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QUESTION:IF EMPLOYEES UNDERVALUE THE COST OF BENEFITS, WHY SHOULD A COMPANY NOT DROP BENEFITS AND SIMPLY ADD

MORE DIRECT COMPENSATION. DO YOU AGREE OR DISAGREE WITH THIS STATEMENT? EXPLAIN USING RELEVAN T ORGANISATIONAL EXAMPLES.

TABLE OF CONTENT

INTRODUCTION

TYPES OF COMPENSATION

INDIRECT AND DIRECT COMPENSATION

COMPONENTS OF COMPENSATION

EMPLOYEE BENEFITS

EMPLOYER BENEFITS

MOTIVATION THEORIES

DATA ANALYSIS

CONCLUSION

REFERENCES

INTRODUCTION

During the beginning of the century, very few employees received compensation from their employers other than direct wages for the time they have worked. These employees were therefore responsible to cater for their needs of old age, poor health and even death. If vacations were allowed, it was usually endorsed but without pay. Fortunately for employees, employees benefit, made its debut in the 1940s and 1950s where it was agreed to be used as a form of compensation in addition to direct wages. This system has definitely accelerated during the past two decades, and has paved the way for several types of benefits to be introduced and the existing benefit system, expanded or modified. Furthermore, while

employee benefits were once fairly standardized and free of government regulation, employers must now make their decisions and verdicts complex in respect to the provision of benefits and methods with which these benefits will be funded.

Employees in all companies are seen to be its priority and most cherished asset, taking in consideration that without them the company cannot be functional. This high value placed therefore on employees gives them with the privilege to enjoy certain benefits and compensation provided to them by their managers which will definitely play the magic to encourage, boost and elevate their morals which helps to enhance productivity. Despite their eligibility or qualifications for these privileges and rare opportunities, it is becoming increasingly expensive and pains-taking for most employers and companies to run the management that is putting up with the cost of such benefits. Therefore, since they cannot provide for these benefitsthey are only left with one option which is taking into consideration alternative means of reducing benefits. One of such plans put in place, is providing benefit plans that are flexible. Employee benefits could include life insurance, health life insurance, vacation, and disability insurance, retirement plans, domestic partner benefit, paid time off, and maybe fringe benefits. In a situation where an employee performs well, he/she needs to be appreciated and rewarded which makes the emergence of compensation very glaring. Compensation therefore includes aspects such as salary, wage, salary structure and programs which will be in relation or in accordance with the job description, bonuses, commission and merit related programs. Benefits and compensation maybe different sides of the same coin, but they virtually mean the same thing and basically express the same meaning, ideas and characteristics.

Benefits Benefits may be defined as forms of values which are different from or separate from payments and are provided to the employee by the employer as a form of recognition and appreciation for their relentless efforts and contribution to the attainment of organizational objectives. Although benefits areviewed as illustrated, some of them are requirements from the state recommended for employees from their employers which may sometimes include both workers and unemployment compensation. Mindful of the definition of employee benefits,we are told that benefits are sub-categorized into Tangible and Intangible benefits.

Employee Benefits

This is a form of compensation or benefit provided by the employer in case of death, an accident, sickness retirement or unemployment. With this approach put in place, there is still confusion on whether the definition should include those benefits that are financed by employer contributions but provided under social insurance, social security and Medicare. On the other hand, the broadest definition of employee benefit includes all benefits and services, other than wages for time worked that are provided to employees in whole or in part by their employers. Some examples are social security, Medicare, temporary disability insurance, workers compensation insurance etc.

Intangible benefits are considered to be less direct and will include benefits such as a bosss reward and appreciation, possibility for promotion, and a comfortable office. Sometimes we could have a fringe benefit which practically refers to both forms of benefits. Tangible benefits are considered or referred to as direct benefit which can be seen in the form of health life insurance, life insurance disability insurance, vacation retirement plans and many more.

Compensation

Compensation is defined as payment made by an employer to an employee as recognition for their skilful contribution and extra efforts in achieving the companys goals, ina nut shell for executing their job excellently. The widely known forms of compensation are salaries, wages and tips. It should be noted that employers must be competitive and avoid too much generosity. Benefits that are given are known as entitlements. These cant be earned because they require no effort on the recipients part. Entitlements destroy a work ethic, because people have no incentive to work for something they virtually take for granted. Benefits that must be earned are incentives; they help to build a work ethic. Employees only reap this benefit from hard work.

