UECH2102 COMPENSATION AND BENEFITS

MANAGEMENT

TITLE:
INDIVIDUAL ASSIGMENT CASE STUDY 2:
THE TRANSPARENCY OF THE COMPENSATION
STRUCTURE

PREPARED BY:

Name Matrix No. Contact No.

1. AGILAISWARI D/O MANIMARAN UDB200004 0164959245

(SECTION 1)

PREPARED FOR:
MADAM NOREENA FHAREED LEE

DATE OF SUBMISSION:
WEEK 10
ACKNOWLEDGEMENT
On this great occasion of succesful completion of my individual assignment on case study , i
would like to thank my lecturer Madam NOREENA FHAREED LEE , who has guided and
assisted me to complete the assigment. Without her support i would not have finished the
assignment within time.

I would also like to take this opportunity to thank my friends and family members, without
them this individual assignment could not have been completed in a short duration.
 TABLE OF CONTENTS

NO CONTENT
1 PROBLEM ANALYSIS
2 IMPACT ANALYSIS
3 SOLUTIONS/ RECOMMENDATIONS
4 POINT OF VIEW
5 CONCLUSION
6 REFERENCES
Case Study 2: The Transparency of the Compensation Structure

University of California (UC) employees were able to access a website

that listed the salaries of each employee in the UC system, not only were
those employees who were paid below the median not motivated to
improve their performance, but they actually started looking for
employment elsewhere. These are the types of concerns that companies
have to wrestle with when they decide to release compensation data.
Organisations have to be transparent in pay decisions and “Such
transparency may include publishing a formal pay schedule and related
policies for all to see, but it also must include consistent discussions
between organisational leaders and their teams regarding a range of
complex pay equity issues, both internal and external. Companies have
to be committed to treating all employees fairly, and with dignity and
respect,” Westover says.

Source: W. Terri. Does Compensation Really Motivates Performance? The Economist.

Problem Analysis (5%)

a) What faults/issues may exist in the transparency of the compensation data and decisions?

Pay transparency is the practise of making the company's compensation figures visible to
others either internally, externally, or both. There are two forms of pay transparency: partial
and full pay transparency. The errors or problems that may exist in this University of
California is that organisations need to be transparent when making pay decisions. This
transparency can include publishing a formal salary schedule and related guidelines for all,
but it must also include consistent discussions between organisational leaders and their
teams about a range of complex pay equity issues, both internal and external. When
implemented properly, aspects of pay transparency can boost employee morale as they
appreciate openness about compensation.When implemented poorly, pay transparency can
lead to frustration, lost productivity, and terminations.

According to the case study, employees who were paid below the median were not
motivated to improve their performance; in fact, they began looking elsewhere for
employment. In my opinion, the likelihood that this will lead to employees not understanding
is one of the biggest drawbacks of salary transparency. It's easy for an employee to put on
blinders and only feel frustration when they see they are making less money than a
colleague. Another cause is that salaries are not distributed evenly or that employees simply
are not willing to share that information. Scott Rick, assistant professor of marketing at the
University of Michigan, says we should "think very carefully before we disclose this
information. It's so personal and people see it as their value"
Impact Analysis (10%)

a) Possible impacts towards both employees and University of California (UC) for such
transparency.

Possible impacts towards employees whether is advantages and disadvantage about

transparency is that individual privacy will be compromised, as people will begin to judge
each other based on their compensation rather than the value they bring to the organization.
Some employees might feel uncomfortable about their salary being shared with their
colleagues or even the world if the company makes salary data publicly available.
Competitors could also usethe published salary data to poach talent, and companies expose
themselves to criticism. Some employees might even leave the company just to escape the
situation.

The negative impact of transparency, however, is that it could reduce job satisfaction
among lower-wage employees. While some research shows that salary transparency
increases job satisfaction and decreases turnover, other data suggests that morale drops for
workers with lower salaries, while there is no impact on those earning mid-range or higher
salaries. The same 2011 study showed that employees with incomes below the median are
more likely to look for a new job, while retention is neither higher nor lower for employees
with incomes above the median. So based on the case study above, University of California
(UC) employees earning below the median wage are not motivated to improve their
performance, but they have actually looked for another job because of this transparency.

