Types of Compensations to Motivate Employees - Essay Example

Types of Compensations Introduction Importance of compensation to motivate employees: When talking about the business world, employees are the most important stakeholders that affect the production and growth of the organization directly. It is thus very important to ensure that all employees are happy and satisfied with their jobs. In every kind of business whether manufacturing or producing, goods or services, big or small, labor or machine intensive; employees will always matter in some way or the other. There are many ways that can be used to give employees the importance and satisfaction that they wish for in an organization. The best way to keep employees motivated is through various types of compensations. Compensations can be direct or indirect which give employees benefits and importance which would motivate them to work in the organization. Employee motivation is a major part of the human resources department. The human resource managers in organizations ensure that each and every employee is given the importance which matches their position and caliper. It is very important that the employers prepare compensation programs that help in keeping the employees motivated. Employees’ performances in an organization matter the most in this era as businesses are growing rapidly and entering the competitive market both local and international (Madura, 2006). Types of compensation to motivate employees Direct compensation: The simplest type of compensation that tends to increase the motivation of employees is their wages or salaries. Most of the employees have reported to say that the major boost they get to work efficiently is the increase in salaries. Sometimes it may be difficult to believe that it’s all about money; but in this era it is simple to say that money is the most important reason why people work. Employees would want to work in organizations where their salaries are expected to rise as their work experience enhances. Most people come out of their homes to work for money. Money is the primary reason for which employees search for jobs and work. Human resources managers of all organizations know that money is the best way to motivate employees to stay on organizations and be satisfied with their work. Managers offer employees increase in salaries and expected increases in future if they work for more than a year etc to motivate them and keep them working. Employees also believe that salaries encourage them to work and enhance their performances (Gully, 2013). This is a type of direct compensation which reflects the involvement of money in employee motivation. Other forms of direct compensation would include bonuses and holidays and leaves. Holidays and leaves are immensely needed for all employees as everyone needs a break from work. Employees would feel motivated in those organizations that do not exploit them, but rather understand them and give them time for their social and personal lives. Giving weekends off and easy timings such as an 8 or 10 hours job would motivate an employee rather than a job which is for 12 or more hours without weekends off. Paid holidays are another way to motivate employees on days such as Christmas holidays, Easter, annual leaves, or other important days. Sick leaves are also a way employees can be motivated as they feel that their employers care about them also instead of only their work. This creates an understanding relationship between the employers and employees. Funeral leaves are also granted which are paid and allows employees to attend the funerals of their loved ones and mourn their death. Maternity leaves are granted to mothers who are about to deliver and who have already delivered. However, in some organizations maternity leave is provided to the fathers as well to assist their wives and spend time with their baby. These kind of leaves motivate employees to believe that their employers think about them, and thus they should give them efficient work in return (Silverstein, 2009). Bonuses are also a way to motivate employees directly. Bonuses can be performance bonus, longevity bonus, and signing bonus. Performance bonuses are compensations that are rewarded to the employees after they have finished a specific project, or their performance analysis has been done. This is a monetary benefit based on performances and they tend to motivate employees to perform better and gain the monetary benefit. However, performance bonuses may tend to be short term or occasionally based on projects or yearly performances. Longevity bonus is a type of compensation which is rewarded to those employees who have stayed in an organization for a long time as specified by the company’s policies. It may also be given to those employees who have stayed on a job more than the specified period. This type of bonus can motivate employees to join companies for a long term considering the benefits of the future. Signing bonus is an amount which is paid to a new employee of an organization as an incentive of joining the organization. This type of bonus can motivate the employee from the first day and efficiency would increase considering the importance and value being given in the business (Gully, 2013). Indirect compensation: Indirect compensation is the various types of benefits that are provided to the employees other than the monetary benefits. These benefits include insurances, child care, retirement benefits, and many others. Insurance includes medical insurance which motivates employees towards the value that is provided by the organization and encourages them to work efficiently. Dental insurance allows employees to have their dental treatments under their insurance. Group life insurance is provided by the organization to all its employees that can be utilized as long as employees are in the organization. Long term disability insurance protects the employees from loss of work in case of a long term disability. It gives employees the motivation and dedication towards the organization. Accidental death insurance is also a policy which many companies adopt in order to motivate employees. This policy pays an amount to the beneficiary if the employee has died in an accident. This motivates employees as the organization is taking care of the beneficiaries as well. This satisfies the employee and encourages him to work efficiently. Unemployment insurance is provided to employees if they leave their job until they don’t get a new one. These types of compensations are indirect but they motivate employees to work efficiently in the organization (Lauby, 2005). Retirement benefits are benefits provided to employees after they have retired. This is known as pension more commonly and it promises benefits to the employees even after they have left the organization in certain conditions. Retirement plans motivate employees as they believe that the organization can secure their future and guarantee them life annuity. Retirement benefits encourage the employees to work in the organization until they retire. Flexible timings are provided by the organizations as benefits for employees and to improve their working conditions. These indirectly motivate employees and satisfy them. Flexible timings and good working conditions are one of the areas of an organization that motivate employees to work. Nowadays employees want a social life and friendly environment in their workplaces to stay connected and satisfied (Madura, 2006). Tuition assistance is a policy in which employers offer employees to finish or obtain a degree by funding their education. Many organizations have motivated their employees by giving them a chance to obtain their degrees alongside their work. Many employees are motivated from this policy as they are willing to study and work together. Some organizations also offer children education fee to the employees which is a benefit for which many employees would want to work. Such benefits motivate employees. Non-monetary benefits play a major role in motivation of employees as it fulfills many of the needs of employees. Employees may agree to work for low wages if they are offered additional wages. Child care is another beneficial policy which motivates employees. In this policy, organizations take care of the children’s education, health, and day care facilities. Many organizations provide separate day cares for the children of employees. Children can spend time in the day care while the employees are at work. This eases the employees’ pressures and they tend to work more efficiently increasing their performances. Most female employers would be looking for jobs which provide benefits for their young children as well. This policy is, hence, very useful in terms of motivating employees (Bruce, 2011). Conclusion However, motivating employees is one of the major tasks of the human resources department in every organization. It may be tough as employee needs vary in regard to the different personal and social lifestyles. Motivation of employees may also vary on these personal needs for instance some female employees may be motivated through maternity leaves, child day care facilities, and children education and medical assistance; on the other hand, the motivation for another worker might be monetary benefits such as bonuses and increments. Motivation is a complex phenomenon which needs to be handled carefully so that all employees are addressed separately and given enough importance to be satisfied. Employee efficiency may vary in regard to different types of compensations granted to them. Conclusively, compensations, direct and indirect, act differently in motivating employees. References Bruce, A. (2011). Manager’s Guide to Motivating Employees. NY: McGraw-Hill Professional Gully, S. (2013). Human Resource Management. London: Cengage Learning Lauby, S. (2005). Motivating Employees. NY: American Society for Training and Development Madura, J. (2006). Introduction to Business. London: Cengage Learning Silverstein, B. (2009). Best Practices: Motivating Employees. London: HarperCollins Read More