A rigorous review of compensation and all its components
Compensation is what is paid to an employee, whether in the form of wages, salary or incentives by the employer for a specific amount of time, skill and effort made available by the employee in fulfilling specific job requirements (Biesheuval, 1984).
Compensation is important in organisations as it conveys information to an employee about their relative importance to the organisation and provides a scale to identify how much recognition they are receiving for their contribution (Harley and Stephenson, 1992). Compensation shows employees how much they are appreciated and worth. The most important differentiating element between jobs is the effort involved in performing a job (Biesheuval, 1985).
• Objectives of pay systems (Harzing and Van Ruysseveld, 1999):
Objective: How to achieve it.
To attract employees: Job salary
To keep qualified employees: Bonus or incentive to stay e.g. shares
To stimulate effective performance: Payment by results
To teach employees new behaviours at work: Multi-skill bonus
To compensate for inconvenient working conditions: A separate allowance
• Monetary and non-monetary compensation
Compensation is made up of many parts. Although money (extrinsic compensation) is the most recognised, other factors can be just as rewarding.
Employee benefits are one type of non-monetary compensation and are intended to improve the quality of work life of an organisations labour force (Sherman and Bohlander, 1992). These benefits make up a significant portion of the wage bill. Although benefits were initially introduced as a bonus to employees, they have since come to be expected in the workplace (ibid). Employee input is integral in determining the type of non-monetary compensation that is the most desired (ibid).
Benefits (Sherman and Bohlander, 1992):
• Medical aid funds including health and dental plans
• Pension funds where the employer also contributes a percentage.
• Employee assistance programs where counselling and assistance are provided with day-to-day issues such as career planning and emotional trauma.
• Education assistance plans where the employer pays a portion towards further study. This often benefits the employer as the employee becomes more multi-skilled and efficient at their job.
• Child and elder care ...
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...e company’s overall strategy before determining the compensation structure. The way an organisation uses compensation can drive an organisation in specific directions (Noe et al, 2003). Therefore, great thought should go into deciding what type of compensation structure to use in terms of the whole organisations strategy and the chosen method should contribute to furthering the overall objectives of the organisation (Sherman and Bohlander, 1992). E.g., individual incentives will not fit into an organisation that wants to further a team-based approach to work (ibid). Compensation sends a message about what an organisation feels is important and the types of activities it encourages (Sherman and Bohlander, 1992). Compensation tailoring is an integral method of maintaining the budget (ibid). For this reason, many companies resort to retrenchments in economic downturns (Venter, 2003). An organisations compensation program determines the type of employees that it will attract as well as either increase or decrease the applicant pool (Sherman and Bohlander, 1992).
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Works Cited
Work Motivation and Compensation By Simon Biesheuvel Published 1984 McGraw-Hill ISBN:0074507184
Benefits are a key component in the total compensation plan for any company. Critically thinking and analytically processing must dominant the discussion when selecting which benefits to offer as part of a benefit plan. This is necessary to ensure that the right benefits will not only connect to the employees preferences but also protect the company’s financial health. These goals can be accomplished by, 1). Determining what benefits are important to the various employees groups by conducting surveys, analyze and interpret the data logically and implement changes accordingly. 2). Research the current business market and industry standards to ensure the organization benefits are competitive and positioned to attract top performers. 3) Determine the current financial health and impact on the organization to ensure the benefits program is both financially cost effective and targeting the desired results. These items will allow the company to foster an effective compensation program while establish a long-term collaborative working relationship between management, employees and the organization.
Compensation and benefit system help appeals to employees by attracting and retaining staff. Compensation system is a systematic approach to providing rewards to personnel in exchange for
Compensation Systems are combined rewards to employees for exchange for labor (Lippincott 2010). There are several different types of Compensation Systems, direct financial compensation, indirect financial compensation and non-financial compensation (Lippincott 2010). Direct financial compensation are wages, salaries, bonuses and commission. Indirect financial compensation are benefits such as leave time, retirement plans, training and employee services. Non-financial compensation are things such as employee recognition and a favorable working environment. I conducted interviews with three individuals from three different generations, the Baby Boomers and Generation X.
Intrinsic rewards are not patterned financial rewards are associated with the requirement for employees to achieve greater success , recognition, a sense of responsibility , influence and development of other individuals. The requirements of the above is a strong motivator and contrast to the one . Each employee has different needs and desires . Rate a tremendous appreciation and gratitude is enough to inspire us all because of the appreciation of the value of giving someone touches his soul and give vigor to keep trying. Appreciate or appreciated regardless of age or where only a thousand meanings. Skinner ( 1969 ) reveals that the reward is a reinforcer . Reinforcing Here the meaning is interrelated aspects to the values that influence an individual's needs . However , Wether states that reward is what an individual received in return for a given job . It is the responsibility of an organization or institution to provide compensation and benefits to employees or students commensurate with a workforce that has been poured . The importance of rewards and benefits are indeed undeniable. If the employee or student is not satisfied with the compensation and benefits provided , then this will result in the existence of such problems as absenteeism , job rotation rate employing high , declining productivity and not serious in doing work .
The company Steel Co, which has been established for around 30 years, has been in a steady decline during the current recession and although a Divisional Director has been employed by the owner the fortunes of the company have not improved. The staff is unhappy, unproductive and unimpressed by the Human Resource system that currently exists in the company. The pay structure that currently exists within the organisation has been much debated among employees who feel it is unsatisfactory. The Business Adviser will research Performance and Reward management tools in order to help the company develop a more suitable Performance and Reward system to use. A variety of sources will be used in order to evaluate the system and tools against other organisational frameworks. The pay structure within the company will also be looked at in order to identify any possible changes that could be made.
