Internal and External Compensation: Riordan Manufacturing

Riordan Manufacturing: Internal and External Compensation

Riordan Manufacturing: External and Internal Equity Compensation

Riordan Manufacturers, being a leader in its industry, appreciates the need to meet the needs of its employees through a fair compensation policy - one that equates pay with the value of the task performed, because fair treatment boosts employee performance and morale, and is an effective employee retention technique (Romanoff, Boehm & Benson, n.d.). Internal equity compensation describes an employee's compensation in relation to that of other employees at the same level within Riordan Manufacturing (HR Council, 2014). External equity, on the other hand, compares Riordan Manufacturing's wages with those of organizations within the industry.

Employee compensation is fundamental to Riordan Manufacturing, just as is stipulated in the company's compensation philosophy. Riordan realizes the intensity of global competition and understands that in order to maintain its industry position and market share, it has to acquire the best in terms of personnel. The quality and R&D disciplines are the backbone of the company's future. Riordan's pay program seeks to help the company realize its objectives by attracting and retaining highly-qualified personnel. This pay program determines an employee's pay by examining and rating the position's compensable factors and then evaluating these against the external job market's compensation packages.

In order to effectuate this pay plan, the HR department identifies the compensable factors relating to any new positions, and then uses these to place the position in the appropriate level in the hierarchical structure. The compensation factors appertaining to a position are determined on the basis of:

Education required

Skills required

Experience required

Manual dexterity

Physical demands

Working conditions and health hazards

Public contact

Supervisory responsibility

The position's appropriate level is determined using these compensable factors, with positions requiring higher educational, skill, and experience levels ranking at a higher level within the hierarchical structure.

Riordan is committed to ensuring the satisfaction of its employees at all times. Ours is, to this end, a flexible pay system designed to allow for reviews and upgrades in line with industry and market trends. Every year, we conduct three market surveys with the aim of establishing new employee compensation trends and newly-arising employee needs and preferences. Our goal is to ensure that our employees' pay packages, at all levels, are commensurate with the external labor market and with those of other employees:

In the industry

In the same profession

In the same geographic location

In other same-size organizations

In order to sustain performance at above-average levels, we offer attractive motivational packages to employees who display significant improvement or above-average performance. Since these are largely internal affairs, they are not subject to the external equity compensation principle, and are based upon the organization's performance in a certain period. The reward mannerisms and packages will mainly be on the basis of organizational policy.

Riordan has always believed in equity; equity forms the basis of our compensation philosophy, and we intend to employ the same principle by letting our employees make their contributions and give their views on this compensation plan. Ours has always been an open-door setting, and we intend to keep it that way by keeping our employees posted on any new discoveries, legislation, and industry trends that could have an effect on their compensation packages.