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Pay Systems in American Private Organizations


Employees’ compensation is an important factor that management of firms must take into consideration when coming up with strategic plans. Cornerstone Café’s compensation system is poor and will need to be reviewed to match that of other similar firms within the region.

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Employee compensation is one of the most important factors that an organization must focus on when developing its strategic plans. The compensation should be commensurate to the amount of employees’ output within the firm. The management must be seen to be fair in its remunerations system, with a strong emphasis on rewarding every effort of their workers. According to Graebner and Seaweard (2004), the pay system that a firm embraces will determine how well its employees are motivated in their various tasks. In this paper, the researcher will look at the pay factor in the private sector and its impacts on the employees’ motivation.

Internal and External Equity

I have a personal experience of a pay system that lacked internal and external equity. I was working for Corner Store Café, an upcoming food outlet within the neighborhood where I stay. The management of this firm was keen on the age factor when hiring its employees. Most of them were aged below 24 years, except the senior chefs. I came to realize that they used this strategy to avoid hiring mature people who could demand higher salaries. The firm paid its employees $ 5 per hour, and we had to work for at least eight hours a day. The compensation system was unfair because it was way below the market average.

Pay Factors and Increases

At the Corner Stone Café, the level of the pay employees received was determined by the amount of work. Those who worked for extra hours got two extra dollars per hour on top of the normal pay. This meant that if one worked for 10 hours, he would be paid $ 5 for each of the first 8 hours and $ 7 for the extra two hours. The amount of pay per hour would be increased by one dollar every year. This meant that the longer one stayed at this firm, the higher he was compensated. I think compensation should be based on the skills and experience of the employees because of the value they bring to the firm. The loyalty of the employees should also be rewarded to ensure that they do not shift to other firms (Heneman & LeBlanc, 2002).

Private Sector Examples

According to research by Armstrong (2012), Google Inc. is one of the private firms with the best payment systems in the United States. The firm has been keen on rewarding every effort of their individual employees. Their pay system is focused on individuals’ output. The pay at this firm is higher than that of the industry’s average. At Google, every new feasible idea that an employee comes up with is rewarded. Every time an employee exceeds the set expectation in the assigned task, there is a reward. As a result, the firm has developed a strong base of loyal employees who are determined to achieve success in all that they do. They are creative and very committed to their work.

Pay System Improvements

The Corner Stone Café will need to improve its payment system in order to develop a base of loyal employees who will not consider shifting to other firms whenever they have an opportunity to do so. First, the management will need to adjust the hourly rates to match the national standards. After that, it will need to come up with a policy where employees are rewarded whenever their performance exceeds the company’s expectations.


Armstrong, M. (2012). Handbook of Reward Management Practice: Improving Performance Through Reward. New York: Cengage.

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Graebner, D., & Seaweard, K. (2004). Bringing it all inside: Job evaluation and market pricing at J C Penney. Workspan, 47(8), 30-35.

Heneman, R., & LeBlanc, P. (2002). Developing a more relevant and competitive approach for valuing knowledge work. Compensation and Benefits Review, 34(4), 43-47.

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