform program, which all individuals in a company are expected to follow. This method creates a standard way of operation which guarantees consistent results. Finally, there is faster decision making because only a few people are responsible for this feat. However, the centralized tactic limits the workers’ maneuverability regarding the way they function. The decisions they make must be in line with the top management’s commands. It means that they remain rigid within the desires of the leaders. Their actions are subsequently limited. Moreover, the approach eliminates the input of employees. It creates a one-way type of relation that may hinder the conception of new ideas into the business (Fredericksen, Witt, Patton, & Lovrich, 2015).
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For the adoption of a proper compensation plan, the organization needs to put various factors into consideration. These analytic features are used to establish a desirable compensation program for employees, while taking into account a company’s objectives (Biswas, 2012). Firstly, the HR department must consider the internal equity factor. This component refers to the reward, allocated to workers relative to the value of their jobs in the organization. The working conditions, wages, benefits and responsibilities must be perceptively equitable, as compared to other employees in the same position within a company. Secondly, the management must analyze the external equity. They must maintain a relatively fair pay rate, as compared to other organizations within the same industry. This gesture not only ensures contentment among the workforce, but also gives a company a competitive edge in the labor market. Thirdly, the corporation must assess individual equity. In this regard, the organization recognizes and rewards employees for their individual contributions and achievements in their respective posts. For instance, the merit pay program is a means of individual equity compensation (Biswas, 2012).
Internal equity is a very pertinent feature of an organization because it has a direct implication on a company’s productivity. It affects employees’ satisfaction and their will. However, corporations continually face the challenges that hinder them from maximizing on the utilization of the web-based tools. The main reason, attributing to the improper usage of the tools is the self-interest among some members of a company. There may be certain employees or even employers who get more than they genuinely work for. An effective internal equity tool would potentially expose them. Furthermore, some boards do not trust these programs for fear that they could be a channel of leakage of critical company information. The apprehensive perception makes them discard the tool’s usage. Communication misunderstandings also raise concern that limit the use of the web-based tools. It is a common line of thought that the system aims at maliciously reducing the wages of some workers or demoting them, hence causing them to refute the idea. The organization should address these concerns by inculcating the right attitudes regarding the software. The workforce should realize that the Internal Equity tools are important in helping the organization to streamline compensation plans with the objectives. Furthermore, the management must compose an equitable salary budget that ensures everyone gets what they deserve to avoid creating tension in the workforce.
Companies must continuously assess their human resource strategies with the benefit programs to gain a competitive edge in the market. They must analyze the data they receive from external sources and determine the quality before acting on it. The first point of consideration upon receipt of the data is the importance to the organization. Next, they must review the information comprehensively to establish, whether it is complete and relevant. The missing links in the provided data must be accounted for to determine whether the information is credible. There must be relativity between the historical data and the normal range professional judgment. In the event of a lack of consistency, supporting data must be brought forth. The information is then assigned to Data Quality Levels, using Data Quality Matrix. The process constitutes the calibration of the records, the conduction of accuracy checks, and the production of duplicates, as well as split samples. Finally, assign the Data Quality Levels to results to determine the usefulness of the obtained information (Loshin, 2010).