It is paramount for any company to come up with policies that shape its pay strategies. These policies are essential when employers have to deal with market changes in the future on whether to lead, lag or match in the market. These three strategies can be used by companies to make adjustments on the best policies to implement or adapt to market changes.
In the case of lead, it is assumed the pay structure of the company is better off than that of competitors. It is at the top when the year begins and by the end of the year, it should be the same level as the market. In lag policy it is the opposite, there is no intention to change, and this can go on for a whole year. This is very common among employers since it may be difficult to pay above or level with the market rate. The match policy balances between lead and lag depending on the amounts acceptable to an organization in a particular time frame. In the match policy employers on the first half of the year put their pay level above the market level and the other half below the market level. In the real world, there are various challenges that limit the decision to choose the preferred choice like competition and budget limitations. Companies that use lead strategies pay more to their employees as they pay more attention to facilitating recruitment. They get applications and make decisions based on the suitability of job evaluation. This type of strategy is mainly on professional jobs like bankers, engineers, and others careers. Those in lag pay much less than the market rate and pay more attention to turnover and increase the stability of their workforce. Manual jobs are a very suitable for these strategies like blacksmiths and miners (Csizmar, 2010). In this regard, it is wise to use deferent payment policies for different job categories within the organization.
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Klaas & McClendon (1996) research can be used by managers to come up with the best strategies which will reward employees and still work for the company financially. By using a utility model they can determine the financial impact of each strategy and can choose the best alternative (Klaas & McClendon, 1996)
It is thus of utmost importance for employers to come up with policies that they can easily manage. They should choose one that balances the internal equity and that of its competitors. It is also crucial to pay attention to employee’s rewards as this will motivate them, and this is most likely to be reflected in the company’s development, as they will work hard..
References
Csizmar, C. (2010). To Lag, or Lead, or Lead-Lag: Examining the Question in the Real World . Retrieved from http://www.compensationcafe.com/2010/10/to-lag-or-lead-or-lead-lag.html
Klaas, B. & McClendon J.A. (1996). To lead, lag or match: Estimating the financial impact of pay level policies, Personnel Psychology , 49(1), 121-14
