...Internal and External Equity Compensation When a company is designing their total compensation plan there are many different factors that need to be taken into consideration. Are they going to go with a compensation plan that focuses on internal equity, external equity or maybe a little bit of both? What kind of benefits are they going to offer? Is the company going to pay for the benefits in full or will the employees be responsible for paying a portion of them? Then there are also the legal aspects that need to be followed to avoid legal ramifications such as the Lilly Ledbetter Fair Pay Act of 2009. Internal Equity Compensation “Internal equity deals with the perceived worth of a job relative to other jobs in the organization” ("Compensation Plans - An Overview - Base Pay", n.d.). “In developing a compensation package based on internal equity requires a corporation to develop and evaluate the compensable factors that will go into setting and individual employee’s pay” (Romanoff, n.d.). When a company chooses to base their compensation plan on internal equity what they do is they look at jobs that perform similar duties, and those jobs will be paid the same wage. For instance, if there are three Executive Assistants in a company then, all three Executive assistants pay will be around the same. Also with internal equity a company wants to retain the talent they currently have, so they are more than likely going to invest more in their employees by offering training...
Words: 910 - Pages: 4
...Riordan Internal and External Equity Equity internal alignment is also called the existing relationship between the payment and the different labor positions, skills, and competence within the organization (Milckovich & Newman. 2008). Internal equity describes the comparison of wages paid to the employee performing at the same level or degree within the Riordan organization. Moreover, the External Equity compares wages in the market competition, Riordan Manufacturing play where to employ and retain similar types of employees. It is based in Riordan's compensation system and pay structures. Riordan manufacturing work towards an equitable payment to the internal and external, which makes it attractive to retain and keep good employees. The implementation of structural job, payments system, analysis, and business structures, which help to identify and define the labor content describing the duties and internal assignations to endorse equal compensation (Martocchio, 2009). Additionally, external equality elements to identify market competition include, marketing surveys, researching new and current competitors marketplaces will help to maintain the company update in pay, and trends. Implementing internal and external equity Riordan will continue to be a successful organization. A wage management process and rationale The purpose behind Riordan program wages, is to get consistency in payment practices, supplemented by laws and regulations, especially with the commitment...
Words: 312 - Pages: 2
...Internal and External Equity Comparison Total compensation means to reward employees for their labor. Compensation packages in today’s market can range from low to high depending on the company’s goal. Compensation packages have the ability to attract a certain type of candidate to apply for a specific position within an organization by the way they are designed. With the economy constantly changing and somewhat unstable, it is important for a company to offer a compensation package geared towards not only the employee but as well as the economic changes. Two types of equities plan an organization can use are, internal and external equity. Total Compensation Internal Equity Internal equity exists when employees in an organization perceive that they are being rewarded fairly according to the relative value of their jobs within an organization (hrcouncil.ca). Internal equity is a good way to ensure that employees receive fair wages and cannot file lawsuits against the employer. Although two employees functioning at the same level in the organization, it is possible for them to draw different pay. J.P. Morgan, an American Capitalist, is said to have a rule regarding investing into a company. Mr. Morgan stated that he would not invest in a company that pays the CEO over 50% more than the next level executives (Compensations Standards 2015). The corrective approach is addressing the "internal pay equity check" as did the companies like DuPont and Intel when they...
Words: 931 - Pages: 4
...Internal and External Equity Comparison Edgar Martinez HRM/324 September 10, 2012 Annette Clark Davis Internal and External Equity Comparison In today’s competitive globalized economy, an organization’s approach to equity and its perception of equity can affect an organization’s ability to captivate, retain, and motivate its employees. Therefore, external as well as internal equity play an important role in an organization’s design of its compensation structure. In this essay, it shall examine the total compensation plans for the Home Depot Corporation and IBM Global Services, focusing on internal as well as external equity. Additionally, it shall also review the various advantages as well as disadvantages of internal and external equity for both organizations. Finally, it will provide an explanation to how each plan supports each organization total compensation objectives as well as the relationship of the organization’s financial situation to its plan (University of Phoenix, 2009). Internal and external equity An Organization that notably uses internal equity to form its pay structure is the Home Depot. The Home Depot’s internal equity exist because of its pays wages and hiring processes designed to fit each store budget, instead of hiring people with the skills to do the job at a market rate pay. The Home Depot’s decentralized stores use an elitist compensation system with different compensation plans by organization level and incentives offered only to...