If the organization uses pay transparency properly, it can also have a positive impact on
employees and improve performance. At first, employees feel uncomfortable with this
system, but implementing pay transparency can increase employee performance because if
employees are namely, if employees know why someone is being paid, how much they are
making, and how that number compares to what others in the organization are making,
employee productivity is likely to increase because they will no longer have to wonder if their
pay is appropriate.

The second impact is to reduce pay disparities. Salary transparency is seen as a way to
reduce pay disparities and ensure that all workers receive the same pay for similar work
received. The company can better attract top talent and reduce the risk of being sued for
discrimination, while workers benefit from knowing that their gender or race does not affect
their income.
 Possible impacts towards University of California(UC) wheter is advantage and
disadvantage about the transparency is honest with its employees about salaries, the
chances increase that employees will understand payroll decisions. Some employees
appreciate the honesty and clear salary explanations. When deciding whether to implement
salary transparency in a company, leaders must evaluate the company culture. Salary
transparency requires a plan. When companies share salary information, they should make it
very clear how management arrived at those salary decisions. Companies must commit to
treating all employees fairly, with dignity and respect.

The good effect of transparency to the University of California (UC) is that their employees
can increase their productivity. A 2013 study conducted at the University of California (UC) at
Berkeley showed that providing workers with information about how their income compared
to others led to productivity gains of up to 10% in average performance. Study participants
were paid for each completed data entry during a specified work period. Some learned only
of their own earnings after they completed a work period and before they began a new one.
Another group received information about how their earnings compared to others. There was
no direct reward for better performance during the second work period, but study participants
with comparable pay data worked harder and performed better.

On the other hand, the impact will also reduce sales. A survey of 71,000 companies by Pay
Scale. A salary and benefits information website, found that employees are more likely to
think their salary is fair (and less likely to leave a company) if their company communicates
clearly about salary. Salary transparency was found to have a greater impact on employee
engagement and reduce employees' willingness to leave than typical employee engagement
criteria, such as opportunities for advancement.

The next issue is the negative impact of transparency on the University of California (UC), if
this organization does not properly implement salary comparisons, it could lead to
dishonesty. A study published in the journal Organizational Behavior and Human Decision
Processes, found that lower-paid study participants were more likely to cheat on tasks when
they could compare their income to that of higher-paid participants. The study concluded that
upward social comparisons encourage cheating among lower-paid participants. However, the
study's author emphasized that this effect only occurs when participants at the lower end of
the pay scale believe they have no other option and that pay disparities are unfair.
Transparency about why pay differentials exist is important to reduce the likelihood that open
pay policies will lead to unethical behavior.
Solutions / Recommendations (10%)

a) Solution / recommendations that University of California could adopt to ensure that

employees improve their performance, and loyal with the University?

Recommendations that University of California could adopt to ensure that employees

improve their performance, and loyal with the university such as lack of communication in the
workplace can cause workplace productivity, working relationships, and overall satisfaction to
dissipate. Without clear communication, it is difficult for employees to understand what is
expected of them, how they should respond to change, and what policies and instructions
they should follow. The lack of clear communication can affect employee engagement and
loyalty. Introducing salary transparency into an organization can cause frustration among
employees. There is no perfect system that satisfies everyone, so adequately explaining
salary discrepancies is a priority. Therefore, the University of California (UC) must
communicate clearly about salary transparency to avoid misunderstandings and disputes
within the workforce.

Strong communication provides an opportunity for employees to speak up about any

grievances they may have. Often grievances go unresolved and can even escalate into a
potentially harmful problem. Good communication in the workplace is a great way to avoid
misunderstandings and make your employees feel comfortable at work.

Employees are attracted to a company that offers them the opportunity to make a positive
impact on the company while continuing to learn and develop as the company grows. From
the beginning of employment, employees seek to connect with their position and the
company by finding ways to adapt and improve their position. An employee will not be
satisfied until they see that there is room for growth and advancement. The employer wants
them to succeed beyond the requirements of their original job role .

University of California should work in collaboration with their employees to build a career
plan which sets out goals and objectives which both the employer and the employee would
like to achieve. Although employers may hold regular performance reviews, employers
should also look to hold regular meetings with the employees to determine how they are
finding their role, where they are performing well and where they may need improvements or
extra training. Most importantly, employers must ensure employees’ roles match with their
future career prospects to ensure employee commitment and loyalty to the company.
 In addition, Providing consistent feedback opens communication between employers and
employees. Employees gain a better understanding of where they are succeeding and what
needs more attention, and employers gain insight into office dynamics and daily workflow.
When giving feedback, employers must remember that it is only effective if it is objective and
fair.

