Compensation of Employees and Pay Differences

Compensation and Differences in Pay Reasons for Differences in Pay The reasons for pay differences include: Good performance that warrants increased compensation - EX, GS Organization Loyalty - GS, PE Experience - amount of time with the organization; - EQ Education and professional qualification level, training, and skills - EQ Negotiation made when recruiting Seniority in the office environment - EQ Need for retaining employee through compensation - PE Hard work; - EX, GS Personal traits in commanding respects and motivating others - EQ Acknowledgment or preferential treatment from a manager.

Expectancy Theory The difference in compensation resulting from the good performance that warrants increased compensation and hard work draw relevance from the expectancy theory. Expectancy theory argues that employees have an expectation that the effort they put in work tasks, and the performance that yields will be valued. The expectation of valuations of the outcomes influences an individual motivation in task performance. Where the outcome is appreciated through value given, the employee's remuneration as compensation is likely to be higher.

The belief employees have about their work performance plays a pivotal role in the expectancy theory. An individual employee is assumed to be rational in the way they undertake their work duties and will only do so much depending on their expected outcomes or the value that is placed on the task they perform. Depending on the value given to outcomes as a form of appreciation, the individual will ensure that their work performance targets to retain the value or even increase the value.

Goal Setting Theory The goal setting theory gives relevance to good performance, commitment to organization goals, and hard work. Employee compensation for the task is dependent on their articulation of task and attempt plus success in meeting set goals or targets. Different employees have a different attribute that influences how well they attend to given task. To be able to tap optimal input and output from employees organizations such as Netflix gives tasks with specified rewards. The rewards seek to encourage employees commitment in coming up with consumer-oriented solutions.

The rewards as well as exploiting the employees' potential will create a different reward system for various achievements. Equity Theory Likely differences in compensation are explained by skill, professional training, experience, Seniority and personal traits. Personal traits include leadership characters that influence possible performance by others. The equity theory looks at individual outputs and inputs in comparison to those of others. Comparison measures will include an assessment of whether one's outcome and their input are equal to others outcome and their input.

Motivation is maximized when an employee perceived ratio of outcome to inputs matches those of some other comparison (employee). Thus, motivation will depend on outcomes received from another comparison. If the rewards received are lower compared to the inputs and compared to those of others, the motivation to work task will be lower. The lower compensation may yield poor future productivity, and higher compensation will necessitate higher performance or a revaluation of the inputs.

Psychological Empowerment Compensation differences are likely to be explained by loyalty to the organization and the organization's need to retain committed employees. Under the psychological empowerment theory, an employee values their contribution to the organization highly. The valuation an employee gives to their task allows them to find meaning, impact, self-determination and competence while working in the organization. The psychological empowerment theory builds towards employee's commitment and growing support to the task and organization at large.

Depending on individual employees commitment to organizational goals, individual commitment to the task may influence differences in pay. From the commitment of an employee, attachment to the organization.