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36-409: PSEA represents the labor, policy, and professional interests of its members. PSEA bargains compensation and benefits , protects members’ rights, and advocates for their professions. According to PSEA's Department of Labor records since 2005, when membership classifications were first reported, around 80% of the union's membership are classified as "active" or "life" members, with eligibility to vote in

72-657: A change in status or remuneration in an organisation (e.g., promotion to a higher-paid position) or other extrinsic motivators can encourage employees to perform better within their role. Research on the long-term effects of higher vertical pay dispersion in an organisation are commonly negative, and usually are associated with dysfunctional behaviour in employees, increased employee turnover, short-sightedness, reduced teamwork and lower intrinsic motivation. There are academic theories which help to explain why vertical pay dispersion exists within an organisation, and how it can have both positive and negative effects. Tournament theory

108-923: A combination of short-term incentives (STIs) and long-term incentives (LTIs) in their compensation packages. This approach helps ensure the organization's long-term sustainability by discouraging executives from prioritizing short-term gains at the expense of the company's future. A well-designed total compensation plan should prevent executives from engaging in harmful short-term behaviors. Why Implement Variable Pay? According to Bussin (2019), more and more companies are adopting incentive and bonus schemes to boost employee performance and align individual goals with organizational objectives. These schemes offer several key benefits: -       Improved Performance : Incentivizing employees can drive superior individual, team, and organizational results. -       Shareholder Alignment: Variable pay can align employee interests with those of shareholders, fostering

144-421: A more balanced approach that integrates both tournament incentives and equity theory. In public sector, equity values are critical. The article highlights that large pay gaps, as suggested by Tournament Theory, may be perceived as unfair by employees, leading to reduce trust and organizational commitment. Therefore, in public sector settings, there is a need to balance the motivating effects of pay differentials with

180-452: A more motivated and engaged workforce, ultimately leading to increased profitability and shareholder value. An example where this type of plan is prevalent is how the real estate industry compensates real estate agents. A common variable pay plan might be the sales person receives 50% of every dollar they bring in up to a level of revenue at which they then bump up to 85% for every dollar they bring in going forward. Typically, this type of plan

216-519: A sense of ownership . -       Cost Management: By tying part of compensation to performance, companies can better manage their overall salary costs. -       Recognition and Reward: Variable pay provides a tangible way to acknowledge and reward employees for their contributions. -       Strategic Alignment: Well-designed incentive schemes can help drive organizational strategy and achieve specific goals. By implementing variable pay, companies can create

252-422: A stake in the company by granting them shares. This aligns their interests with those of the shareholders, encouraging long-term commitment and fostering a sense of ownership. Employees benefit from the company’s success, as the value of their shares increases with the company's profitability, creating a powerful incentive for both individual and organizational success (Investopedia, 2024). Organizations should use

288-420: A topic of political, social and news media discussions. In particular, special attention is paid toward cases where the difference of an executive director of an organisation is seen to be disproportionately high, when compared to the rest of the workforce and the difference in pay is visible within the organisation. Whether an organisation is in the public sector or private sector, research shows people care about

324-455: A type of incentive that can typically expressed as a percentage of sales revenue, gross profit, or a fixed amount per unit sold. In a full commission or straight commission plan, employees earn their income solely through commission. This model is commonly used in sales-driven environments to incentivize high performance by directly tying compensation to revenue generation. Long-term Incentives (LTIs): The design of long-term incentives (LTIs)

360-522: A wide range of benefits, these generally fall within the categories of: Reciprocity theory is an important theory underpinning benefits, as it builds a social norm whereby an employer provides a 'positive' benefit, which is warmly received. In return the employee is inclined to provide positive workplace behaviour, strong productivity, and strong organisational commitment which is the bond or attachment that an employee has towards their employer, and subsequent levels of involvement. Social exchange theory

396-406: Is a fixed monetary (cash) reward. The basic element of guaranteed pay is base salary which is paid on an hourly, daily, weekly, bi-weekly, semi-monthly or monthly rate. Base salary is provided for doing the job the employee is hired to do. The size of the salary is determined mainly by 1) the prevailing market salary level paid by other employers for that job, and 2) the performance of the person in

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432-402: Is a highly effective incentive system that encourages employees to work collaboratively by rewarding performance improvements. By focusing on participation and teamwork, gainsharing motivates individuals to contribute beyond their standard responsibilities, resulting in enhanced problem-solving, cost reduction, timely delivery, and higher-quality outcomes. This collective effort ultimately benefits

