Look at “Compensation strategy: internal
alignment” and “Consequences of structures” in the prescribed book.
, also called internal equity, recognises the relative value of various jobs within an
organisation. The relationships form a pay structure that should support the organisation strategy, support the
work flow and motivate behaviour toward organisation objectives.
Internal alignment forms the basis of the pay structure by providing appropriate pay differentials to jobs of
It recognises the differential value of the qualifications to perform different jobs and the
conditions under which jobs are performed.
Perceptions of internal alignment by employees will affect their
motivation, their desire to remain with an organisation, and their interest in pursuing various HR activities, such
as training and development.
refers to the array of pay rates for different work or skills within a single organisation.
of levels, the differentials in pay between the levels, and the criteria used to determine those differences
describe the structure.
An aligned structure can lead to better organisation performance.
If the structure does not motivate employees
to help achieve the organisation’s objectives, then it is a candidate for redesign. Internal pay structures imply
The size of the differential between the entry level in the structure and the highest level can
encourage employees to remain with the organisation, increase their experience and training, cooperate with co-
workers, and seek greater responsibility.
Departure from an acceptable wage structure will lead to turnover, grievances, and diminished motivation.
However, there does not seem to be much agreement regarding “fairness” with regard to internal pay alignment.
On the one hand there are writers that argue that if fair differentials amongst jobs are not paid, individuals may
harbour ill will toward the employer, resist change, and so forth.
Others, including labour unions, argue for only
small differentials, in the belief that more egalitarian structures support cooperation and commitment and
Internal pay structures should comply with the regulations as governed by law. The following factors are
important in internal alignment:
the organisation’s strategic intent, its design and work flow, human capital and
the external conditions, regulations and customs it faces.
Aligning the pay structure to fit the organisation’s
conditions will more likely lead to competitive advantage for the organisation and a sense of fair treatment for
Discuss the concept pay policy and discuss the different pay policy alternatives.