Three-tier remuneration

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Three-tier remuneration <?xml:namespace prefix = o ns = "urn:schemas-microsoft-com:office:office" />

Aaron Z. Brook

As scaled by three levels of needs of Alderfer's ERG theory, three-tier remuneration consists of absolute value remuneration, relative value remuneration, and attached value remuneration?similar to fringe benefits?.

Here, remuneration is specially meant the whole proceeds for meeting individual needs that employee gain from working for employer.

Absolute value remuneration is laid at the bottom of the three-tier remuneration. It is corresponding to existence needs.

Although being all termed existence needs, there is very large distinctness of the quality and quantity of basic necessities between living in villas and living in apartment. When mentioning existence needs, we in mind can not only remain basic necessities of life, even simply clothing and food. If companies, particularly being those companies in stage of starting up, follow such view of existence needs to design remuneration, it would be very harmful.

In contrast with low-level production operation employees, considerable status factors (belonging to growth needs), such as needing famous brand, are included into the existence needs of high-level managerial and technical talents. As reflected in three- tier remuneration, this absolute value remuneration including status factors has not been pure absolute value remuneration yet. In a sense, it has occurred partial overlap with later attached value remuneration (corresponding to growth needs). The reason within it is very simply, because the distinction among three kinds of remuneration is rough and relative, just as the relationship between three types of management level. I am incorporated into you. You are embedded into me, too.

Overall speaking, though absolute value remuneration has been rising because of ever-raising level of economic development, it does not mean that everyone is such a case. In some specific situation, the result will depend on the economic cycle or stages of individual career development. The former is that if an economy recession occurs, individual absolute value remuneration would probably decline. The latter is that when someone’s career development is at low ebb, his or her standard of absolute value remuneration would also fall. For instance, a person was a general manager at a large company before, and has a higher standard of existence needs, but now he loses his work, and then become an ordinary employee at a small company, so he has to reduce his standard of absolute value remuneration.

Enterprises have an obligation to reasonably guide employees’ absolute value remuneration based on existence needs, especially those companies that have a larger influence in their industry. They should try to advocate the concept of healthy and green existence for helping employees shape a reasonable expectation of absolute value remuneration. Of course, this is also a type of corporate social responsibility.

Relative value remuneration is laid in the middle of the three-tier remuneration. It is corresponding to relationship needs.

An employees who had previously been satisfied with his salary may become dissatisfied after he secretly compare herself with colleagues, peers, classmates, and even friends and relatives. Of course, there are also the opposite situations. All above just go to show that the relative value remuneration is at work.

If companies want to have an effective relative value remuneration, on the one hand, they should help employees learn how to correctly compare themselves with others rather than blind and regardless of the specific circumstances, on the other hand, they should not only own a competitive salary in their industry, but also establish a fair and open remuneration mechanism, performance appraisal mechanism, and reward and punishment mechanism. Despite having the need to keep salaries secret, the transparent on employee salaries is necessary. Otherwise, it would be difficult to give employees true satisfaction.

Attached value remuneration is laid on the top of the three-tier remuneration. It is corresponding to growth needs.

Specifically, Attached value remuneration include enterprises word of mouth and reputation in their industry and the locality, occupational prestige, training opportunities, tour, fitness, corporate culture, usefulness for personal career development, fair and equal competition opportunities, flexible working hours, office environment, intimate interpersonal relationships and other factors affecting employees’ physical and mental health.

As considering attached value remuneration, company needs to avoid two kinds of one-sided tendency.

First, as its name implies, the attached value remuneration is mistakenly viewed as secondary factors that influence employees’ pay satisfaction by company rather then main factors. To low-level production operation employees whose chief needs are existence, the attached value remuneration is secondary. But to high-level managerial and technical talents, the attached value remuneration is major.

Second, companies ignore absolute value and relative value because of too much emphasis on attached value remuneration. When speaking the attached value is the main factor influencing employees’ pay satisfaction in some companies, certainly we can not overlook one premise: their absolute value and relative value are all reasonable, and are sufficiency to meet employees’ existence needs and relationship needs. Leaving this premise would be meaningless to talk about the importance of attached value remuneration. Such a case is the same as we suggest that product quality has not been a major factor in today's global competition yet, not to say that product quality was not important, but product quality has already become a basic threshold for enterprises to participate in global competition. If companies can not reach this threshold, they will not be eligible to go global.

In accordance with the principle throughout three-tier management, three-tier economy, and three-tier marketing, three-tier remuneration still is an indivisible whole. As three kinds of management, economy, marketing and need, three types of remuneration coexist in each remuneration system of each employee of each enterprise. Even if the remuneration system to meet blue-collar employees’ existence needs in which absolute value remuneration is to act as main body, objectively, also contain some relative value remuneration, and attached value remuneration, regardless of whether or not the company realizes it.