What does it mean to the current employees?
I was reading the last post on how market pay rates will attract and might not retain employees that something struck me. When a company keeps paying higher pay packages to justify the market rates, how about the current employees. There are companies who recruit experienced people by offering them pay packages which are much higher than the market rates depending on the changes in the so-called "Market" and many of us would have heard one story or another on these lines. Now this can be a highly de-motivating factor for the current employees who having spent long years in the organization and performing the same work and are paid lesser.I have heard of instances in which a new recruit's compensation package amounted to almost as his boss's pay. Now the current employees are not going to like this at any cost. During the time that I worked as a software engineer, I remember, how frustrated many of us were when we got to know that the new batch that has been recuruited has been offered a higher basic which would entitle them to the same salary that we were drawing at the end of an year. Though the HR department tried to convince us saying that they had to pay according to the going rate at the market, I am not sure how many of us were convinced.... So what can organizations do to retain or motivate these employees or rather how can they just explain this better so that it makes sense to both parties...
Another issue is how to compensate your employees who are situated in different geographies. When an organization expands, it is quite possible that it expands into new markets sometimes situated in various geographies. Now comes the new challenge.. There might be people working in different countries who are doing the same work, but paid very different salaries. The market rates of companies are different in different countries. Thus a marketing head's pay in US might be less than or equal to that of someone lower in rank might draw in Europe. This is usually explained by attributing it to the difference in cost of living expenses in various regions. But what about the kind of work done. The widely accepted principle that the same kind of work should derive the same compensation package is a myth!! And there is no concept of a logical market here...All that depends is where you are and how crucial your skill sets are at this point in time.
I was reading the last post on how market pay rates will attract and might not retain employees that something struck me. When a company keeps paying higher pay packages to justify the market rates, how about the current employees. There are companies who recruit experienced people by offering them pay packages which are much higher than the market rates depending on the changes in the so-called "Market" and many of us would have heard one story or another on these lines. Now this can be a highly de-motivating factor for the current employees who having spent long years in the organization and performing the same work and are paid lesser.I have heard of instances in which a new recruit's compensation package amounted to almost as his boss's pay. Now the current employees are not going to like this at any cost. During the time that I worked as a software engineer, I remember, how frustrated many of us were when we got to know that the new batch that has been recuruited has been offered a higher basic which would entitle them to the same salary that we were drawing at the end of an year. Though the HR department tried to convince us saying that they had to pay according to the going rate at the market, I am not sure how many of us were convinced.... So what can organizations do to retain or motivate these employees or rather how can they just explain this better so that it makes sense to both parties...
Another issue is how to compensate your employees who are situated in different geographies. When an organization expands, it is quite possible that it expands into new markets sometimes situated in various geographies. Now comes the new challenge.. There might be people working in different countries who are doing the same work, but paid very different salaries. The market rates of companies are different in different countries. Thus a marketing head's pay in US might be less than or equal to that of someone lower in rank might draw in Europe. This is usually explained by attributing it to the difference in cost of living expenses in various regions. But what about the kind of work done. The widely accepted principle that the same kind of work should derive the same compensation package is a myth!! And there is no concept of a logical market here...All that depends is where you are and how crucial your skill sets are at this point in time.
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