Total Compensation Methods to Compensate Employees - Case Study Example

Employees are an asset to the organization. When we think of our company's success we look at measures and steps to achieve it. The first thing that would help us in achieving our goals would be our employees. The question arises how to make them achieve those goals, how to make them more productive, how to keep them happy and most importantly how to retain the best of all employees. To answer such question we have to look from the employees' perspective. What are they expecting in return of their efforts, what would other organizations give in return of the same efforts, what security do they have in terms of career and so on. They only thing that would keep our employees happy is a well-planned compensation and benefit strategy program. Compensation and benefits, like we all know are rewards that an organization gives to its employees in return of their efforts and services that they have given. These rewards may vary from direct to indirect forms. There are various methods to compensate employees and each method and benefits may have its own impact on the employees and on overall the organization, and this is what we are going to discuss below. Compensation Methods Skill Based Pay This is one method of compensating those employees who have certain needed skills, whether job related or not. This is a creative way of paying for the internal skills and gives a flexible job design, where employees could move from one assignment to another on periodic basis. Impact on employees This encourages employees to increase their skills which in return would increase their values to the organization and hence improve their competitive position. Employees may receive pay increases, job security, greater mobility and the satisfaction of being more valuable. Impact on organization Organizational units are provided with a greater degree of versatility in dealing with absenteeism and turnover. Broadbanding This is another method of compensating employees. Here those employees are compensated who are the key performers. They are though paid within a certain pay range. The organization here does not need to promote its employees, as they would already be paying them more comparatively. Broadbanding normally provides flexibility, entrepreneurial management style and performance orientation. Impact on employees Provides flexibility to the employees, promotes lateral development of employees, helps in developing employees skills and encourages a team focus and directs employees attention away from vertical promotional activities. Impact on organization It make compensation system more simpler that de-emphasizes structure and control and places greater importance on judgment and flexible decision making. Group Incentives, Gain Sharing, Success Sharing These are other methods of compensating employees. Here the compensation, which is the certain amount of profit of the organization, is given not to one but a group those employees who are identified directly with the improvement. The key here is to share the success of the organization with the employees. Impact on employee When the employees see that gain sharing supports a true pay for performance culture, hence they see their progress linked directly to the organization. The commitment to the organization is thus increased. Impact on organization Many organizations already having gain sharing as their means of compensating employees and have found an improved organizational communication, especially between labor and management and between different functional units. Benefit Programs Workers Compensation This is one kind of legally required benefit, which like others is meant for benefiting the employees. This benefit provides a degree of financial protection to those employees who have incurred expenses resulting from job related accident or illness. The organization pays for the workers compensation insurance, and the expense is tied to their past experience and job related accidents and illness. Impact on employees Employees' loyalty increases when they see organization thinking of them in time of need. Impact on organization Here the organization proves that we are there for our employees in time of need and we value our employees. When an organization thinks good for an employee, the employee would automatically in return think good for the same organization. This would overall improve the organizations efficiency. Relocation benefits There are some benefits, which are termed as employee services. Relocation benefit is one of those benefits. This kind of benefits includes shipment of household goods and temporary living expenses that covers all or portion of the real estate costs associated with buying a new home and selling the previously occupied home. Relocation benefits may include special allowance payment, house-hunting trip, destination services, lease break and so on. Impact on employees When the organization provides its employee with relocation benefits, the employee feels that the organization is with him in searching a new home. When the above mentioned expenses are covered by the organization the employee is more relaxed and his potential output is maintained. Impact on organization The organization in this way keeps its key performers in their hands and pampers them so that the overall efficiency of the organization is not affected due to these matters happening at the employees end. Hazard Pay This is an extra pay given to those employees who work under extremely dangerous situations and conditions. Like Military pilots are paid extra in the form of flight pay because of the risks involved. Impact on employee The employee gets motivated to visit hazardous areas when paid extra. They become more challenging. Impact on organization The organization can achieve its goals by catering those areas. They even get an edge over others who do not get to visit such areas. Employee Stock Option Plan This kind of a benefit is a defined contribution plan in which the organization contributes stock shares to a trust, which then allocates these stocks to participating employees on the basis of employees' earnings. Impact on employee The employees remain more interested in the increasing value of the organization in terms of stocks, and they feel themselves as one of the owners of the organization they are working for. They try to put in their most so that the organization does well in the competing market. Impact on organization Stock option plan helps in aligning employees interests with those of shareholder, as well as helps in retention of key employees. Conclusion Recollecting all the compensation methods and benefits mentioned above one can say that an organization is incomplete without its employees and vice versa. Both here have to play the role of keeping each other happy. We know that one of the reasons of success behind top organization is their salary and benefit package. The organization is not obliged to provide all the benefits stated in the books but to assist employees in such a way that most of their legal and moral responsibilities are fulfilled. References 1. Nadel, Robert S. (2003). Compensation Alternatives; Changes in Business Strategy, Plans and Expectations. Retrieved August 27th, 2006, from http://www.hrspectrum.com/art_compalternatives.htm. 2. Recardo, Ronald J. & Pricone, Diane. Is Gain Sharing For You. Retrieved August 27th, 2006, from http://www.qualitydigest.com/jul/gainshre.html. 3. Relocation Benefits Summary. Retrieved August 27th, 2006, from http://www.basf.com/careers/careersrelocationbenefits.html. 4. Robert L. Mathis, John H. Jackson (April 26, 2002). Human Resource Management. 10th Edition. Read More