Problems and Secondary Issues in the case study “No Fair Pay in THIS Place.”
The idea that an employee might be unfair in compensating employees, choosing to compensate key performance, and perhaps even if it means paying less instrumental workers seems to disconnect. That is particularly the case in the case study “No Fair Pay in THIS Place.” One employee, Judy, discovers that her compensation is significantly lower than that of another employee performing nearly lesser work, and also less competent. Since salaries and wages are kept as a secret, issues of comparability may often arise.
However, it may be challenging and difficult for HR to address such complaints. While there may be legitimate reasons for pay disparities, there may be no reason at all. Most commonly, higher pay is justified where one worker is more educated than the other. Experience is yet another factor. Typically, an employee who has more experience may earn more salary than their less experienced colleagues. In this case, pay differences are justifiable even if two employees are performing similar roles.
From the case study, the complainant, Judy, has been in the company for only eight months but was being paid $ 18,000 less than another hired employee Helen (McShane & Glinow, 2005). In actuality, Judy has 20 years of experience in customer relations and supervision. She also has a degree in business. Comparatively, Helen has no university education or seniority to that matter. She also has no experience with customers or anyone to supervise, yet she earns $ 48,000 a year compared to Judy’s $30,000.
No Fair Pay in THIS Place
Elsewhere, when employees complain about pay, the boss should respond carefully to explain the differences in income. However, in this case study, the boss, James, acknowledges that indeed the complainant, Judy, not only has a vast workload, but is also more educated and qualified than Helen (McShane & Glinow, 2005). However, he argues that the pay may not be fair, but its policies dictate that employees in New York should earn more than those in Seattle. This is justifiable, as companies also peg employees’ salaries on geographic locations because of the cost of living. According to salary.com, the cost of living in New York is 33% higher than in Seattle.
Conceivably, an employee living and working in New York, would have to earn a higher salary (Salary.com, 2020). In addition, the website highlights that it is standard for employers in New York to pay about 10% more than the employers in Seattle. Admittedly, the geographical location warrants the differences in pay. Nevertheless, the boss’s response to the issue was dismal. Rather than being concerned and upright to explain the differences, the boss’s concern was knowing how Judy came to know of the differences in pay. In Judy’s words, the boss completely ignored her. In fact, earlier on, the case mentions that James had completely forbidden discussions of compensation. This suggests that unequal compensation is typical in the organization. No Fair Pay in THIS Place
In sum, primarily, the case revolves around discussions of unfair and unequal pay among the employees. The complainant is more educated and experienced, and also has a significantly higher work load, yet she earns substantially lower than another less educated and experienced employee. Secondly, the boss’s response to the issues has been disheartening. The boss does not care to listen to the employee but cares only to know how she came to know the differences in pay. Lastly, it seems that issues of pay discrepancies are the norm in the company. If so, why else would James prohibit discussions of salary and? In essence, doing so, the company tells good workers that their efforts are not recognized, and low performers are encouraged to continue with mediocre work. Ultimately, high performing works are demotivated and angry.
Article Summary: Solutions
Article Name: Research: Better-Managed Companies Pay Employees More Equally
Author: Nicholas Bloom, Scott Ohlmacher, Cristina Tello-Trillo, and Melanie Wallskog
Source: Harvard Business Review
Date: March 06, 2019
The authors argue that companies that have better management tend to pay their employees more generously and also more equally. The authors base their argument on the US Census Bureau survey known as the Management and Organizational Practices Survey (MOPS). MOPS collected data across 500,000 manufacturing companies between 2010 and 2015. In actuality, MOPS gathers information on how companies utilize management policies such as monitoring data on business performance, use of targets, and incentives. Bloom and colleagues (2019) hypothesized that high earning companies with more structures have unequal compensation plans.
By controlling aspects of capital usage, level of educated employees, industry, and the age of the firm, the authors revealed that companies that had more structured management practices paid their employees more equally than their counterparts. More specifically, the authors found a negative relationship between monitoring practices—conversely, the authors associated higher usage of incentives with decreased inequality. The authors suggest that companies that regularly collect and analyze data about their business have overall increased financial performance, increased profitability, and also equal distribution of the earnings.
In culmination, the authors opinion that setting goals and aligning the employees to those goals, while also monitoring their performance is key to overall heightened performance.Therefore, having in place an effective employee performance evaluation system may help track employee performance, which will help in designing an effective compensation scheme.
