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COMPENSATION Discuss the three forms of equity in reward strategy and how they interrelate to each...

COMPENSATION

Discuss the three forms of equity in reward strategy and how they interrelate to each other. Which should be most important and why?

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Internal equity is how one employee’s pay package compares to others inside the same organization. It focuses on job evaluation which measures the relative worth of jobs within an organization. External equity compares a pay package to others outside the organization. External equity is entirely unexpected from internal equity. Organizations plan their remuneration methodologies by evaluating the contenders' or industry models. Organizations set the remuneration bundles of their representatives lined up with the predominant pay bundles in the market. This involves for reasonable treatment to the workers. Not like to internal equity, which centers around the inner adjust in pay structure separately to the organizational structure, external equity centers around the aggressive condition anв pay structure in the business. Individual equity means a fairness criterion that promotes adjusting pay or granting an award by individual according to individual variation in merit. Designed pay range and setting pay range are two categories that shows how individual equity is established.

Internal, External, and Individual equity are all connected thru the perceptions of equity. From the perceptions of equity we get motivation, commitment, and performance. Organizations look at numerous factors in deciding the best method for compensation. The most important one would be the external equity. The outside company has no bias when observing employees so their judgement is not based on how long a person has been there or what skills they came with. They can do their observation and have a clear sense of what is need to make payments fair.

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