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Companies and Businesses

Essay by   •  May 14, 2013  •  Essay  •  349 Words (2 Pages)  •  593 Views

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Companies and businesses have used the traditional bases for pay, seniority and merit pay systems to reward their employees. These two bases for pay have been tweaked and adjusted over the years as times change and increased competition between companies to keep their employees happy with the pay they receive from their company. Companies really must work hard to keep their top talent or top producing employees from leaving for opportunities with other companies because of higher pay or better incentives offered by other companies.

Companies have used the seniority pay and longevity pay for years, this system is based on the amount of time that they employee has been with the company and is set up to reward the employee for the tenure that they have with the company. Employers use Seniority and Longevity pay systems to make sure that their employees are able to see a clear path that they can make in their careers to higher levels, with higher pay. Employees that can see future opportunities with higher pay and increased promotions if they stay longer at their respective employer are more apt to stay long term with the company. This is very important because it reduces employee turnover, keeps longer tenured and more experienced employees within the company and reduces cost for hiring and training new employees due to high turnover.

Another pay system used by companies is the merit pay system, this system is set up to reward its employees for their production and job performance; the better the employee performs, the more of a merit increase they may receive. Employees that work for a company that uses the merit based pay system know that the harder they work and better they perform, the more money and income they can get. This keeps the employees happy and motivated to produce and perform at the highest possible rates, which helps both the employee and the employer. The merit pay system is widely used at companies all over the world and has been a very successful part of the strategy used by companies today.

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