Compensation and Benefits Management - Essay Example

? Compensation & Benefits Management Affiliation: Human Resource Management (HRM) gainedits significance in the professional arena like never before. Organizations require to attract, sustain and encourage brains to accomplish goals. Nowadays humans are considered as one of the most important assets required to carry out the tasks effectively and efficiently. Among many techniques which companies utilize to attract the potential minds, keep and encourage its people is Compensation and Benefits Management (Zingheim and Schuster et al., 2009). Compensation & Benefits Management An effective compensation and benefits plan is one of the most crucial human resource procedures. A well equipped compensation and benefits policy assures effective returns for an organization. There is a famous axiom according to which a person will always have to offer things to people in return for what they acquire from them, in short, give and take. Compensation refers to this trend; however in financial terms. Compensation is the employer’s reaction towards an employee’s effort. It determines the financial worth an organization offers to its workforce in return of their services. Since employees are not motivated to work merely for the money alone, they want ‘extra’. This extra can be termed as the employee benefits. It is also commonly known as the fringe benefits. Employee benefits are non-fiscal compensation suggested in addition to money for the enhancement of employee’s well being (Biswas, 2012). Contribution of an effective compensation and benefit system towards organizational effectiveness An effective compensation and benefit program supports to attract, encourage, and maintain talent in an organization. A well planned compensation and benefits philosophy can benefit an organization in a number of ways (Henderson, 2006). Workplace satisfaction: Through effective compensation and benefit management, workers would be content with their occupations and would be motivated to perform better if they are awarded with adequate appraisals and incentives in return of their services. Encouragement: Every individual poses different motivational triggers. Many of them are motivated by money and willing to work for companies which offer higher pay. While some consider self-accomplishments as a greater motivation for themselves and tend to work in an environment where they find greater opportunities of learning, growth and promotion. Thus, a compensation policy that targets employee’s requirements is more likely to encourage them to work in a desired manner. Lower Absenteeism: Through an effective compensation and benefits management, employees would not want to miss any day of their work. They will be happy with the way they are paid as well as with other incentives they desire. Minimum Turnover: If the compensation and benefit management is effective enough, then the employees least want to shift the organization. Employee’s Well-being: Through offering numerous types of incentives to your employees alleviates them from specific fears. The employees will perform with more confidence (Henderson, 2006). The city’s largest employer, Holland Enterprises after facing a massive turnover rate recently, needs to have an effective compensation system comprising of few major objectives. It has to empower the organization so that it can attract and maintain talented individuals. The compensation and benefits management should encourage employees, nurture a sense of equity and offers a reward for their efforts. The program must help, interact and strengthen the organization’s culture, norms, and long term competitive strategy. Moreover, the compensation and benefits management should develop a cost structure which determines the organization’s potential to pay its employees. Finally, it has to coordinate with state laws and policies (Idemobi and Onyeizugbe et al., 2011). In order to attain Holland Enterprises’s business and functional goals, it must rely on the participation of its human resource. Holland Enterprises’s compensation and benefits management play a significant role in the organization’s capability to attract, encourage and maintain a quality workforce (Martocchio, 2010). Compensation and benefit philosophy Holland Enterprises should be dedicated to a complete compensation outlook that perceives compensation as counting base salary, short-term inducement pay, benefits, retirement funds, leaves and bonus. A key element of an effective compensation and benefit philosophy should be the maintenance of a meaningful degree of competing with the appropriate external market (Zingheim and Schuster et al., 2009). Pay structure architecture (pay grades, pay ranges, and pay width) Compensation & benefits management in numerous organizations inquire their human resource experts to design base pay structure from initial level or reform the current structure to accomplish their altering requirements. The Holland Enterprises should establish a pay structure policy guidelines and design pay grades with the help of minimum and maximum required extends of the pay grade range. The organization should determine overlap between pay grades. Also, they should realize if their company requires more than one pay structure and then evaluate its reason (Zingheim and Schuster et al., 2009). Every organization must create their own pay policy line, which is a patterned guideline of proper information that expresses the middle value of tasks that have been determined or categorized to have a specific value. In order to be effective in maintaining its employees and encourage them to work, Holland Enterprises must establish a salary pay scale for its employees within their business. Hiring employees and offer them random salaries can be a mistake. Since, the decided salary scale can inspire the business, so select a compensation philosophy sensibly (Biswas, 2012). Ratio of base pay to incentive (bonus) pay Base pay to incentive which is also referred to as pay for performance is typically awarded for particular performance outcomes rather than merely for time jobs. Although, incentives are not the key to all employee challenges, they can do much to enhance employee performance. Individual and team efforts or performance objectives are not easy to determine. Since, they should neither be too striving nor too simple to attain. It is most appropriate for employees to determine the coming year’s performance objectives once current year outcomes are known. However, the manager should avoid the excitement to rely on employee performance objectives on an exceptional year. When that occurs, both employees and manager can become upset. In these situations, managers mostly give their employees discretionary bonuses by the end of the year to cover up the loss of performance based incentives (Henderson, 2006). Annual incentive program should be built around the expectations that the Holland Enterprises has of itself. Bonus program members can wish to achieve least acceptable performance and get a bonus payment 90 percent of the acquired target standard of performance or better minimum at 60 percent of the time (Idemobi and Onyeizugbe et al., 2011). Emphases on external equity or internal equity In order to run a business effectively, the company requires to create a compensation strategy that acquires the two aims of paying wages considered reasonable for employees, while offering a financial outcome on the investment for the employer. Pay equity has two ways. The first one is externally led by market forces, while the second one focuses on internal elements, led by the employer’s valuation of the job. Managing external and internal equity is an active procedure demanding human resources to stay cautious regarding the changes that occurs in market situations and business demands. The market based pay approach to compensation gives the inspiration of the external market on pays priority over internal equity (Martocchio, 2010). Principle type of benefits to include Benefits are crucial methods of meeting employees’ requirements and desires. Employers regularly utilize optional benefits as incentives to endorse employee endurance, by attracting and sustaining a good workforce. However, the prime role of employee benefits is to offer various types of income defense to those employees who are facing income deficiency. Such income defense offers employee security and socioeconomic sustainability. There can be five principal employee benefits which should be focused by the Holland Enterprises: (1) disability income substitute, (2) medical cost compensation, (3) retirement income substitute, (4) instinctive unemployment income substitute, and (5) survival income substitute. Various compulsory and voluntary components of each of these types are mostly combined to offer a benefit package to a group of employees that complements the resources and aims of the organization supplying the benefits (Zingheim and Schuster et al., 2009). References Henderson, R. (2006). . Compensation Management in a Knowledge-Based World. Upper Saddle River. New Jersey: Pearson Education, Inc.. Biswas, B. (2012). Compensation and Benefit Design: Applying Finance and Accounting Principles to Global Human Resource Management Systems. New York: FT Press, pp. 71-80. Idemobi, E., Onyeizugbe, C. and Akpunonu, E. (2011). Compensation Management As Tool For Improving Organizational Performance In The Public Sectors: A Study Of The Civil Service Of Anambra State Of Nigeria. Sacha Journal of Policy and Strategic Studies, 1 (1), pp. 109-120. Martocchio, J. (2010). Strategic Compensation: A Human Resource Management Approach. 6th ed. New Jersey: Prentice Hall, pp. 100-120. Zingheim, P., Schuster, J. and Dertien, M. (2009). Compensation, Reward and Retention Practices in Fast-Growth Companies. WorldatWork Journal, 18 (2), pp. 22-39. Read More