The amount of compensation an employee receives for his or her services to a firm is a very sensitive issue because it is a reflection of what the employee is worth to the firm. Compensation even is one of the major motivators for employees; and it is motivation that leads to increased productivity. A firm can choose to compensate its employees based of length of tenure and seniority or based on ability and productivity. Both systems have raised a lot of debate.
In my opinion, the aim of management is to add to a firm’s bottom line by attracting and retaining talented and dedicated employees. It is an employee’s productivity that adds value to an organization, and it should be the most influential factor in determining compensation. If compensation is solely based on length of tenure, new skilled and talented employees who must of course start in lower hierarchies may be de-motivated because they are compensated below their equals who have stayed in the organization for longer periods of time.
This will then be a sure way of getting rid of talent from the organization.
I think that even though senior employees have more experience in the operation of an organization and can double up on various responsibilities within the structure, this should not be the only aspect considered in awarding compensation. In fact, I am an advocate of skill-based pay systems under which employees are rewarded according to the expertise and competencies as exhibited in their service delivery.
This applies to promotions: seniority should be awarded on merit to avert de-motivation which could arise if employees are promoted based on the length of their tenure instead of their ability and productivity.
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