Ineffectiveness of pay structure in employee retention

Ineffectiveness of pay structure in employee retention






Human resource management



Answer to question 2:

Businesses today comprehend that human capital adds value to the organisational performance as employees are responsible for the key operations within the workplace boundaries. In today's globalised business world, organisations are looking for the most effective tactics to lure and attract the top talent so as to attain a competitive edge. Organisations attract the pertinent candidates by offering high salary structure. Virtuous pay scale is among the key determinants of the employees why while agreeing upon a job and joining, however, it is not the only eminent factor for their retention. High employee turnover among the organisations remains a global issue which still needs to be addressed (Mikkelsen et al. 2017). This is so because there are many attributes associated with an employee's decisions regarding retaining in a firm.

Workplace behaviour is vital for organisational performance. Managing the same is integral for a firm to ensure that the employees remain enthusiastic about their job role.

According to authors Mikkelsen et al. (2017), many employees decide to quit their jobs as a result of deflated motivation. Motivation is a key necessity for employees to keep performing with optimum quality. An enthusiastic employee is accountable for contributing towards organisational mission and vision in an effectual custom, henceforth, it is not just the pay structure which is responsible for retaining the employees but it is also about the workplace behaviour and work environment. The support that employees receive from the supervisors, leaders and the managerial team is necessary.

Ineffectiveness of pay structure in employee retention

With the advent of online retailing systems and technological interventions, employees are burdened with numerous job responsibilities. Employers expect the employees to work relentlessly and provide an output in return of a good salary, however, employee motivation is not only dependent upon the monetary incentives but is also reliant upon other psychological, behavioural and emotional factors. Organisations today face many challenges in terms of high employee turnover involving delivering quality service to the customers, increasing the profit margin, reducing the shrinkage in inventory and many more (Mikkelsen et al. 2017). The turnover statistics fluctuate from one firm to another and also depends upon the industry type. Multiple industries today face the issue of employee turnover as a result of diminished levels of motivation among the employees.

Employee retention is basically the capability of a business to retain its employees; it can be represented by a simple statistic. It is also related to the efforts that employers attempt to retaining the workforce. It is defined as a phenomenon wherein the employees choose to continue their work in the current company.

Provision of incentives is one of the key strategies that organisations must embed in the organisational culture. The incentives are additional compensatory pays which are provided to the employees as a result of outstanding performance or an extraordinary contribution. It not only helps the organisation to achieve higher productivity but is beneficial in ensuring that employees are motivated to perform in a similar custom.

Employee retention programs are systematic efforts made by the firms to create and foster the atmosphere that supports and encourages the employees to remain employed by using strategies and practices in place for addressing diverse needs of the employees.

Fulfilling the basic needs of employees as a retention stratagem

Maslow's hierarchy of needs is one of the vital models employed by businesses to comprehend the basic needs of the employees so as to balloon their motivational levels (Zavei and Jusan 2017). Good salary structure can only be beneficial in attracting the employees but cannot be effective in retaining them for a longer period as the employees require the collaborative and supporting environment to continue. Employee reward programs must involve open communication so that the feeling of being valued is cultivated among the employees. Involving the employees in the decision-making process causes a positive impact on them and also assists in establishing a continuous feedback system so that the employees can use the constructive feedback to improve themselves and enhance productivity. According to the two-factor theory of motivation, there are certain factors that demotivate the employees; hygiene and safety are the critical factors among the demotivating factors as improper hygiene may reflect a negative image of the organisation on the employees (Alshmemri et al. 2017).

Reward management systems

Reward management systems are important components of the human resource management systems (Bratton and Gold 2017). Provision of compensative rewards to the employees helps in driving their performance and influencing the commitment towards organisation and it is subsequently helpful in ensuring that the employees remain in the organisation for a longer duration. Strategic paradigm is a new agenda that stresses on aligning the reward system with the corporate strategy. It is the cornerstone in the regulation of employment relationships. It can be used by different firms to provide a wide array of rewards to retain and motivate employees apart from attracting them. It is a contingent reward system with the alliance to the organisation and the external contexts. The reward systems involve both intrinsic and extrinsic rewards, the key agenda of the reward system must be to ensure that the high performing employees are retained and the performance is maximized by satisfying the legal standards. The model of the strategic reward paradigm is as follows:

Reward management system

Strategic perspective

Choices of rewards supporting the strategic


Reward objectives

Stresses on the relationship between human behaviour and reward system

Reward options

Different pay options such as indirect pay, base pay, bonuses and many more

Reward techniques

Performance appraisal and job evaluation

Reward competitiveness

Considering the competitors’ pay

Table 1: Model of reward management system


Internal equity in employee retention

Equity is essential for retention of the employees as it cultivates a sense of equal worth or value among the employees which needs to be established in the firms via job evaluation (Bratton and Gold 2017). Job evaluation usually incorporates gathering data, selecting compensable factors, evaluating and assigning pay to the job. It ensures that the external labour market data is incorporated for determining the pay levels and makes a good dispersion of the pay structures. With higher income inequalities on a global scale, employees perceive it as a prejudiced practice and usually get demotivated as a result of biased procedures. The reward system must be free from any such prejudices and must reward all the employees on the basis of their performance. It contributes to their enthusiasm (Bratton and Gold 2017). The pay is crucial for the employees as it is the key motive for which the employees work. It is significant that apart from appreciable pay, the other motivational factors are considered.

Factors driving motivation

For retaining the employees, it is crucial that fluent communication is facilitated, better career development programs are launched, performance-based bonuses are provided, recreation facilities are given and gifts are provided at some special occasions to boost their encouragement. Performance-driven rewards boost the organisational performance as well as contribute to the comprehensive development and learning of the employees. Better induction and orientation programmes can also be conducted so as to ensure that the employees are clear about the job roles and are able to deliver the quality work within the specified due time (Mikkelsen et al. 2017). It can be hence, concluded that the reward management systems are preliminary motivational stratagems which must be an aggregate of both financial and nonfinancial rewards. It plays an integral role in attracting and retaining the employees and is also effective in eliciting reciprocal performance of the workforce.


WC: 1251


Alshmemri, M., Shahwan-Akl, L. and Maude, P. 2017. Herzberg’s two-factor theory. Life Science Journal14,5 pp.12-16.

Bratton, J. and Gold, J. 2017. Human resource management: theory and practice. Palgrave.

Mikkelsen, M.F., Jacobsen, C.B. and Andersen, L.B. 2017. Managing employee motivation: Exploring the connections between managers’ enforcement actions, employee perceptions, and employee intrinsic motivation. International Public Management Journal20,2  pp.183-205.

Zavei, S.J.A.P. and Jusan, M.B.M. 2017. End-users'perception from housing needs based on maslow's theory of motivation. Open House International42,1 p.58.



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