The Internal and the External Equity
Category : Equity Finance
The Internal and the External Equity
The system of the compensation is one of the important aspects in the organizational environment. It has also the attempt of breaking even the internal and external equity. The internal equity is the consistency internally. This will also have the job comparison within the organization and to its relative contribution. On the other hand, the external equity is simply the competitiveness externally and the position of the employers in connection to the fact that it is connected to its competitiveness towards its the amount he is willing to pay (Stony Brook, 2007).
Internal and External Equity – Objectives
The total compensation in the philosophy of the company are the internal consistency influence. This has significantly comply in the legislation of the government and it must be efficient as it was being influence to the employees. This internal equity in the organization has an objectives of influencing the the employees for the further commitment in the organization and has the goal for continuing its services. This also have been done for the for the enhancement of dedication that will motivates its employees to commit and share its skills in the organization. In this case it can add the effectiveness of the organization and to the employees as well. It has also the objectives in evaluating jobs which is based on the factors which has the relationship and connection to the entire corporate philosophy of the organization. On the contrary, the objectives of the external equity is the assurance of sufficient and fair rates and to the employees retainment. In addition, it can also controls the the organization so that it can remain competitive (EBS Consulting, 2008).
Procedures to Achieve Internal and External Equity and How to Achieve this Goal
The internal and the external equity can be achieve through the reviews and to the sufficient adjustments which can be accomplish with the aide of position description, evaluation,and the structures of the salary. The valuations of the jobs can be determine through the classification or the creating range inside the description and ranking of the jobs according to the highest and up to the lowest rank in contribution to the success of the organization. And point method on the work can contribute in strategy and compensation factor. The external equity can be achieve through the salary survey which can determine the nature of the relative competitiveness. The objectives can be determine through the competency or the skill based structures wherein the internal payment are necessarily based on how competent the employees are and how their skills in the specific jobs. The market pricing and the pay grades are also part of the process whereas it can relies on the rate of the external with the same group into the levels of the employees, respectively (Ibid).
Internal and External Equity – Relationship
There is a huge relationship between the two wherein these equities can serve as the bridge for the proper compensation to the employees. If one of the these equities are being omitted, then it can result to not fairness to the process of compensation of the employers to its employees. This can also lead to the to the insufficient job job quality and which can create a hard working atmosphere to the relationship of the employees, the employers and to the organization itself.
Influence of External Factors
The external factors can have significant influence in the structures of the internal payment to the employees because it will be the basis of the internal payment. The external factors are also the key drivers for knowing the competitors in the field of payment to the employees so that the organization can remain to be competitive. In knowing the competitors' prices can also be the foundation of the employer and the employees to be paid in accordance to what he has been worked on, to its skills, and to the output of its job.
Compensation has the key importance as to what the employers willing to paid in accordance to the employee's output, skills and its share to the improvement of the organization. The the internal and the external factors therefore can be properly analyze so that the compensation can be fair and equal in accordance to the entire organization and to others prices to avoid improper pricing. In this manner, the development and improvement of the company can be attained. The employers must also have a wide survey for the internal and external policies so that its business will be competitive.
Definition of Internal and External Equity. (2007). Stony Brook. Retrieved March 12, 2008, from http://www.stonybrook.edu/hr/employmentservices/classification/equity_review.shtml.
Internal and External Equity. (2008). EBS Consulting. Retrieved March 12, 2008, from http://www.ebs-consulting.com/consuting/wage_internalequity.html