468-406: Is a member-driven organization, headed by elected Officers, an Executive Director, and a Board of Directors. This article related to a United States labor union is a stub . You can help Misplaced Pages by expanding it . Compensation and benefits Compensation and benefits refer to remuneration to employees from employers. Which is the payments or rewards provided to an individual for

504-515: Is another relevant theory which suggests that employees weigh up the total benefits and costs of their relationship with the employer. If an employee feels the costs of their work or employment relationship outweighs the benefits received from their work, the employee will be more likely to choose to end the employment relationship, to pursue an employment relationship that provides greater regard for benefits and social exchange theory. The motivation for an employer to provide benefits can vary. While

540-406: Is based in economics, which assumes an individual is a rational economic actor who will aim to maximise their individual utility, with the prize as the main motivator for the performance. Tournament theory relates to vertical pay dispersion because it suggests organisations where executive directors have a much higher level of pay will motivate other high-performing employees to work toward achieving

576-406: Is based on an annual period of time requiring a "resetting" each year back to the starting point of 50%. Sometimes this type of plan is administered so the sales person never resets or falls down to a lower level. It also includes Performance Linked Incentive which is variable and may range from 130% to 0% as per performance of the individual as per his key result areas (KRA). Benefits consist of

612-449: Is based on the idea of “tournaments” or “competitions” in an organisation, where there are clear winners and losers. Tournament theory states individuals are best motivated to perform well when any prizes available to be won are based on winning or failing, rather than just a monetary value. Employees within an organisation will compete against one another to win higher-level positions, which are usually associated with higher pay. The theory

648-1301: Is classified as non-monetary (not wages or salaries). These rewards are typically funded fully or partially by the employer. Employee benefits refer to the extra advantages offered to employees in addition to their salary. These consist of packages provided by the employer to enhance the cash compensation. Benefits typically encompass health coverage, income protection, savings, and retirement programs, all of which offer security for employees and their families. Benefits, often referred to as indirect compensation, are provided to employees through various plans instead of cash payments. These are including health insurance, retirement or pension plans retirement benefits, vacation time, sick time or other paid time off, flexible work arrangements including remote, hybrid or windowed work, healthcare savings account (HSA), flexible spending account (FSA) for healthcare or dependent care costs, transit benefit account, training or continued education subsidies, childcare subsidies, work from home equipment reimbursement, employee recognition programs, meal reimbursement and etc. Compensation and benefits can be primarily categorized into two types: monetary (direct compensation) and non-monetary (indirect compensation). The key components are outlined below: Guaranteed pay

684-415: Is defined as the ‘differences in pay levels between individuals within (i.e., horizontal dispersion) and across (i.e., vertical dispersion) jobs or organisational levels. Vertical pay dispersion is specifically the difference in remuneration between the most senior employees of an organisation (e.g., Executive Directors of Chief Executive) and an average employee. Vertical pay dispersion has recently become

720-453: Is supportive of them, and their ‘perceived organisational support’ will increase. This is important as perceived social or organisational support can be one of the most significant factors in building resilient employees and reducing unplanned turnover. Employees will also build a sense of emotional commitment towards their employment which will foster in them a willingness to perform highly. While an employer may establish benefits, it

756-568: Is to reward exceptional performance over periods that extend beyond a single year. Unlike STIs, which focus on past achievements, LTIs are forward-looking, encouraging sustained performance and aligning employees' goals with the long-term objectives of the organization. These schemes foster a culture of continuous improvement and commitment, helping drive ongoing growth and innovation. Examples of LTIs include share schemes. -       Share Schemes : Share schemes, such as stock options or Employee Stock Ownership Plans (ESOPs), offer employees

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792-433: Is worth considering the importance of demographics on benefit satisfaction. For example, a workforce with a significant number of parents may value a benefit package which is centred around supporting them and their children. However, those without children, may perceive these benefits as unfair, irrelevant, and a financial disadvantage as they cannot gain the same financial benefits as employees with children. Pay dispersion

828-434: The company’s overall performance. Effective profit-sharing plans require careful design, considering factors such as company size, employee participation, and a clear profit-sharing formula. If well-executed, profit-sharing can enhance employee motivation, productivity, and overall organization performance, particularly in environments that emphasize teamwork and collaboration. -       Gainsharing : Gainsharing

864-428: The difference between what they are paid and what those at the highest level are being paid – it is important to an employee. There can be short-term and long-term effects of vertical pay dispersion. Research suggests some short-term effects of vertical pay dispersion can lead to increased outputs and productivity in employees. This is based on the idea that competition is a driver of human motivation, and prizes such as

