Question

Discuss the following pros and cons and Which outweigh the other?

Cap executive salaries.

Eliminating the pay gap altogether may not possible for some companies, but instituting a salary cap can keep the gap from growing wider.

Whole Foods has capped salaries for their top executives for more than 20 years. Originally, the salary cap ratio was set at 8 to 1, but as the company has grown, so has the salary cap to 19 to 1. That means the maximum cash compensation anyone can make with the company is about $650,000. The cap is low enough to satisfy their lower-level employees but still competitive enough to keep their key executives from leaving.

Capping salaries shows employees at every level that the organization values and cares about them. In fact, 40 percent of U.S. and Canadian employees surveyed by Virgin Pulse this year said they wished their employers cared more about their financial well-being.

In addition, employees who feel valued by their employers are more likely to be satisfied by their job, a 2014 survey conducted by the American Psychological Association found.

Capping salaries shows all employees that their skills and work are valued and important to the company.

Answer 1

answer-

A salary cap is the upper threshold your company pays for employees in each position. Although the term "salary cap" generally is used in the athletic arena, the same principles may apply in the traditional workforce.The pros and cons of salary caps range from effective budgeting to placing limitations on employee earnings and morale. Organizations generally put caps on salaries to foster pay equity and manage compensation costs. That being said, any employer can put a cap on salaries; however, there should be a justifiable reason to do so.

In above discussion. Walmart put salary cap 19 to 1 which means its thresold to compensate the employees is about $650,000. by this, Employees remain in the company as well company does not suffer any extra workforce cost.

pros of salary cap-

Salary caps are essential, particularly in large organizations where the compensation structure is more defined. Smaller businesses may give their managers latitude in determining salary increases for employees, which can raise salary levels and put employees closer to the salary cap sooner than is possible with a large company. Putting a cap on salaries stabilizes the organization's budget -- they prevent unanticipated salary expenses and they enable the organization to project future costs to hire and retain employees with greater accuracy.

The disadvantage of salary caps is the potential of long-term employees becoming red-circled. Red-circled employees are workers who have been with the company long enough and have received the maximum salary increases over the years to reach a salary cap for their positions. In this instance, salary caps have a negative impact on the workforce. Employees with little chance for increasing their salaries might exhibit signs of complacency or their performance may remain steady because they don't have an incentive to improve because they won't receive an increase based on their performance evaluations.

I think Pros outweigh the cons because Big organization like Walmart which has a big amount of share to pay to its wide range of employees and also has to maintain the morale of employee so salary cap is needed to cut the cost as well create an environment of fairness and equity.