Recognizing Employee Contributions - Assignment Example

Recognising employee contribution Incentive pay structure based on performance of individuals, groups and company As competition is growing in the retail sector, the company requires implementing innovative and productive strategies for optimization of effectiveness of resources. Besides various other resources, workforce is an essential resource for the company, therefore it is important that the company implement competitive and innovative compensation strategies in order to retain and motivate its employees. It was ascertained that the company should pay its employees salary that has an appropriate mix of fixed as well variable components. In this context, two pay structures have been proposed so that employees can be provided with compensation package that is appropriate from individual and team perspective (T. Milkovich, Newman & C. Milkovich, 1999). The first kind of compensation package is incentive at risk compensation. Under this structure, the company will be focusing more on sales performance of employees as it is a retail company primarily centered towards on physical and online sales. Since sales job involve a certain degree of risk taking, it is necessary that employees are rewarded for their risk taking capabilities. Such an approach motivates high achievers to perform better in their field as well as motivates under achievers to pursue greater hard work. At risk compensation should be monetary as well as non-monetary in nature, that is, apart from performance bonus employees should be appreciated on a large scale for their efforts for boosting their self esteem (Werner & Ward, 2004; Hendry, 2012; Bloom & Milkovich, 1998). The second approach to compensation structure is add-on incentives. Unlike risk incentives, add-on incentives are not related to sales target of employees. Instead, it is related to various other roles that an employee plays in an organization. For instance, bonus related to employee performance in team motivation, team management, group activities, organizing abilities, task delivering capabilities and so on and so forth can be considered under add-on incentives. Add-on incentives act as a hygiene factor for employees as per Herzberg two-factor theory. It is noteworthy in context of the paper that add-on incentives enhances team and organizational performances by large while at risk incentives motivate employees at individual level to deliver greater performance (Werner & Ward, 2004; Hendry, 2012). Legal requirements in context of employee compensation In an increasingly competitive business environment, work pressure on employees has increased by many folds. With increased competition, work related risks have also increased tremendous and low productivity and performance is not tolerated in most organizations especially those operating in retail sector. In such sectors, legal regulations are very important for protecting the interest of employees. Employees often feel vulnerable in context of not only performance but also with respect to their age and gender. There are numerous examples of workplace discrimination that can be observed in the present business environment (Price, 2011). In many organizations, for instance, women employees are not easily hired at top management or employees are underpaid despite desired performance. There are also situations where only specific employees are promoted at authoritative positions as well as nepotism is practiced. In such situation, employee benefits and rights are protected through legal interventions. The legal intervention in present competitive environment is necessary because jobs are limited and unemployment is on rise, therefore many unfair practices are rarely reported. Legally mandated benefits are also known as workers’ rights which are referred as a set of certain human rights pertaining to labor relations between employer and employees. Presently, all these rights are considerer under the purview of labor and employment law. The basic benefits of employment law are basic fixed pay for workers, fringe benefits, well-defined work hours and appropriate working conditions. In different countries, the law has been modified as per requirement but the core legal benefits can be extended to paid holidays, sick leave, medical insurance, life insurance, cafeteria, retirement plans, stock option, severance packages, health and wellness programs, work-life balancing activities, education assistance and scholarship fund, employment assistance programs, protection against discrimination and prepaid legal services. The various legal benefits differ from organization to organization depending upon size, capabilities and operations of a particular organization (Hendry, 2012; Lambert, Larcker & eigelt, 1993). Additional benefits that can be provided to employees and factors that need consideration while designing benefit plans In context of the company that has been mention in this paper, three additional benefits that can be provided to the employee for the purpose of motivation are: Personal loan facilities, family health insurance program, employee stock option. Personal loan facilities: Personal loan facilities during emergencies can act as a source of employee engagement. This facility will make employees feel that the organization care for them and will boost their loyalty towards the organization. In addition, a personal loan from an employee’s own organization makes them feel more secure at vulnerable time (Price, 2011). Family health insurance program: For every human being, family forms one of the basic psychological needs as per Maslow. Therefore, health of family members is naturally a reason of concern for employees. If the organization provide health insurance program for immediate family members, it will