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Pay Systems in the U.S. Organizations


The private sector is the section of a state economy possessed, led, and managed by remote persons or companies. Its key purpose is to show a profit and hire more staff than the public segment. A private-sector organization is formed by creating a new company or transferring a public sector corporation. A big private-sector business may be confidentially or visibly operated (Reilly, 2012). Companies in the private sector minimize the prices for products and services while contending the customers’ money as hypothetically, clients do not need to spend more on something when they can purchase the equivalent item in a different place at a lesser price.

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This paper dwells on the equity of the public and private-sector salaries. It discusses the difference in internal and external equities and answers the question of whether employees are compensated following their contribution to the working process and the company’s success. The author of the paper gives their opinion on the factors that should be used to determine the level of pay and pay growths. The study presents a thorough examination of relevant sources that provide the necessary information and help answer the questions concerning the private sector pay.

Lessons on Internal and External Equity

Equity, an essential topic in compensation concept and practice, ascends in many dissimilar settings. A company’s vision of equity is as significant as the genuine pay plans it employs. Businesses characteristically stress external equity in the strategy of applying their reimbursement schemes. The concept of fairness can also impact a corporation’s ability to entice, hold, and stimulate its employees. External equity is present when a company recompenses a pay rate proportionate with the salaries predominant in peripheral labor marketplaces.

Evaluating external equity necessitates determining these labor marketplaces. Nevertheless, there is no specific labor marketplace for a certain job. Stock and demand vary greatly among marketplaces, resultant in a noteworthy dissimilarity in earnings across labor markets. Internal equity is present when a company pays salaries corresponding with the comparative internal worth of each profession. This is traditionally conferring to the company’s awareness of the significance of the work done and in most cases, employees are compensated for the worth of their contributions. Although, there is a gap in gender wage equality (Western & Rosenfeld, 2011).

Private Sectors Pay Factors and Increases

Several factors affect the private sector salary level. First of all, it is the personal perception of wages. If one worker earns less than another, this is going to be seen as an inequity. Another vital aspect distressing the wage is the price of living modifications of earnings. There are measurement difficulties both in determining the efficiency and cost of living upsurges. This may lead to the understanding of deficiency and lack of harmony between the organization and the employees as it happened at Koch Industries. Efficiency is the main factor in the processes of the business. Dell’s example proved that high salaries and low expenses are conceivable only when output upsurges substantially (Katz & Krueger, 2012).

My Opinion of Pay Factors and Increases

I believe that supply and demand are two other factors that influence the level of pay. If the firm claims for certain services, it must recompense a value that will bring out the supply, which is guided by the individual employee or by an assembly of employees working together. There are four key factors that I think should be considered in the case of a pay increase – the company’s general economic situation, the subdivision’s or division’s available funds for raises, the worker’s time with the company, and the worker’s experience.


Katz, L., & Krueger, A. (2012). Changes in the Structure of Wages in the Public and Private Sectors. Research in Labor Economics, 12(3), 721-756. DOI:10.1108/S0147-9121(2012)0000035046

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Reilly, T. (2012). Rethinking Public Sector Compensation: What Ever Happened to the Public Interest? Armonk, NY: M.E. Sharpe.

Western, B., & Rosenfeld, J. (2011). Unions, Norms, and the Rise in U.S. Wage Inequality. American Sociological Review, 76(4), 513-537. DOI:10.1177/0003122411414817

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