Compensation Systems Compared: The Old and the New Essay

Excerpt from Essay :

E-Compensation: Benefits and Challenges

Compensation is one of the basic roles of the Human Resource department. This refers to the process of rewarding effort of the employees by assigning salaries and wages for work done. Compensation serves as an appreciation for good work done and as a motivation for more work to be done. E-compensation is the art of making these said payments through the online platform. This is where the human resource managers issue payments for the work done through the online channels available over the Internet. This mode of payment does not involve the handling of cash in any way. All payments are made using the electronic means that the online platform provides. The following study identifies the merits and demerits web-based compensation systems compared to the usual stand-alone or a PC-based method.

PC-based system

This method of compensation involves the use of a fixed method where spreadsheets are filled using the manual method. It involves the staff, the time, and energy to fill the documents, as they are required. Although it involves the use of a computer system to record all the details, the truth is that it will require actual sitting man-hours from the HR employees. These employees are a going to spend much time handling specific details pertaining to the work at hand. This method of compensation is suitable only for small firms that do not have large volumes of data to handle (Kleingartner & California, 2013).

The advantages of each

There are many advantages attributed to e-compensation. E-compensation derives the benefit of relieving workers at the HR department from having to handle spreadsheets. The situation in the absence of the e-compensation methods is characterized by the loss of the freedom to deal with manageable payment details. Using the e-compensation technology helps the employees deal with the large number of work documents easily so that work goes on smoothly. E-compensation also brings in the advantage of time-saving. From the use of the online-based method of compensation, time spent at the workplace executing the compensation is greatly reduced (Gueutal, 2011).

The technology allows multiple activities to be done in as short time as possible. It also enables the employers to have a chance to focus on other issues that are of importance to them. The adoption of the e-compensation method relieves the hands of many employees and enables them to divert their energies elsewhere where they can be of more use. In this case, the managers have to direct employees since they know where the skills of each of them fall and fit. One other advantage of e-compensation is that it can store large volumes efficiently and in a fast manner. Information dealt with under this program becomes stored in fast and in a secure manner. Others include the use of if the chance to make more cash. This includes using the method of compensation in economic quantities. This means that the method be used when it can only generate a benefit. This is the situation n where the benefits derived from it are way above the costs incurred to implement it (Martocchio, 2009).

The use of the PC-based system has the advantage of saving on extra costs when the concerned firm is operating on a small basis. The use of a PC-based system saves the business the extra costs that would be incurred unnecessarily in an e-compensation system if the business is small scale. The other advantage is that it brings in complications as the business expands because the need for increased operations arises. In any business situation, an appropriate method of compensation has to be selected to avoid running into loss (Bondarouk, 2014).

The disadvantages

The disadvantage of using e-compensation method is that it that it results in obsolescence with time. The system has to be frequently upgraded as well as new features added to solve the emerging problems that come. The other disadvantage is that the method requires that staff be trained on how to use it every time an improvement is done. The system also lacks the ability to develop more uses apart from the ones prescribed. The users have to stick to the set guidelines and uses (Kleingartner & California, 2013).

In contrast, the PC-based system is disadvantageous as it is only useful for small-scale purposes. The use of this system falls short of the ability to store large volumes data appropriately. This system is only useful for users where data storage is not a priority. The system cannot deal with large data thus appropriate for a small firm (Gueutal, 2011).

Justification for the use of e-compensation

E-compensation is appropriate and must be adopted given its ability to save on costs besides allowing the HR department to deal with the many challenges related to employee payment systems. E-compensation can fix a difficult situation by making it work well through the simplification of services at work. Ideally, the work of every employee is captured by the pay system. E-compensation is a good way of making payments as it deals with the issue of large volumes in an efficient and comprehensive manner (Martocchio, 2009).

Merit pay programs vs. decentralized pay system.

Merit pay system is the one that attaches pay to performance. It has a number of advantages. One advantage is that it reduces laziness in a firm. Every employee will be up on toes trying to meet the minimum marks to earn a decent pay. It also enables the managers have an easy time at work. Merit pay reduces the problems related to absenteeism and laxity. Therefore, the managers will have to state the rules and make them known to all the employees. Thirdly, merit pay system leads to improved work service. It is the best way to have a smooth functioning at the workplace (Bondarouk, 2014).

This method is disadvantageous because it leads to the drop of quality of services. Reasonably, employees will be too concerned with meeting target volumes at the expense of scrutinizing quality. The second disadvantage is that this method of pay discourages teamwork. Under this, pay system. Everyone among the employees will be striving to meet personal targets that will secure their earnings. Lastly, this method of pay has the disadvantage of being subjective. Measurement of standard success can at times suffer the problem of being influenced by the mood of the assessors (Kleingartner & California, 2013).

Characteristics of an effective e-compensation

An efficient e-compensation system has three main characteristics. First, it is intuitive and informational and must enhance the way managers work. It should inform them of what needs to be done in every situation. The system's features should give managers opportunities to make decisions easily. Secondly, a good e-compensation system needs to be powerful yet simple for the users when solving problems. Ideally, the power of the system has to be anchored on the ability detect and troubleshoot any problem. Lastly, the pay systems should be flexible in order to allow the managers to make changes to them as needed. The flexibility must be secure so that no fraud can take place. It is always important to ensure that employees can get to learn to use them in the shortest time possible. This extends to include enhancing their working efficiency so that the organization can maximize its prospects of making profits (Martocchio, 2009).

Barriers to web-based internal audit

Web-based internal audit is the ideal way to deal with the management of business services. However, this endeavor faces challenges with implementation. One challenge is on cost. It costs very high to introduce a web-based audit. These costs are on infrastructure and training of personnel. The second challenge is on adaptability. It takes long for a company to adapt to the use of this system. Therefore, time is lost before benefits can be derived. The last challenge is on the issue of human error. Being an IT-based platform, the handling by man can also alter the results. Reasonably, there is a need to have measures that can be used to verify every outcome (Bondarouk, 2014).

Evaluating the quality of the market data

Market data collected from the field is important if only it can be accurate, relevant and accurately fits the situation. In this sense, managers need to have a way of verifying the authenticity of the data they receive from the field. One way in which data can be verified is using screening methods. In this case, the data obtained is investigated using comparative analysis techniques. Data can be collected using several sources then compared for consistency. The second method of evaluating data is by use of the tools of statistical analysis (Gueutal, 2011). Through these tools, it is possible to know whether the data collected represents the true position on the ground. For instance, ANOVA tests are some of the crucial statistical tests and they show whether data has been altered or correct. Lastly, the qualification of the staff and professionals who took part in the collection of data can act as an indicator of…

Sources Used in Document:


Bondarouk, T. (2014). Human Resource Management, Social Innovation, and Technology. Bradford: Emerald Group Publishing Limited.

Gueutal, H. (2011). The Brave New World of EHR Human Resources Management in the Digital Age. San Francisco, CA: Jossey-Bass

Kleingartner, A., & California, L. (2013). Human Resource Management in High Technology Firms. Lexington, Mass.: Lexington Books.

Martocchio, J. (2009). Research in Personnel and Human Resources Management. Amsterdam: Elsevier JAI

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