Words: 1037 - Pages: 5
...Organizational Objectives and Total Compensation in Different Markets Lynette Gill HRM/324 December 10, 2012 Jocelyn Freimark Organizational Objectives and Total Compensation in Different Markets One of the fastest growing fields in Human Resources is compensation. The main motivator for employees is compensation; potential employees are searching for jobs that fit their area of specialty. A company’s human resources team is constantly looking for ways to compensate employees for job performance. When analyzing organizational objectives and total compensation packages in the various markets, it is important for small companies to know the differences in wages and salaries. Wages are paid to hourly employees based on the number of hours worked in a week while salaries are paid to exempt employees, executives, and those defined by the Fair Labor Standards Act of 1938. Deciding an employee’s level of monetary compensation depends on various factors. The wage should be high enough to attract qualified potential employees; the wage should in competitive with similar jobs performed in similar companies. Other considerations include: * The number of other employees capable of fulfilling the job responsibilities * The demand within the community and/or industry * Cost of living There are laws which have an impact on compensation that small companies should be aware of. The Fair Labor Standards Act (FLSA) has been amended over the years and now includes five major...
Words: 560 - Pages: 3
...perception of fair, equitable compensation. Pay Equity: Internal and External Considerations KENT ROMANOFF Associate Hay Group, Inc. KEN BOEHM Labor Economist Pacific Telesis EDWARD BENSON Vice-President, Hay Group, Inc. EqUity (or fairness), a central theme in compensation theory and practice, arises in many different contexts. Here, for example, are some major areas: • The legal and economic issue of equal pay for similar work (comparable worth). • Pay differences caused by external competition or market pressures. • The fairness of individual wage rates for people who are doing the same job. • Individual employee views of their value relative to their pay. A company's approach to equity is as important as the actual pay programs it im plements. Companies typically emphasize external equity in the design of their com pensation structures. This focus on external equity enables a ,company to develop compensation structures and programs that are competitive with other companies in appropriate labor markets. Perceptions of equity can also influence a company's abil ity to attract, retain, and motivate its employees. Employee perceptions of equity and inequity are equally important and should be carefully considered when a company sets compensation objectives. Employees who perceive equitable pay treatment may be more motivated to perform better or to sup port a company's goals. Individual employees, however, perceive equity in many different ways. Therefore, it is...
Words: 3553 - Pages: 15
... Identify advantages and disadvantages of internal and external equity for the organizations. Explain how each plan supports that organization’s total compensation objective and the relationship of the organization’s financial situation to its plan. Format your paper consistent with APA guidelines. Introduction All organizations value the compensation as a vital factor when trying to recruit and retain the appropriate staff. This will also help reduce turnovers within a company. The importances of external and internal equity are highly recommended. This paper will illustrate the total compensation plan for an organization focused on external equity and internal equity. This paper will also identify the advantages and disadvantages of internal and external equity for the organizations. By doing this I will explain how each plan supports the organizations total compensation objectives as well as the relationships of the organization’s financial situation to its plan. Internal and external equity Intel is an organization that practices using internal equity. Internal Equity method undertakes the job position in the organisational hierarchy (2007 Payroll.Naukrihub.com). This process aims to help balance the compensation provided to a job profile. This helps ensure that there is fairness between job rankings, job classifications, and level of management. Intel using this to ensure that their employees are being compensated fairly...
Words: 890 - Pages: 4
...Internal and External Equity Comparison HRM 324 April 28, 2014 Internal and External Equity Comparison` When reviewing a successful companies' portfolio to determine what makes them more successful from the next, you will find the company will have a strong compensation plan. A Compensation Plan is one of the more important aspects in the organizational environment. Before formulating the compensation plan based on internal and external equity, it is important to first understand what internal and external equity refers to. External equity is said to be prevailing in the organization when the employees are rewarded with fair compensation to those who perform similar jobs in other organizations. External equity persists when an organization's pay rates are equal to the rates prevailing in the organization's market. (Lederer & Weinberg, 1995) Internal equity is present when the employees are being provided with fair wages relative to the value of their jobs within the organization. Responsibility, rewards and compensation provided to an employee should be in equity with the other person working at similar position within the organization. When formulating an effective compensation plan that is based on the internal equity, it is important to first consider the basic factors. The first step is to understand the types and varieties of jobs being performed by various employees within the organization and also the required level of skills, education...