Compensation is equally sub-categorized into two different categoriesthrough which it could be transferred onto some other person as variable pay, and base pay.

Variable pay on the other hand throws light on how well the person executing the job does it and some relative examples could be setting up a time scale, like a year and taking note of

when the targeted goals and objectives are achieved. Furthermore, we can also classify incentives asbonus plans which can be seen as an example of variable pay.

Base pay lays emphasis on the company and the market for the knowledge required on how to perform the role or task.

TYPES OF COMPENSATION

Combining compensation packages is no longer an abnormality that is combining pay with the actual job specification to be executed by an employee. In such a situation, it will include the minimum as well as the maximum amount of money that can be gotten at the end of the year in that particular role. When the employees work, part of their salary or payroll is withheld and it is used as a contribution towards the federal income tax, state income tax social security contribution, and finally employee contributions to the costs of some benefits which mostly includes retirement and medical insurance. Organisational jobs are classified into two main forms, the exempt and non-exempt.

Non-exempt jobs will usually consist of unskilledor entry-level jobs which is usually rewarded hourly. Employees can as well get paid for overtime worked such as public holidays, and certain days of the week. A very important point worthy of note is the fact that both jobs will receive equal pay range for anyone involved in that same particular form of task, implying that no one is entitled to receive more money for performing that same task.

With jobs that include the management, professionals and the other skilled jobs, all these can be classified under one group known as exempt jobs. Here, the salary ranges are fixed with particular amounts of money expected within a time frame and its normally a stated amount during the end of the month. Once here, it is not a surprise to start receiving certain compensations and benefits much higher than that of non-exempt jobs. Even though they obtain this extra compensation and benefits, it is not bizarre to find out that those at nonexempt jobs can receive or earn more money due to the fact that they are capable of putting in extra hours of work.

Diagram 1.Types of Direct compensation.

Direct Compensation Direct compensation is defined as monetary benefit which employees earn or receive, that isprovided by employers in return for the work and services they have rendered to the organisation. These monetary benefits will therefore include salary, conveyance, leave and travel allowance, house rent allowance, medical reimbursement, bonuses and special allowances which are only given at specific time period. Direct compensation is alsodefined as what a service provider receives for services rendered to an organisation or an individual on behalf of the organisation. An example of this type of compensation will consist of loan fees, expenses put on forfeited account that will have to be linked to specific participants accounts. Studying the diagram above, basic salary is money an employee receives at the end of the day week or month for the tasks or jobs hes performed and also money he will receive from his employer for services rendered. Conveyance will entail the provision of a transportation medium, be it a car or a cab, for the employees to facilitate their arrival at work. To retain its best, cherished and most productive employees, an organisation schedule leaves and travel allowance to these group. The organisation gives them allowance to visit any destination of

their choice with their families but this is relative and dependent with the employees position in the organisation. To provide social security and motivate its employees, house rent allowance is allocated to employees who are nationals as well as foreigners. During festivity periods, organisations motivate their employees with bonuses and also provide them social security. A healthy body means a perfect job done, and mindful of this principle, organisations provide their employees with medic-claim for them and their entire families. It could include treatment bills and health-insurance reimbursement. Finally, organisations are bound to provide social security and motivate their employee that is through the provision of benefit programs or plans such as, special allowances in the forms of overtime, mobile allowances, insurance, club membership, meals and travel expenses.

An example of such benefit program can be seen in MTN Cameroon (mobile telephone Network Company). The management of this organisation is aware of the fact that without human resource, the organisation cannot reach its target nor achieve its goal. Therefore based on the companys engagement and demands, special compensation packages are being arranged for employees, believing it will boost their morals to work hard, deliver and lead the organisation to its target. Most of the employees are given allowances for their housing, risks in certain operations, out station allowances if you are on a mission and what have you. For those employees who adore going on trips, paid holiday schemes are available for them after a hard and tiring session of work which definitely yielded positive results to the companys credit. Besides their wages, other allowances like transportation, breakfast and launch are also part of this benefit program all in the name of motivation.

Indirect Compensation Indirect compensation is defined as non-monetary benefits apportioned to employees as appreciation for their services offered to the organisation.These include overtime policy, hospitalization, car policy andinsurance;leave policy and travel assistance limits, holiday homes and retirement benefits. It can also bedefined asany payment a service provider will receive which is not direct compensation but from another source either which could be the organisation or its various branches. This will only be possible if the reward received is linked to the services provided and also to the organisation or the individual connected to the organisation. Some examples of indirect compensation will be discussed below.

