There can be various alternatives to the traditional job based approach of employee compensation. One of the important alternatives is that of Delayering. Delayering is the process by which we reduce the number of job levels. Delayering promotes greater flexibility in job assignments and hence the assigning value increases. Another alternative is by the means of Banding. Banding is the process by which many different job levels are combined into smaller number job levels. There is an increased opportunity responsibility, training, and pay attached to seniority or performance. But there are decreased opportunities with delayering and banding.
Another answer to job based pay structure problems has been to sway away from relating pay with jobs. They should rather incline towards building structures on knowledge, skill, and ability. Competency based remuneration is similar in nature. It normally refers to a strategy that shelters exempt employees such as managers. Skill based pay system is a also an efficient wage payment concept. In skill based pay employees are compensated for the skills they are proficient with instead of the job they are accomplishing at a particular time. An example of skill based concept is when employees not only work with a machine but they may also take accountability for troubleshooting, maintenance and quality control (Mondy, 2009).
The advantages of using these alternative approaches are flexibility helps endorse junior staffing levels and assists in circumstances where the manufacturing process stresses upon adaptable and flexible reactions. Flexible manufacturing and Just-in-Time systems are a few of them. Experts are of the view that skill based plans account to a environment of adaptability and earning and offers the employees a wider view of the functioning of the organization. Arguments against are that the organization may not be able to utilize all skills of its employees effectively. A change in the design of work must be altered. The employees may procure skills speedily and compensation may top out and skill based approaches may necessitate a bigger bureaucracy pertaining to measurement, training, and skills definition. Last but not the least, there is practically no information available in the market on how to compensate skills. Executive pay makes up only a small part of the labor costs of a company. Executives have a uneven knack to affect organizational performance. They help build the culture. Therefore, if their pay appears distinct to organizational performance, workers generally do not understand the reason behind their incentive-based pay (Mondy, 2009).
The advantages of such a plan are that employees will be more motivated to think like proprietors and they will expand their view about their duties and the overall performance. Labor costs will drop in meager economic circumstances and layoffs will not be the need of the hour. Disadvantages of this plan are that staffs will disbelieve that they the power to control results. They will be disappointed to know that there no profit exists and hence no profit sharing can take place.
According to me the plan would impact different people in different ways. In particular, those with high performances would be concerned more since they possess high motivation levels. Such employees may find the plan unsatisfying, as they would not be rewarded for their efforts. Reinforcement theory proposes that rewards would not come rapidly unless motivation would get greatly increased.
One way of achieving employee ownership is by the means of stock options that which provide employees the chance to buy company stock at fixed prices. Employee Stock Ownership Plans or ESOP’s, are those plans in which employers offer employees with stock in the organization. They are the most widely accepted arrangement of employee ownership. Gainsharing programs provide a medium for allocating efficiency advances with employees. They are different from profit sharing in the sense that in place of using an organization level measure they appropriate group performance. This approach is possibly seen as more manageable by employees. Another feature of it is that payouts are allocated more often and are not delayed. Another alternative method is that of Balanced Scorecard. If only individual incentives are practiced, high motivation would be there but it would lead to decrease of focus on goals of the organization. If only gainsharing and profit sharing are used there may be more teamwork and care towards organizational goals. But work motivation of individuals might be small (Mondy, 2009).
Employers have contributed towards cost control since majority health care is provided by organizations instead of national health care. Such efforts are known as managed care and they include design of plan, use of alternative funding methods, claims review, use of alternative providers and education. Another style is to transfer costs to the staffs through the use of coinsurance, exclusions and deductibles and maximum benefits. In certain instances, cost reduction is practiced through preadmission testing, second opinions and need for surgery.
Health maintenance organizations (HMO’s) lay emphasis on outpatient treatment and preventive care therefore employees are required to use only HMO services. Preferred provider organizations (PPOs) are those associations of health care providers which make a deal with employers to render health care at subsidized fees. PPO’s do not deliver benefits on a prepaid basis and employees are discouraged to just use PPOs. PPOs appear to be not as expensive as traditional health care but are more costly than HMOs.
Communication with employees is vital if return on the investment is expected to be achieved. Experts are of the view that employees mostly do not comprehend the provisions of the cost of benefits. Flexible or Benefit Plans are the plans that allow employees to select the types and quantity of benefits they desire. Plans differ in terms of whether certain levels are essential and whether staffs can get their money returned for disbursing less than the allocated amount (Mondy, 2009).
Mondy R., W, 2009. Human Resource Management, 10th ed. India: Pearson Education, Inc.