CRAFTING EXCELLENCE : NAVIGATING COMPENSATION AND BENEFITS

 

(OpturaDesign, 2018)

Introduction

To be successful for any company in today’s corporate world paying well for their employees and offering good benefits are very much important. That has the ability to make employees happy, make them want to stay with the company and do their best in the work they perform. In current business world where really difficult to find good talent due to the increasing competition companies use compensation and benefits as way of attracting potential people to the company and make employees stay motivated. This article looks into the compensation and benefits studying different parts of the compensation and benefits while studying the importance of it and the difficulties companies have to face.

(Org Communications, 2013)

Compensation & Benefits Explained

(Tess C. Taylor and Miriam Mourad, 2023)

When we explore the compensation, we are able to identify two main types of compensations methods. Those are,

• Direct Compensation
• Indirect Compensation

        When a company give money directly such as their wages to an employee that can identify as direct compensation. (Pour and Thibodeau, 2024) explains direct pay as monetary earnings tied to an employee's work and value to an organization. Here are few of direct compensation methods,

• Salary – Employees receives a salary that's paid in weekly or monthly basic as agreed when joining to the company. But there are occasions employees get paid daily or bi-weekly too. Most of the employees receives salary are people that organization has long term relationship such as contracts.

• Bonuses – Employees get bonus from the company for achieving targets or other achievements. Sometime bonuses can also be given by companies when it has good financial results in completed year. Bonuses not mandatory payment. Normally companies give bonuses as per the criteria.

• Commission Payments – Commission is payment type of that is normally used as motivation for achieving set targets. This is common in the field of sales but not limited in that field.

        (Indeed, 2023) states that Indirect compensation includes everything an employer offers their employees in addition to their base salary or wages they earn during each pay period. There’s a more detailed explanation as (Pour and Thibodeau, 2024) states that Indirect compensation refers to ancillary compensation that has financial value and this type of compensation is often divided into monetary or non-monetary categories. Indirect compensations methods also important as direct methods as it can help to attract people to companies when they are offering and something other companies doesn’t offer. Because direct payment methods are mostly common between organizations and indirect methods are the ones can make difference.

• Monetary Methods - Monitory methods of indirect compensation can be included such as health or insurance benefits, ability to buy company stocks or pensions provided by companies.

• Nonmonetary Methods - This type of indirect compensations methods has huge range such as paid time off, parental leave, meals, accommodation facilities, vehicles, laptops or mobile phones provided by the company.

Importance of Compensation and Benefits

(Tess C. Taylor and Miriam Mourad, 2023)

Good compensation package plays an important role in the success of any company by increasing employee motivation and their satisfaction. Here are few of the reasons why compensation and benefits are important,

• Attraction of Top Talent: When companies offer competitive packages, it can attract skilled candidates to the company assisting the company to recruit best employees to the company. (Leonard, 2019) explains that people are always looking to put themselves in the best possible position financially and those who are worth a specific salary amount often know their value and will seek a position that pays accordingly. Therefore, when companies offer good packages it’s a good benefit for company to attract top talents.

• Retention of Talent: Good compensation package assists to make long term relationship between the employer and employee as employee tend to stay in the company without looking for new opportunities when they get paid well. This will reduce the company turnover also.

• Increasing Morale and Satisfaction: Good compensations and benefits package can improve the motivation of the employees to work up to their best ability and create a good connection to the organization.

• Ability to achieve Pay Equity: (Nguyen and Bottorff, 2023) explains pay equity as the legal concept that equal work deserves equal pay regardless of an employee’s race, gender, ethnicity, age, religion or other non-job-related factors. Reasonable compensation makes sure employees feel valued by the company and will be satisfied with their salaries when comparing with the market. That is one of the main importance of good compensation & benefits package.

• Control in Negotiations: Complete compensation & benefits plans shows support for the employees which will give advantage when negotiating with the employee unions.

        When a company closely consider these reasons when they create its compensation and benefits package create a culture of appreciation and more engaged and will lead to happiness of the employees ultimately tend to work best as their capabilities.

Strategies for Effective Compensation and Benefits

As per (Indeed, 2023) an effective strategy that outlines how to determine compensation can help a company manage costs and improve employee quality. There for its important for all the companies to have effective compensation strategies. Otherwise, they will not be able to stay in the competition of the corporate world. Here are few ways a company get insights to create good compensation and benefits plan for the company,

• Conduct Industry Survey: Regular industry surveys needed for the companies to identify the existing rates and get aware about legal requirements related to compensation and benefits.

• Offer Complete Compensation Package: When a company offers complete package of monetary and non-monetary compensation it gives a motivation for the employees as even though monitory packages are common within the industry non monitory ones are different and can make an interesting package when added with monitory compensations.

• Performance based Compensation System: When employees are getting paid as per their performances it motivates employees to work harder to earn more. This automatically will be a reason for the improvement of employee performance and ultimately company performance too.

Challenges in Compensation and Benefits Management

Organizations has to face various challenges in compensation management. Companies has to manage a balance between offering a good competitive salary and their budget limitations while considering the multiple requirements of the employees. In addition to that companies have to consider legal requirements also when preparing compensation packages which will make the task more difficult. Therefore, when planning compensation and benefits packages companies need to carefully consider the financial situations, employee requirements, legal requirements and other factors can affect to the compensation packages.

Conclusion

Simply compensation and benefits are important part of making employees motivated at the workplace. Organizations has to face lot of challenges in compensation & benefits area but if a company uses the correct strategies, they will be able to create good compensation and benefits package that will retain the good employees. That will be a main reason for company to be successful when consider the long term benefits.

References

Indeed (2023) Indirect Compensation: Definition, Importance and Examples, indeed.com [online]. Available at: https://www.indeed.com/career-advice/pay-salary/indirect-compensation [accessed on 12.04.2024]

 

Indeed (2023) What Are Compensation Strategies and Why Are They Important?, ca.indeed.com [online]. Available at: https://ca.indeed.com/career-advice/career-development/what-are-compensation-strategies [Accessed on 12.04.2024]

 

Leonard, K. (2019) Importance of Compensation in the Workplace, smallbusiness.chron.com [online]. Available at: https://smallbusiness.chron.com/importance-compensation-workplace-38470.html [Accessed on 12.04.2024]

 

Nguyen, J. & Bottorff, C. (2023) What Is Pay Equity And Why Is It Important?, forbes.com [online]. Available at: https://www.forbes.com/advisor/business/pay-equity/ [Accessed on 12.04.2024]

 

OpturaDesign (2018) Conceptual business illustration with the words compensation and benefits [image]. Available at: https://www.shutterstock.com/image-illustration/conceptual-business-illustration-words-compensation-benefits-1013940391 [Accessed on 12.04.2024]

 

Org Communications (2013) compensation and benefits in animation [video]. Available at: https://www.youtube.com/watch?v=pqtYQb9nbRk [Accessed on 12.04.2024]

 

Pour, C. H. & Thibodeau, P. (2024) compensation management, techtarget.com [online]. Available at: https://www.techtarget.com/searchhrsoftware/definition/compensation-management [Accessed on 12.04.2024]

 

Tess C. Taylor & Miriam Mourad (2023) total-compensation [image]. Available at: https://www.aihr.com/wp-content/uploads/total-compensation.png [Accessed on 12.04.2024]

 

Tess C. Taylor & Miriam Mourad (2023) Why-Is-Compensation-And-Benefits-Important-1 [image]. Available at: https://www.aihr.com/wp-content/uploads/Why-Is-Compensation-And-Benefits-Important-1.png [Accessed on 12.04.2024]