Day, Junard E.

BIT CIVIL III-9

Industrial Psychology and Group Dynamics

Case Study
Pay Raises Every Day
How do you feel when you get a raise? Happy? Rewarded? Motivated to work harder for that next raise? The hope
of an increase in pay, followed by a raise, can increase employee motivation. However, the effect may not last. In
fact, the “warm fuzzies” from a raise last less than a month, according to a recent study. If raises are distributed
annu- ally, performance motivation can dip for many months in between evaluations. Some organizations have tried
to keep the motivation going by increasing the frequency of raises. Currently, only about 5 percent of organizations
give raises more than annually, but some larger employers like discount web- site retailer Zulily, Inc., assess pay
quarterly. Zulily CEO Darrell Cavens would like to do so even more frequently. “If it wasn’t a big burden, you’d
almost want to work on it on a weekly basis,” he said. That’s because raises increase employee focus, happiness,
engagement, and retention.

CEO Jeffrey Housenbold of online photo publisher Shutterfly, Inc., also advocates frequent pay assessments, but for
a different reason. The company gives bonuses our times a year to supplement its biannual raise structure as part of a
review of employee concerns. “You can resolve problems early versus letting them fester,” he said. An- other reason
is to increase feedback. Phone app designer Solstice Mobile gives promotions and salary increases six times a year;
with this structure, Kelly O’Reagan climbed from $10/hour to $47.50/hour in 4 years. The company’s CEO, John
Schwan, said that young workers are especially motivated by the near-constant feedback. O’Reagan said, “Seeing
that increase was like, ‘Wow, this is quite different than what I had ever dreamed of.’”

You might be wondering how organizations can keep the dollar increases to employees flowing. Organizations are
wondering, too. One tactic is to start employees at a low pay rate. Ensilon, a marketing services company, has
coupled low starting salaries with twice-yearly salary re- views. Initial job candidates are skeptical, but most of the
new hires earn at least 20 percent more after 2 years than they would with a typical annual raise structure.

No one is saying frequent pay raises are cheap, or easy to administrate. Pay itself is a complex issue, and
maintaining pay equity adds another level of difficulty. Frequent pay reviews are motivating, but only for the people
receiving them—for the others, it’s a struggle to stay engaged. If a person has a track record of raises and then pay
levels off, it can feel like a loss of identity as a strong performer rather than a natural consequence of achieving a
higher level of pay. The frustration can lead to lower performance and increased turnover for high performers. CEO
Schwan acknowledged, “It’s definitely a risk.”

Questions

1. How can HR administer a complex pay structure that rewards pay increases on a regular basis?

HR is responsible for performing a pay survey in respect to the money to the other employer for a
comparable job. The purpose of these surveys is to determine the rate of pay for a specific wage
in respect to the job group. HR does an evaluation as well. It aids in determining the worth of a
job inside a company entity. Occupations that appear to have difficult requirements and those
with large qualifications are rewarded far more than jobs with lower qualifications. HR is
required to combine occupations that pay the same amount. This necessitates the formation of a
pay grade that includes occupations with the same implications. HR establishes payment ranges
 by creating payment structures. The wage output or money created assures the pay rate for each
range of payment.

2. Why are younger employees more likely to be motivated by very regular pay increases than older workers?

Every organization that enters the business sphere has a certain goal and objective. Different
things inspire people at different ages. Periodic wage increases encourage the younger generation
more than the elder generation. Because young people are fresh to the business world, they will
search for prospects for advancement. Furthermore, such people have many goals for their lives,
such as starting a family, among other things that demand money. As a result, they will be more
driven to achieve their goals if they receive frequent wage raises.

3. In some countries a national minimum wage or a “living wage” has been set by the government. What are
the drawbacks of such an approach to dealing with low pay?

A minimum salary is a legal requirement for employees. It means that employees are guaranteed
a fixed hourly salary, which helps to alleviate relative poverty. A minimum wage, on the other
hand, has the potential problem of causing unemployment because businesses cannot afford to
hire people. Unemployment in competitive labor markets, a minimum wage may generate
unemployment since employers will require less labor, but higher salaries may attract more
employees to give their labor. Firms may become uncompetitive in certain circumstances, a
higher minimum wage may raise expenses, forcing a company to go out of business because it
cannot pay wage expenditures. This may be especially problematic if the organization is
operating in a worldwide market and their higher pay expenses render them uncompetitive in
comparison to low-wage cost nations. The poorest do not profit since the minimum wage does
not enhance the incomes of the lowest income categories. This is because the poorest people rely
on government assistance and are thus unaffected by minimum wage.