Article Name: Why Your Company Needs to Implement Pay Equity Audits Now
Author: By Robert Sheen
Source: Harvard Business Review
Date: October 21, 2019
According to Sheen (2019), many countries, including Canada and Europe, have implemented pay equity regulations. While gender pay gaps are illegal in most countries, the author argues that the USA still lags in implementing gender pay reporting regulations, at least compared to a country like the UK. Crucially, the pay reporting regulations demand stricter reporting requirements from both national and regional governments. Consequently, gender pay regulations have made UK companies more aggressive in identifying pay gaps through pay equity audits (PEAs).
PEAs provide the first defense to national and regional governments as well as businesses against pay inequalities. In definition, PEA is an analytical tool that helps an organization to identify and explain the diversity in its pay across its workforce in terms of justifiable business factors that involve regression analysis. PEAs help analyze a company’s pay practices. They equally help evaluate if a company’s practices support the priorities of an organization. In so doing, the PEAs allow a company to reexamine and improve its pay practices. PEAs also reduce the exposure of litigations plus heightens an organization’s commitment to equitable pay.
Furthermore, PEAs also enhances a company’s credibility in hiring and retaining employees and increasing the motivational levels. For these reasons, Judy’s company may need to start scrutinizing their pay practices. Even so, Sheen (2019) recommends that companies should be rigorous in their analysis to consolidate useful data to promote accurate results. According to Sheen (2019), the company should collect enough data, including employee characteristics, working conditions, direct and indirect reports, key performance indicators, education and experience. Collecting such data is critical to having an accurate system of managing pay gaps. In light of the case study, the company should adopt PEAs to reduce pay gaps. Additionally, the PEAs will provide the company with the avenue to communicate and justify pay differences across the company. All these are critical to accentuating employee motivation.
Article Name: What If Companies Were Required to Tell Workers What Their Colleagues Earn?
Author: Benjamin Harris
Source: Harvard Business Review
Date: September 14, 2018
According to Harris (2018), most employers have access to data on employee compensation that enables them to get a full picture of compensation in the market place. In contrast, employees have limited sources of employee compensation, making it difficult for them to make a comparative analysis of wage differences within the organization and also outside the organization. Moreover, most organizations prohibit employees from talking about pay. Furthermore, workers are reattributed for initiating compensation discussions. The real problem lies in the asymmetry of information between employers and employees. Hence, the argument for transparency in pay. No Fair Pay in THIS Place
Lawmakers in the USA have been moving towards enhancing pay transparency. For example, Harris (2018) highlights that numerous states continue to pass anti-retaliation laws that make it illegal for employers to punish employees for discussing pay. The Obama administration instituted steps for collecting data on wages as a strategy for combating against gender and racial discrimination. Likewise, Congress proposed the implementation of the paycheck Fairness Act to promote equitable pay. Some companies are encouraging transparency through publications of their worker’s salaries on online platforms. Glassdoor and the Bureau of labor also seek to enhance transparency by providing compensation-related data across different companies and industries.
According to Harris (2018), transparency forces companies to raise wages for underpaid employees and compresses wages for executives whose salary is exceptionally high. Harris (2018) notes that the disclosure of public managers in the state of California led to lower wages and heightened resignations that came as a result of public backlash. Lower paid CEOs had their salaries increased. On the flip side, transparency makes employees aware of pay differences. For employees that are paid poorly, such awareness led to diminished morale and satisfaction.
From this background, increasing transparency can significantly reduce unequal pay in the company. For this reason, Harris (2018) advises that the company should seek to promote transparency by not prohibiting pay discussions. Legal regulations should be implemented to protect workers who do so, and especially those that face retribution. The author also argues for the wide accessibility of data for both employers and employees. Transparency will significantly benefit the company. Making employee’s salaries accessible will promote equitable pay and also motivation for the employees. No Fair Pay in THIS Place
References
Bloom, N., Ohlmacher, S., Tello-Trillo, C., & Wallskog, M. (March 06, 2019). Research: Better-Managed Companies Pay Employees More Equally. Harvard Business Review. https://hbr.org/2019/03/research-better-managed-companies-pay-employees-more-equally
Harris, B. (2018). What If Companies Were Required to Tell Workers What Their Colleagues Earn? Harvard Business Review. https://hbr.org/2018/03/what-if-companies-were-required-to-tell-workers-what-their-colleagues-earn
McShane, S. L., & Glinow, M. A. (2005). Organizational Behavior. (3rd Ed.). Boston: McGraw-Hill.
Salary.com. (2020). Cost of Living Comparison between Seattle, WA vs. New York, NY. Salary.com. https://www.salary.com/research/cost-of-living/compare/seattle-wa/new-york-ny Sheen, R. (October 21, 2019). Why Your Company Needs to Implement Pay Equity Audits Now. Harvard Business Review. https://hbr.org/sponsored/2019/10/why-your-company-needs-to-implement-pay-equity-audits-now