Base pay system refers to the initial payment whereby workers receive payment in exchange for their skills and services which may include bonuses and other forms of incentives. As a basic rule of employment, the base pay is the minimum amount that an employee receives at an hourly, weekly, monthly or annual rate. The development of base pay structures is essential to boost an organization’s ability to attract and retain talented and skilled employees (Tenhiälä & Lount, 2013).
One of the principle considerations that HR managers should consider in the creation of a base pay system is the corporate budget allocation to compensation. A budget is critical in promoting effective planning and management of a firm's operations. The budget allocations specify the number of funds available to pay the employees and limits the salary ranges based on the job descriptions. The budget allocation also helps to meet the expectations of the employees by communicating the possible compensation ranges. Most organizational budgets are fixed and, thus, HR managers can construct the base pay system without interfering with other business activities (Arthur, 2015).
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Employees are protected by various laws on base payments, safety, and health standards. These legal requirements are vital aspects which HR managers should consider when constructing a base pay system. The system should reflect the statutory provisions on minimum wages and other allowances such as health and safety. Organizations that comply with employment laws avoid the loss of financial and time resources through legal suits. Firms that adhere to legal requirements on base pay possess an excellent public image which is vital in attracting and retaining proficient employees. A legally-considerate base pay system also enhances the work motivation among employees by increasing their levels of job satisfaction (Arthur, 2015).
The prevailing economic conditions such as the cost of living is also critical in determining the base pay systems of modern organizations. According to Maslow's theory of motivation, people are happy and satisfied when their financial and emotional needs are met. Firms are profit-oriented and thus seek to operate at the lowest possible costs of production. This business objective may make it challenging to meet the precise salary expectations of the employees. However, the base pay system should reflect a considerable amount of concern towards the economic welfare of the employees. The amount of pay allocated should at least increase the workers' ability to pay for essential commodities such as food and shelter (Tenhiälä& Lount, 2013).
There exist different payment schemes for different job descriptions. However, the amount of pay can also be varied in various organizations within the same job category. Modern organizations recognize the need to attract and retain skilled and talented individuals through considerable compensation packages. When constructing the base pay system, HR managers should pay attention to the skills set of the individuals. Reasonable base pay systems increase the rate of employee retention and save the firm the costs of time and funds in training new employees. Proper compensation based on qualifications also enhances the employee’s dedication towards the attainment of the growth and success objectives of a firm (Arthur, 2015).
References
Arthur, D. (2015). Fundamentals of Human Resources Management : A Practical Guide for Today’s HR Professional (Vol. Fifth edition). [Place of publication not identified]: AMA Self-Study.
Tenhiälä, A., & Lount, R. B. (2013). Affective reactions to a pay system reform and their impact on employee behavior. Journal of Occupational & Organizational Psychology, 86 (1), 100–118.