Words: 973 - Pages: 4
...Internal and External Equity Comparison HRM / 324 Recruitment, retention and reduction of staff turnover are some of the key things that many organizations focus on when they begin to put together the “fundamental glue” of the company, the Compensation Plan. Those things in mind, both the internal and external equity considerations, and how they effect an organization should not be dismissed. Compensation packages are arguably the most valuable piece of information to an organization as it begins to draw up a package geared at attracting and retaining suitable employees. A well-constructed compensation package has the ability to ensure that employees are not only attracted to the job in question, but are also willing to stay with the organization for an extended period of time after the job is secured. Proven to be highly beneficial to an organization especially by way of cost effectiveness is the ability to recruit effectively, higher the appropriate candidate, maintain a high retention rate for employees, and increase productivity. In this paper, internal and external equity is explored, including the advantages and disadvantages of both, an explanation of how the plans support an organizations total compensation objective and how they relate to the organization’s financial situation. Internal equity refers to the Employees' perception of their responsibilities, rewards, and work conditions as compared with those of other employees in similar positions...
Words: 832 - Pages: 4
...Internal and External Equity Comparison Internal and External Equity Comparison Edgar Martinez HRM/324 September 10, 2012 Annette Clark Davis Internal and External Equity Comparison In today’s competitive globalized economy, an organization’s approach to equity and its perception of equity can affect an organization’s ability to captivate, retain, and motivate its employees. Therefore, external as well as internal equity play an important role in an organization’s design of its compensation structure. In this essay, it shall examine the total compensation plans for the Home Depot Corporation and IBM Global Services, focusing on internal as well as external equity. Additionally, it shall also review the various advantages as well as disadvantages of internal and external equity for both organizations. Finally, it will provide an explanation to how each plan supports each organization total compensation objectives as well as the relationship of the organization’s financial situation to its plan (University of Phoenix, 2009). Internal and external equity An Organization that notably uses internal equity to form its pay structure is the Home Depot. The Home Depot’s internal equity exist because of its pays wages and hiring processes designed to fit each store budget, instead of hiring people with the skills to do the job at a market rate pay. The Home Depot’s decentralized stores use an elitist compensation system with different compensation plans...
Words: 310 - Pages: 2
...Debt, Equity, and Taxes By Deen Kemsley* Columbia University and Yale University and Michael G. Williams** University of California, Los Angeles January 10, 2002 We express appreciation for insightful comments from Antonio Bernardo, David Bradford, Roger Gordon, Larry Glosten, Rick Green, Glenn Hubbard, Jack Hughes, Michael Kirschenheiter, Stephen Penman, and workshop participants at the Columbia University Burton Conference and the Yale School of Management Faculty Workshop. Professor Kemsley also expresses appreciation for financial support from the Columbia Business School Research Program in Tax. * Correspondence Author: Yale School of Management, 135 Prospect Street, P.O. Box 208200, New Haven, CT 06520-8200, deen.kemsley@yale.edu, (203) 432-3780, fax: (212) 432-6974. ** University of California at Los Angeles, Anderson Graduate School of Management, Box 9511481, Los Angeles, CA 90095-1481, (310) 825-4720, michael.williams@anderson.ucla.edu. Debt, Equity, and Taxes Abstract In this study, we extend Miller’s (1977) capital structure analysis by adding potentially high personal taxes on dividends and share repurchases, and by focusing on mature firms with at least some pre-existing equity. We demonstrate that personal taxes on equity distributions push new equity financing to an inferior corner, but they do not push internal equity (i.e., reinvested free cash flows) to a corner. Therefore an interior capital structure solution remains, in which firms...