900-551: The job. Many countries, provinces, states or cities dictate a minimum wage . Employees' individual skills and level of experience leave room for differentiating income levels within a job-based pay structure. In addition to base salary, allowances may be paid to an employee for specific purposes other than performing the job. These can include allowances for transportation, housing, meals, cost of living, seniority, or as payments in lieu of medical or pension benefits. The use of allowances varies widely by country, as well as job level and

936-548: The nature of job duties. According to Bussin (2019), the most prevalent types of variable rewards are generally categorized as short-term incentives (STIs) and long-term incentives (LTIs). While definitions may vary, these can typically be understood as follows: Short-term Incentives (STIs): Short-term incentives (STIs) are designed to reward exceptional performance achieved within a one-year period, focusing on past accomplishments. This retrospective approach ensures that employees are compensated based on measurable outcomes from

972-462: The non-wage compensation that form the total remuneration package for an employee. While there is less research in this field, it is an important field, as benefits can create significant costs for employers, be they through compulsory means (e.g. compulsory pension schemes), or by the discretion of the employer (e.g. childcare allowances). Benefits can also be seen as an attractor for potential employees and can reduce turnover. Employers can offer

1008-524: The organization’s bottom line, making gainsharing a valuable approach for achieving better results. -       Bonus schemes : In the context of corporate finance and compensation, a bonus is a form of additional compensation awarded to employees, typically based on performance metrics or achieving specific goals. Bonuses can be monetary or non-monetary and are often used to incentivize employees to meet or exceed their performance targets. -       Commission Schemes : Commissions are

1044-416: The overall intent of benefits is to keep employees satisfied with their employment, employers may provide benefits to mitigate disruption caused by increased union density and increased bargaining power. In other instances, employers may provide benefits as a result of a union bargaining for strengthened benefits. When an employer provides benefits, it is critical to note that benefit systems must adhere to

1080-420: The perceived value of benefits. This could include an employee having the potential benefit of flexible working, which may not be utilised. The employee will still note satisfaction with the potential benefit. However, benefit system satisfaction , is based on the: Benefit systems which are seen to be of value and managed well, will result in satisfied employees. These employees will feel that their employer

1116-421: The previous year.  Common examples include profit sharing, gainsharing, bonuses schemes, and commission schemes. -       Profit sharing : Profit-sharing is a compensation strategy in which employers distribute a portion of the company’s profits to employees, typically as an addition to their regular wages or salaries. The goal is to motivate employees by aligning their financial interests with

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1152-421: The principles of organisational justice. Organisational justice is seen as ‘the extent to which employees perceive workplace procedures, interactions and outcomes to be fair in nature’. The principles of organisational justice include: If an employee perceives that the benefits system lacks organisational justice, the perceived or actual satisfaction with benefits is undermined. The overall satisfaction with

1188-419: The system of benefit administration is called the benefit system satisfaction , while benefit level satisfaction refers to the satisfaction an employee has 'with the amount of benefits they receive'. It is important to note that benefit satisfaction can be viewed as actuarial value benefit satisfaction and perceived level of benefits. it is interesting to note that some employees are more satisfied with

1224-524: The union. Other, voting ineligible, classifications include "retired," "student," "reserve" and "substitute/associate." PSEA contracts also cover some non-members, known as agency fee payers, which since 2005 have numbered comparatively about 3% of the size of the union's membership. As of 2014 this accounts for 27,809 "retirees" (15% of total), 7,902 "students" (4%), 816 "reserve," and 552 "substitutes/associates" (both <1%), plus 5,662 non-members paying agency fees, compared to 142,406 "active" members. PSEA

1260-700: The work that has been completed. Compensation is the direct monetary payment received for work performed, commonly known as wages. This is the compensation that employees earn for their work or contributions to the organization. This term may also denote a structured method in which employees receive financial compensation and additional benefits in return for their labor and contributions. Compensation can be any form of monetary such as salary, hourly wages, overtime pay, sign-on bonus, merit bonus, retention bonus, commissions, incentive pay or performance-based compensation, restricted stock units (RSUs) and etc Benefits are any type of reward offered by an organization that

1296-611: The “prize”, and has the additional organisational benefit of increased work effort and higher commitment to organisational goals. In public sector organizations, the application of Tournament Theory is more complex. The emphasis on equity and fairness in public service contexts often contradicts the high pay differentials that the Tournament Theory suggests. Public sector organizations are expected to uphold public service values. and excessive vertical pay dispersion could determine those values. Public sector organizations may adopt

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