NadTalk

The pay is part of extrinsic rewards and its role has always been in the discussion of researchers and management experts. One the one hand, appropriate payment is important not only for employees’ satisfaction but also for productivity; on the other hand, it should be understood that appropriate remuneration is not the sole reason of increasing level of employees’ satisfaction. Research findings show that it is important that employees have opportunities to voice their views and have openings for development of skills through the assignment or training programs along with appropriate remuneration.

Best Practices Model has initiated a new debate as to how employees should be paid: should firms follow dispersed or compressed pay practices? Best Practice Model favors dispersed practices in which pays should be made according to performance. The model assumes that performance based pay system (Dispersed Pay structure) compared to the traditional payment system (Compressed pay structures) is more effective in enhancing satisfaction and productivity. Despite of favorable view of the best practice model assumption, different researches show that the performance based payment system has its own implication, for example it can increase instability and turnover. Pay structure that is highly dispersed where pay gap is considerably big decreases the level of satisfaction because ‘low earners’ feel under-valued.

The phenomenon is quite easily observable in developing countries where there is a big gap between low level workers and managers. Therefore, low level workers feel alienated. And a repercussion of alienation is that employees feel less concerned about maintaining quality according to specification.