Moreover, It is important to create a flexible approach to managing the organization's

workforce. This can include flexible work schedules, annual leave, and even professional
development.

There are many benefits to flexibility in the workplace, as it allows employers and employees
to make arrangements that are mutually beneficial. Some companies may require a higher
level of flexibility, but this flexibility ensures that employee-employer relationships remain
balanced. Taking the time to understand the needs of employees shows that the employer is
making an effort to fully integrate them into the company and see them as a valued member
of the team. This is important to increase employee engagement and loyalty.
Point of View (POV) (10%)

a) Should University of California disclose the compensation data to the employees?

The University of California (UC) should disclose salary data to employees, as LinkedIn
surveyed more than 5,000 professionals from around the world in its 2019 Global Talent
Trends report, 27% of whom said their company currently shares salary ranges with
employees, applicants or both. Respondents reported key benefits, such as efficiency and
fairness, that they have noticed since their companies adopted this practice. This study will
help ensure that workers are paid fairly for equal work. When there is less secrecy around
salaries, it is much harder to avoid pay inequities. This is better for workers in terms of
fairness and protects employers from potential lawsuits. So University of California (UC)
employees will be motivated to do their jobs because other employees' pay is fair.

Second, if the University of California disclose the compensation data it builds trustwithin
their employees. When employees feel valued and are not spending cycles thinking about
whether they might be underpaid, they are more likely to be more fully engaged in their work.
When Pay Scale studied the link between pay and employee engagement, they found “that
one of the top predictors of employee emotion including ‘satisfaction’ and ‘intent to leave,’
was a company’s ability to communicate clearly about compensation. In fact, open and
honest discussion around pay was found to be more important than typical measures of
employee engagement such as career advancement opportunities, employer appreciation
and future enthusiasm for the company.”

b) Should a company disclose the formal pay schedule, compensation decision and
compensation policies to employees?

A company should not disclose the formal pay schedule, compensation decision and
compensation polies to employees because all employee salaries are published for all to
see. Salaries can be kept in a spreadsheet or otherwise accessible format, and employees
within the company (and sometimes internally and externally) can see exactly what their
colleagues are earning. Companies considering an open salary policy should take care to
introduce it proactively and positively, especially if it is being introduced in an established
company. Because the data is mixed on whether there are long-term benefits or drawbacks
to releasing salary data, it is essential to think carefully about whether this approach will work
given the company's culture.
 Even among companies that do not have open salary policies, it is becoming easier than
ever for workers to use online tools to compare their own income to others in their
professions. Therefore, the organization still needs to ensure they are providing fair pay while
employees have plenty of opportunities to determine their worth and negotiateeffectively for a
reasonable salary.

In my opinion, depending on the nature of the company, its culture, and its workforce, an
open pay policy carries risks that must be considered, such as the decline in morale, private
concerns, turnover, and others. The biggest limitation to adopting an open salary policy,
according to the creative leaders interviewed, was the perception that salary transparency
would hurt employee morale. In fact, many felt that this risk outweighed the benefits of such
a policy, as employees might be upset if they found they were underpaid compared to their
peers. Next, concern about employee privacy is important to the company because it will
determine employee productivity. Some people are very uncomfortable with the idea of their
salary being made public, and companies need to be aware of this fact. Some employees
might even leave the company just to avoid this situation. And if salaries are widely known,
companies may fear that competitors will lure their top talent with higher salary offers.
Conclusion (5%

In conclusion, the University of California (UC) must consider the types of concerns that
companies face when they choose to publish compensation data. In a business, there is the
opportunity to go into much more detail, and the University of California (UC) must
thoroughly investigate any potential risk. Organizations considering implementing this policy
should do so as a careful implementation across the organization. Explore the current state
of the organization and begin by understanding its employees and existing culture. To
implement this policy, the University of California (UC) must commit to treating all employees
fairly and with dignity and respect
REFERENCES

 Pay transparency, explained retrieved from [ CITATION htt92 \l 17417 ]

 What is pay transparency & why does it matter? retrieved from[ CITATION htt93 \l17417 ]

 The pros and cons of salary transparency retrieved from [ CITATION htt94 \l 17417 ]