How can internal pay structures motivate or demotivate employees? Please share examples from your experience.
Internal pay structure refers to the pay structure within an organization that is applicable to the employees. This means the comparison of the pay between employees at same level and different levels within the organization. For example, if a manager and a subordinate is on the same pay, then the manager may not feel that he/she has the power over the employee. In addition, if two employees/managers who work similar roles get paid differently, then the one who is paid lesser may be demotivated. This is often owed to the equity theory of motivation.
In my personal experience, I began my career as a junior executive at a hardware manufacturing company. I joined the organization with 0 years of experience and some of the other colleagues who joined in the similar role had 2-3 years’ of experience. Obviously they were paid higher than I was even though we were doing the same job. It was demotivating at first, however, the organization was very fair and performed frequent market correction. It was difficult to fight the demotivating factors but eventually in the next two years I received several pay revision and my salary became equal to the others. This has been possible only due to a strong internal pay structure that is innovative and focuses on equity theory of motivation.
How can internal pay structures motivate or demotivate employees? Please share examples from your experience.
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