Many businesses consider compensation the primary reason that people decide to work for a company. Walmart is one of the largest employers that provide compensation packages for their employees, it's beneficial for them to understand the importance of compensation. This paper will discuss the compensation plan that most appropriate for this company. The paper will also cover internal and market consistent compensation systems, while evaluating the current pay structure and recognition of employee contribution. Furthermore, the paper will recommend two ways to improve discretionary benefits while evaluating the employee- sponsored retirement plans and health insurance program provided by the company. Compensation can empower some companies to motivate and satisfy employees while remaining competitive in the market.
Since the 1980s, it has been established that there must be a strong association between employee compensation and business strategy (Hufnagel, 1987). However, the development of strategically-oriented compensation scheme is a complex endeavor that requires consideration of numerous factors. Some of these elements are evolving employee needs, changing employee and societal demographics, the changing sexual composition of the labor force as well as transforming qualifications of job applicants (Dawson, 1995). It cannot be emphasized enough that strategic compensation enables an organization to align employee interests with those of the owners of the company (Santone, Kevin, & Britt, 1993). Indeed, numerous studies attest that effective compensation schemes can be tools for employee motivation, high levels of which can lead to excellent organizational performance. However, a sad reality is that not all organizations have strategic compensation programs that seek to align employee interests with that of the enterprise. This paper presents a proposed compensation scheme for Nike, Inc. (Nike), a company that has had issues with employee compensation, particularly for offshore factory workers (Taibi, 2013).
...r investigate what sort of rewards or fringes would their employee’s desire compared to the old method of monetary incentives for the beneficial for the company”.
With human resource management becoming the most comprehensive subject when it comes to the management of people in organizations, it is imperative to reiterate the importance of worker compensation in the confines of managing labor. The chief purpose of this term paper is to analyze the Soergel (1) report on the state of employee compensation in the U.S. Based on the report that was presented by the Labor Department of the United States; there were not changes in the patterns of employee compensation in the country. Therefore, it is quite necessary to explain the trend and the implication for work input and the upcoming performance of the labor market as a whole.
The U.S. government plays the enactment and enforcement roles concerning compensation in organizations. They establish and enforce legislative rules and standards for compensation that ensure and protect the fair and equitable treatment of employees and their well being (Milkovich, Newman, & Gerhart, 2016, p. 614). Through the Department of Labor, and its many subordinate agencies, the government’s mission is to, “foster, promote, and develop the welfare of the wage earners, job seekers, and retirees of the United States; improve working conditions; advance opportunities for profitable employment; and assure work-related benefits and rights” (U.S. Department of Labor,
Holland Enterprises is on a new strategic direction, to attract and retain the most talented employees and to reduce turn over. Human resource department has came up with a new compensation plan. In the propose compensation and benefits system plan , I will explain a new compensation plan for Holland Enterprises, also I will explain the components of the compensation and benefit system plan in order to attract and motivate employees to be productive . In order for the compensation and benefits system plan to be operational, the package should include a necessary level of compensations to fulfill basic needs, equity with the external labor market, equity within the organization (Henderson, 2006).
Management spends a huge amount of time to design incentive systems and schemes to motivate their workers and to ensure they work in their best possible manner. Motivating workers by giving them decent pay helps in winning employees heart to make the work done efficiently, significantly and effectively. The most effective way to motivate people to work productively is through individual incentive compensation (Pfeffer, 1998). An attraction of getting more is a powerful incentive to people for high performance. While most people agree that money plays a major role in motivating people, in organizations there is a widespread belief that money may also have some undesirable effects on morale.
Employee compensation and reward systems have undergone a couple of paradigm shifts since inception. Reward systems were traditionally compensation based and focused on the individual or the position (Beam 1995). After a recession in the early 1980's, employers turned to performance based models in an attempt to save money while still rewarding top performers (Applebaum & Shapiro, 1992). Today, the most successful organizations are using a total reward model, a hybrid of the performance based model combined with strategic human resource management planning to create reward systems that both benefit the employee and help organizations realize their operational goals (Chen & Hsieh, 2006).
As per Martocchio (2017), “compensation represents both the intrinsic and extrinsic rewards employees receive for performing their jobs and for their membership as employees” (p. 3). Therefore, compensation structures should achieve three objectives: attract top talent, motivate employees to perform at a high level, and boost employee retention rates (Kulik, 2004). In the business development sector, all three goals are vital to maintain a competitive advantage and increase market share. For example, the fifty largest business development corporations only accounts for twenty-five (25) percent of the industry’s total revenue (Zacks Equity Research, 2017). Thus, to achieve these objectives and maintain a competitive advantage,
A compensation package includes salary but also includes other non-salary benefits such as: health-care benefits, 401(k) plans, PTO (paid time off) and other perks. Businesses often utilize experienced Human Resources professionals to review, update and create salary scales and compensation packages for new hires. The total compensation package is often used as means of attracting employees who will complement the organization and should be consistently reviewed, acting as an incentive for retaining qualified staff. “Organizations that are not able to develop competitive pay scales along with strong compensation packages, face the risk of a competitor offering a more attractive package, which can result in employee turnover” (Dias, 2011, pg.