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
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.
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.