Human Resource Management (HRM) has never been as
significant as it is today. Companies want to attract, retain and motivate
brains to meet objectives. Today Humans are regarded as one of every company’s
assets so they need to be efficiently and effectively managed. One of the tools
companies use to attract, retain and motivate its people is Compensation
Management. In this article, I shall define compensation and benefits along
with their advantages for a company and its workers.
A
compensation plan, explained as the motivational factor which makes employees
show up to work, is the most central concept in the study of human resources.
HR professionals around the world spend most of their work day working with
compensation plan benefits.
Importance
of Compensation in the Workplace
Benefits
Employees today are not willing to
work only for the cash alone, they expect 'extra'. This extra is known as
employee benefits. Also known as fringe benefits, Employee benefits are
non-financial form of compensation offered in addition to cash salary to enrich
workers’ lives.
Employee benefits are not
performance-based, they are membership-based. Workers receive benefits
regardless of their performances. Employee benefits as a whole have no direct effect
on employee performance, however, inadequate benefits do contribute to low
satisfaction level and increase absenteeism and turnover in employees. So every
management has to carefully design a benefit package.
ADVANTAGES
OF COMPENSATION AND BENEFITS
A well designed compensation and
benefits plan helps to attract, motivate and retain talent in every firm. A
well designed compensation & benefits plan will benefit to the employees in
the following ways.
1. Job satisfaction: Employees would
be happy with their jobs and would love to work for the organization if they
get fair rewards in exchange of their services.
2. Motivation: We all have different
kinds of needs. Some of us want money so they work for the company which gives
them higher pay. Some value achievement more than money, they would associate
themselves with firms which offer greater chances of promotion, learning and
development. A compensation plan that hits workers’ needs is more likely to
motivate them to act in the desired way.
3. Low Absenteeism
4. Low Turnover
Tips to Determine a Salary Scale for Employees
The subject of salary is a top
concern for potential hires and employers. As a business owner or facilitator
of salaries, having a payment scale to reference when determining an employee's
compensation allows for smoother fiscal transactions as well as clear
communication within an organization. Being able to explain how salaries are
determined in relation to a potential hire can make for a desirable employer,
which in turn attracts the best talent.
1. Assess the Position
Before determining a salary scale,
it's important to assess the value of the position for which you're going to
pay. A helpful starting point can be creating a detailed description of the job
that outlines all expected duties and responsibilities, the formal job title,
the time commitment, and other pertinent information.
2. Research Wages
A key component to determining a
salary scale is offering competitive payment. By researching the median pay for
a given position, you can forecast what an employee will expect to make.
3. Determine a Max and Min
Once you know the value of a position
and the median pay, you can figure out your base line and maximum. To be sure
that you're creating a sustainable position and employee, you have to be
mindful of creating a feasible salary that your business can comfortably
support.
4. Decide How You'll Pay
While payment methods certainly
address salary versus hourly or biweekly versus monthly, it also spills over
into other ways of rewarding your employees. Finding ways to sweeten the pot
for the employee can give you a fair amount of wiggle room in the salary you
pay.
5. Be Flexible and Open to Negotiation
Though it can sometimes be
uncomfortable, you should expect employees to inquire about their salaries and
try to negotiate. Employees who can respectfully assert their worth often
demonstrate desirable negotiation and professional qualities that will likely
benefit your business.
Conclusion
Each and every company must identify
its mission, understand the perspective within which it has been operating and
developing a policy and structure for meeting its’ objectives and goals. To
retain, attract and motivate the employees required for high levels of performance
the human capital plan it adopts must contribute to its success.
The direct compensation program and
strategy utilization must be fitting the context and contributing to
organizational effectiveness. The rate of the pay must be fair, perceived and competitive
as appropriate by all companies. If the management of the any company believes
pay rate above the market averages for some or all employment produce benefits
it must paying above market averages for some or all occupations produce
benefits it must influence those benefits resulting against the costs. There
are a number of options open if the company believes paying for performance
fits the organization’s context and provides more advantages than the
disadvantages. The resources which are available in the organization for
example; management skills, money, freedom from regulatory/citizen intervention
etc. should be a main concern, and one that should be measured early in
negotiations. The effect on workforce is also a critical concern.
Before cutting down the benefits and
to add direct compensation the company should be determining the direct
compensation strategy and the programs that are best for them. What is vital is
that the system of the pay used is appropriate and effective, provided the company’s
mission, environment objectives, culture, strategy and structure.
However the direct compensation
system is not always the best. We can find its bad influence in some of the
organizations.