Words: 9981 - Pages: 40
...DISCUSSION ASSIGNMENT 1 5 MARKS WORTH 5% OF THE OVERALL GRADE FOR THE COURSE INTERNAL EQUITY (ALIGNMENT) AND EXTERNAL EQUITY (COMPETITIVENESS) After reviewing the Wilson Brothers Case Scenario, as Director of Human Resources for the organization, what conclusions can you draw with respect to the status of the company’s compensation strategies that are currently in place? What would you do to begin to address this situation? (3 Marks) Provide Constructive Feedback to at least two other student’s postings. (2 Marks) HINT:-reference both internal equity (alignment) and external equity (competitiveness) in your response. NOTE:-this Discussion Assignment will be marked on content, analysis, direct references to the readings, the overall professionalism of the presentation and constructive feedback to other students’ work. The organization’s strategies seem to be outdated, reflecting a different period in time. It does not seem that government policies, laws, and regulations are being followed and/or up to date. There are no consistent policies on employee relation issues and some employees’ fear of getting on the owners bad side would cause them to be terminated. There are also no policies on employment equity and pay equity. This could cause legal issues if they are not following the proper legislation set out by the government. There is also no pay structure and therefore, no differentials. Hiring salaries are negotiated which leads to no salary range for jobs within...
Words: 1436 - Pages: 6
...CRITICAL ESSAY: COMPENSATION EQUITY IN CHINA Hou Guangjian ABSTRACT In China presently, employees receive different compensation according to all kinds of ad hoc definitions of external equity, internal equity and individual equity. Consequently, employee attitudes toward work and social status are affected. If the government would provide people with access to better education, legal measures that guarantee fair competition, and training opportunities to people who have need, the Chinese people would have greater reason to believe that improved compensation equity will be realized in the future. INTRODUCTION Two years after the death of late chairman Mao Zedong, Deng Xiaoping launched century. During the past twenty-five years, the country has witnessed tremendous gains in economy and social wealth in general. Although, on the average, people are leading a much better life, the gap between rich and the poor is becoming larger. As a large developing country in a transition period from a planned economy to a market economy, China at present has to adopt a de facto policy of “letting a few people get rich first” to stimulate enthusiasm and initiative for the rest of the population. Thus, the usual egalitarianism -- what Chinese term the “Large Bowl” -- has been smashed. People working at similar jobs receive different compensation. Various ad hoc definitions of external equity, internal equity and individual equity influence compensation and, consequently, employee attitudes toward...
Words: 3190 - Pages: 13
...Is the Growth of Small Firms Constrained by Internal Finance? Robert E. Carpenter UMBC Bruce C. Petersen Washington University First Version: December 4, 1998 Second Version: June 18, 2000 This Version: January 22, 2001 Abstract This paper examines the long-standing theory that small firm growth is often constrained by the quantity of internal finance. Under plausible assumptions, when financing constraints are binding, an additional dollar of internal finance should generate slightly more than an additional dollar of growth in assets. This quantitative prediction should not hold for the relatively small number of firms with access to external equity. We test these predictions with a panel of over 1600 small firms and find that the growth of most firms is constrained by internal finance. Our results have implications for several different research literatures, including models of firm growth. JEL Codes: L0, D9 We thank Steven Fazzari, Lauren Lax, Josh Lerner, Dorothy Petersen, Laura Rondi, Alessandro Sembenelli, Jim Rebizter, James Stock and three anonymous referees for valuable comments and suggestions. We also thank seminar participants at Binghamton University, Case Western Reserve University, the CEPR Conference on Industrial Structure, CERIS-CNR, Depaul University, the 1998 EARIE meetings, the International Conference on Funding Gaps at the University of Warwick, the London School of Economics, the University of Michigan, the University of Missouri, the University...
Words: 7001 - Pages: 29
...Between a Causal Model And a Time- Series Model? In: Business and Management Choose One Of The Forecasting Methods And Explain The Rationale Behind Using It In Real Life. What Is The Difference Between a Causal Model And a Time- Series Model? Choose one of the forecasting methods and explain the rationale behind using it in real life. I would choose to use the exponential smoothing forecast method because it weighs the most recent past data more strongly than more distant past data. This makes it so that the forecast will react more strongly to immediate changes in the data. This is good to examine when dealing with seasonal patterns and trends that may be taking place. I would find this information very useful when examining the increased production of a product that appears to be in higher demand in recent times than past. Describe how a domestic fast food chain with plans for expanding into China would be able to use a forecasting model. By looking at the data of other companies the fast food chain would be able to put together a forecast to determine if their business venture was viable. They could examine the sales data and determine through a exponential smoothing forecast if it made sense for them to enter into the market. This would show the trends and changes in the data more recently rather than in past time. What is the difference between a causal model and a time- series model? Give an example of when each would be used. The time–series model is based on...
Words: 7505 - Pages: 31