stimulate an employee emotionally and keep them focused on work (Hendry, 2012). Stock option: Besides various monetary compensation packages, employee stock option can be an important source of employee engagement. Through stock option, employees are provided ownership to the organization making them feel more connected therein. Providing stock option to employees allows them to participate in organizational decision making (T. Milkovich, Newman & C. Milkovich, 1999; Huddart & Lang, 1996). Factors that are to be considered while designing compensation package In the present competitive market, two prime factors that require special attention while determining compensation package of employees are: net worth of the employee and external market and economic condition. Competition in the business sector has reached the cutthroat level and organizations are vying to hire the efficient employees. Hence, a productive employee is an asset for an organization and the management should provide a highly satisfactory compensation package to retain the employee. Another important factor that should be considered while determining compensation package of employees is various economic factors such as increasing cost and standard of living, inflation and cost of goods and services (T. Milkovich, Newman & C. Milkovich, 1999; Bloom & Milkovich, 1998). Assessment of common techniques of communicating compensation and benefit plans Communication of compensation and benefit plans can be a complex process and require sufficient attention on the part of human resource department. The communication method should be designed in such a way that it is easily understandable to all employees. As a number of clauses are included in the compensation program that employees may find difficulty to understand. In generally, compensation and benefits related programs are communicated by human resource department either through emails or by sharing a common database with all employees where continuous changes in compensation packages, incentive related information and base salary of employees as per their grades (Freitag & Picherit-Duthler, 2004). It is important for an organization to ensure that employees are well-aware of their total compensation instead of just incentives. This is important because total compensation reflects the net worth of an employee to an organization. However, it is important that messages regarding total compensation are conveyed in a clear manner so that employees understand what they are reading and none of the important parts go unnoticed (Freitag & Picherit-Duthler, 2004). It is important for management to communicate the compensation and benefit plans to employees from time to time at multiple occasions. For maintaining efficiency of the communication process, it is not sufficient to inform employees just once in a year. Communicating benefit and incentive plans regularly helps in building employee morale, thereby retaining them for longer period. Compensation structure and bonuses can be communicated during team meetings, performance reviews and at annual meetings (Freitag & Picherit-Duthler, 2004). Ethical risk related to variable incentives and recommendations to mitigate the same There are a number of ethical factors related to high level of variable incentives. A feeling of over expectation and greed from high variable pay may engulf moral sense of employees resulting to practices such as fund embezzlement and client misrepresentation. A number of authors have advocated that high level of monetary incentives extinguish motivation and result in self-satisfaction, diminishing performance and creativity and fosters short term thinking (Mehran, 1995; Tenbrunsel, 1998). For managing an unethical situation, it is important that an organization distribute various incentives in monetary and non-monetary benefits proportionately emphasizing more on the non-monetary component of the benefits. Such benefits can be setting up scholarship fund for children, employee stock option, company sponsored family holidays and so on. Benefits that are easily monetized initiate feeling of greed among employees hence are should be minimized. The other recommendation in this regard is to distribute the compensations with longer time gap such as quarterly and yearly bonuses. In addition, the distribution should be done publicly by an organizational leader of higher order such as Chairman. This approach will enhance public status of employees and prevent them from any kind of malpractices. References Bloom, M. & Milkovich, G. T. (1998). Relationships among risk, incentive pay, and organizational performance. Academy of Management Journal, 41(3), 283-297. Freitag, A. R. & Picherit-Duthler, G. (2004). Employee benefits communication: Proposing a PR-HR cooperative approach. Public Relations Review, 30(4), 475-482. Hendry, C. (2012). Human Resource Management. London: Routledge. Huddart, S. & Lang, M. (1996). Employee stock option exercises an empirical analysis. Journal of Accounting and Economics, 21(1), 5-43. Lambert, R. A., Larcker, D. F. & Weigelt, K. (1993). The structure of organizational incentives. Administrative Science Quarterly, 438-461. Mehran, H. (1995). Executive compensation structure, ownership, and firm performance. Journal of financial economics, 38(2), 163-184. Milkovich, G. T., Newman, J. M. & Milkovich, C. (1999). Compensation. New York: Irwin/McGraw-Hill. Price, A. (2011). Human resource management. Connecticut: Cengage Learning. Tenbrunsel, A. E. (1998). Misrepresentation and expectations of misrepresentation in an ethical dilemma: The role of incentives and temptation. Academy of Management Journal, 41(3), 330-339. Werner, S. & Ward, S. G. (2004). Recent compensation research: An eclectic review. Human Resource Management Review, 14(2), 201-227. Read More