NAME: OMOSIGHO DESTINY

STUDENT NO: 20205750

EAS 402 ASSIGNMENT 6

Developing a pay system involves careful consideration of various factors to ensure fairness,
competitiveness, and alignment with organizational goals. Here are three key considerations:

1. Internal Equity:

 Description: Internal equity focuses on ensuring that employees are paid fairly within
the organization based on the relative value of their jobs. This involves comparing the
value of different roles, considering factors such as skill requirements, responsibilities,
and contribution to organizational objectives.

 Importance: Internal equity helps maintain a sense of fairness among employees,

reducing dissatisfaction and potential conflicts. It can contribute to a positive
organizational culture and employee morale.

2. External Competitiveness:

 Description: External competitiveness involves benchmarking an organization's pay

levels against those of its competitors in the industry or relevant labor market. This
ensures that the organization's pay rates are competitive enough to attract and retain
skilled and qualified employees.

 Importance: To remain competitive in the job market, organizations need to offer

salaries and benefits that are in line with industry standards. Failing to do so may result
in high turnover or difficulty in recruiting top talent.

3. Performance-Based Pay:

 Description: Performance-based pay systems tie compensation to individual or team

performance. This may include bonuses, incentives, or merit-based salary increases. The
idea is to reward employees for their contributions to organizational success.

 Importance: Performance-based pay can motivate employees to excel in their roles and
align their efforts with organizational goals. It provides a clear link between performance
and rewards, fostering a culture of achievement and continuous improvement.

Preference: Choosing the best consideration depends on the organization's goals, culture, and industry.
However, a balanced approach that incorporates all three considerations is often recommended. Internal
equity ensures fairness within the organization, external competitiveness helps attract and retain talent,
and performance-based pay motivates employees to excel. A holistic approach that considers these
factors collectively can contribute to a well-rounded and effective pay system.