Internal equity and external competitiveness are two of the core elements of effective compensation plans. If you are employed, ask your HRM department what steps are taken by them to ensure internally that compensation is assigned in an equitable manner and externally, the compensation for benchmark positions are competitive. If you are not employed, you may either seek the answers from an organization of your choice or research the needed steps and describe the needed steps. 2 references are needed
Expert Answer
To start with, yes, internal equity and external competitiveness are theoretically the two core elements of effective compensation plans. But in reality the scenario is different. Observe the rationale described below.
- A and B are from two different countries hired for the similar roles in B’s host country. An equal pay rise next year will amount differently for A and B because the hiring salary were different. So internal equity is not the determinant, other dominant factors too play some role.
- As compared to your counterpart in a different company, you may get lesser because their company made more profit than yours. External competitiveness didn’t play here that much.
- Other factors include, you relation with the manager who decides what percentage hike you should get (overall this amount is not constant and can change depending upon relationship too.)
Now coming to the question as per HR they take the following steps:
- Your job responsibility and contribution to the revenue of the organization.
- How much you contribute extra apart from your current work responsibility?
- Market conditions , comparison with your counterpart in the same field and in a company at a similar level with yours. (They don’t employee salary of McKinsey and Bristlecone, for people having same responsibility).
- They try to level salary for people within the same role band and department.
Note: These are personal experience shared. So no reference available.