Strategic Pay

Posted in Human Resource Terms, Total Reads: 257
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Definition: Strategic Pay

Strategic pay is payment being made to employees, focusing more on the strategic perspective as to how & when the pay should be disbursed to ensure that the employee is performing to the fullest. Pay in the literal meaning refers to the compensation or remuneration a person expects after doing his/her job. It could also refer to as the benefits that the person gets which he can redeem.


The various metrics upon which the strategic pay is based are:

Responsibility: The amount of responsibility that had been handled by the person working upon the job, it also refers to the span of control.

Difficulty: The level of challenges faced, while working on the job. The compensation could be based on the persons handling the difficult challenges & going in sequence to the others

Supervisory Aspect of the job that is allocated to the person.

Impact to organization: Keeping the values at the core, the plans & ideas that have been implemented in order to add value to the organizational practices already in place.

Organizational Design: Depending on the bands & grades, which determine the range of salary an employee gets over the period of time.

Market Implications: The strategic pay structure should be subject to market constraints, like understanding the current HR & whether the compensation plans are matching those initiatives that are taken.

The Strategic Pay structure according to the market Implications


Advantages:

1. It helps us understand the optimum amount of compensation to be paid to any employee.

2. The system takes into consideration various factors that may possibly affect the employee benefit scheme, so it is more comprehensive.

3. We could understand the weakness and the loopholes where the paid amount is not being put into good use.

Disadvantages

1. Often strategic pay demands holding of the salary till the right time arises, this may lead to reduction in employee morale.

2. Hiring the right people & having the right resources goes a long way in determining the effectiveness of an organization.

3. Legal constraints & ability to pay an employee are few of the prominent reasons why strategic pay structure fails in cases.

Thus, it is imperative to not only relate the metrics to pay in order to form a strategic pay structure, but also we need to focus on the constraints that may arise if we are going for this model.

Hence, this concludes the definition of Strategic Pay along with its overview.

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