Factors Influencing Employee Compensation

Factors Influencing e Employee Compensation

Introduction

When determining employee compensation, there are internal and external factors that can influence how employees are paid. Some of these factors are standard among most industries and others are industry specific. This paper will discuss some of factors that influence compensation in the airline industry.

Internal

When deciding compensation, internal factors include the ability to pay, job requirement, job evaluations and organization strategy. In addition, there are other employee related factors that can further influence compensation including performance, experience, and seniority.

The ability to pay can be one of the most significant factors in the airline industry today because so many of them are experiencing problems in profitability. For example, in 2008 when Frontier Airlines filed for bankruptcy, the company’s employees were asked to take pay-cuts or concessions to assist the company in becoming profitable enough to attract a bidder under the company’s reorganization plan. Generally, when a company is profitable and successful, they are able to pay a more competitive salary.

Wages can also be influence by the jobs specific requirements including safety, decision making requirements, knowledge requirements or special training. Often, the higher the risk is when making decisions, the higher the wage. While airlines pilots and flight staff tend to have higher salaries, their risk is higher and the impact of their decisions is also greater and affects a larger number of people including airline passengers. In retrospect, airline reservations agents are paid much less than other airline staff because a firm policy is put in place and the need to make decisions that have a substantial impact is relatively low.

Previous experience can affect compensation because previous experience adds valuable insight and therefore is rewarded appropriately. Companies often require many years of experience before hire for higher level positions. Companies presume that and experienced candidate will possess leadership skills which will influence the behavior and performance of their teams. In addition, experience candidates will be able to step in to perform a job with little or no training which can be time consuming and can be costly for any company.

Seniority can play a role in compensation in unionized divisions of the airline industry. Most of our organization is not unionized and salaries are more standard varying only slightly on our Reservation team.

External Factors

There are many external factors that can also play a large part in the determination of compensation. The cost of living in a specific area, labor laws and regulations, labor market, economy, inflation, technological