Seniority and Merit Based Systems

Seniority and merit based systems are the methods that are used to determine at what level an organization should compensate their employees.

Seniority pay is when a person is paid based on the length of time they are with their employer. Which has its advantages and disadvantages; it is an advantage because the worker is knowledgeable of the company and its procedures, making it easier for an organization to retain. It can be a disadvantage to the employee if there is a limit placed on the amount you can earn within an organization. When it comes to merit based pay, the wage is paid off of the skill requirement of the position and the skill of the workers. This is the most common pay system in the U.S.

I believe the merit based system is the best compensation system because it seems easier to pay someone what they are worth, which is probably why it’s the most common.

Active strategic analysis which is the act where an organization compensates their employees in the best interest of the company’s’ profit; meaning an organization must compensate its employees to a level where they are content meanwhile generate the most possible return for an organization. Contextual factors are the factors in which the employees and the organization associate compensation. There are numerous contextual factors that can affect the compensation of an employee. One is the amount time an employee is employed and compensated by seniority and longevity based systems.

Reference

Martocchio, Joseph J. Strategic Compensation: A Human Resource Management Approach. 7th ed. Upper Saddle River, NJ: Prentice Hall, 2011. Print,