| Companies competing in different industries among | | | | reward for the work done, and other benefits are |
| each other do not only oppose one another while | | | | less attractive than those of the competitors. |
| trying to sell their good or services, but also they | | | | As already was mentioned the total reward model in |
| compete for skilled and experienced employees. How | | | | the appropriate to company’s situation balance |
| a company chooses to attract future employees and | | | | would be the best answer in recruiting and |
| keep people working for them is determined by the | | | | maintaining employees. However there are number of |
| competitive pay policy. This policy is generally based | | | | situations to be considered and different types of |
| on three marketing conditions while recruiting new | | | | businesses to be taken into consideration. For |
| workforce, those conditions are: a) availability of | | | | instance a company only starting its operations should |
| qualified workers in the market, b) the | | | | emphasize log term incentives in order to attract |
| aggressiveness of other employers searching for the | | | | people willing to participate in the creation of a new |
| same type of workforce; c) company’s abilities | | | | successful business. Of course in such case a |
| in recruiting new people (financial situation, other | | | | company will not be able to pay high salaries, as |
| benefits it can provide). | | | | opposed to big companies of the same industry, but |
| Most of the times in modern business world, | | | | it has to promise, say, a 75th percentile in long term |
| company’s competitive pay policies are based on | | | | payments and benefits, so that workers have |
| the percentile levels of the targeted market. | | | | motivation to stay with this company. Another |
| Generally companies choose market’s 50th | | | | example of different pay system approach is when |
| percentile or median policy which allows an | | | | we view an already established and mature company, |
| organization to stay competitive and at the same | | | | generating a lot of cash and yielding great profits. In |
| time not spend too much money or benefits for | | | | this instance the human resource manager should |
| attracting employers. However, some companies do | | | | target the median in salaries in the relevant recruiting |
| choose to stay above or below this median point in | | | | situation. Such companies usually encourage |
| competitive pay system; it may be caused by | | | | employees to work for an annual cash incentive or a |
| company’s decision to focus mainly on one of | | | | premium, which is based on annual performance |
| the three earlier mentioned compensation types. | | | | reviewed against company’s standards. In the |
| Often such companies get exhausted in providing too | | | | previous case with developing company, the long |
| much of particular sort of payment of benefit, and | | | | term incentives was the only attractive feature to |
| this results in employees’ dissatisfaction. | | | | potential employees, here, on the other side, such |
| The trick, that every company that wants to be a | | | | benefits are granted to executives or highly valued |
| competitive employer has to learn, is to understand | | | | employees. Non-financial benefits in well developed |
| the concept of balance in identifying the best | | | | companies are targeted at the median level of the |
| competitive pay policy. The notion of total reward | | | | relevant industry, and company’s performance |
| model is the most reasonable one for the employers | | | | culture aims at staying stable at the present |
| to consider if they want to attract, retain, and | | | | management level. |
| motivate, for further success, employees. This | | | | Although the external parameters are very important |
| approach is based on the principal of providing an | | | | in identifying company’s pay policy, the individual |
| employee with compensations that is money for the | | | | capabilities of the employer should be precisely |
| provided services. The second type of reward | | | | evaluated as well. It can be done through the |
| consists of benefits such as income protection, | | | | interviewing process, when hired and by work |
| welfare, health, different capital accumulation | | | | performance throughout first three months of work |
| programs. Another important part of this system is | | | | or first year. The payment level can be determined |
| represented by working condition, which at first | | | | taking into consideration company’s market |
| glance seems to be irrelevant, but in reality they are | | | | position, internal equity, and budget limitation. The |
| essential to employees, especially developmental | | | | total reward system should consider personal qualities |
| opportunities, company’s culture and | | | | as well, only then it will be balanced and most |
| performance recognition. Most of the time | | | | appropriate from the point of view of recruiting |
| organizations do not focus on three of the | | | | market requirements, company’s profit, and |
| enumerated elements in equal proportions while | | | | employee’s satisfaction. The combination of all |
| designing their pay policies. Usually it happens that the | | | | these elements will results in a successful employer |
| compensation or the salary is emphasized as a major | | | | with happy staff. |