Making sure their employees give in their very best performances, organisations need to provide them with their basic facilities (Maslows hierarchy of needs), security, value and allowances during overtime periods. These could be in the form of overtime pay as well as travel facilities and relaxation parties just to show them how much you value them and respect their comfort. Managers and CEOs should bear in mind that, All work without play, makes Jack a dull guy. Too much work load and thoughts of deadlines could hinder the time laid aside for rest. Caught in such a circumstance, the employee will might just become dull and it might also lead to brain fatigue. Hospitalisation will include employees given allowances for yearly check-ups. It should equally be extended to the families thus assuring them of social and emotional security. To ensure employee emotional security and life, organisations provide life and accident insurance and this goes along to make employees to have the feeling of belonging in the organisation. Organisations as well provide employees with leaves and travel allowances to go for holidays with their families and some organisations go an extra mile to arrange for tours for their employees. This will go a long way to relief them of work stress and acting as a refresher for any task when they resume work. Holiday homes are provided by organisations to their employees and these are mostly in highly wanted holiday locations. Lastly organisations make sure they take care of their retiring employees by providing them with pension and benefit plans which assist them when they retire. A vivid example of indirect compensation is Orange Cameroon another mobile telephone company. This company is known to be of French origin and therefore it runs under the French cultural system just like any other organisation will have their own culture. The Frenchman is known to be a holiday fan that is moving from on continent, island, or beach just to catch fun and see new places. Thus this organisation does everything to make sure their employees (mostly the senior staff from France and a few from Cameroon) are entitled to a holiday trip to any destination of their choice. For such holiday trips, the company offers accommodation in a classy four star hotel of the employees choice and their meals for the duration of this holiday. Added to this, they still receive their monthly pay and might come back to a big promotion if they actually performed well throughout that business year.With such forms of motivation, many employees will wish to join such a company or organisation in order to be accorded so much value and return for what you have put in. When they are sick, they visit the doctor with their families on the organisations account, they are also being covered by insurance that is both their property and lifes

They are further assured of retirement benefits just in case they retire forcefully maybe due to a defect or disability that might hinder them from working for life. Diagram 1.1 below will show how they are positioned.

Diagram 1.1 Types of Indirect Compensation

Components of Compensation Job-Analysis Job analysis is a systematic approach used in defining the job task, its requirements, responsibilities and evaluation. It is also used in discovering if the applicant or the potential employee has the required level of education, skills, and knowledge and training that will suit the job position to insure competency and performance. Through this, the job worth is also revealed that is measurable effectiveness of the job and the contribution of the job to the organization. In a nut shell, this basically sets up the compensation package. Its importance is that it enables resources to be analysed while establishing strategies to accomplish the business objectives. It has as its base demand supply analysis, recruitment, compensation management and training need assessment and performance appraisal. A good example of job analysis can be drawn from one of the biggest supermarket in Cameroon SKT. This supermarket has virtually all the products you can think of. From house hold equipments to clothings for male, female and children. Therefore to recruit a staff or an employee for such and Organisation, the management has to be sure if they are the right

people for the job. Consequently, job description will help in the pre- selection process. The assistant manager of SKT and his team will have to evaluate the applicants one by each to test if they have the required skill, knowledge and attitude which suits the job position, then the role and responsibilities will come to play which is a link to the job description and finally their educational background and work experience to see if they meet the criteria for the job which is job worth. This we can tell are very important points worthy to note when running a successful organisation. You need to maintain the standards and also the performance level especially in the domain of customer services. Sometimes illiterate, lazy and rude employees are selected due to negligence on the part of the selection team which will later cost the organisation its customers and will consequently paint a bad image of it. More so,the organisations goals and long term objectives cannot be met. In this light SKT ensures humility, respect for clients, trust and hard work, are a hallmark of all staffs besides their educational achievements and relevant work experiences.

Pay Structure

When organisations sort out job analysis, they now move on to the next decision which is the pay structure for employees. Pay structure is known as the process whereby the pay load of jobs in an organisation is determined. This takes into account internal and external analysis in order to build up a compensation package for any job within the organisation. Internal, external and individual equities are the most important and well known pay structures practised by most organizations. The job description goes further to give a vivid understanding of a job and its worth. Pay structure is very important in an organisation because it determines employee value within the company and goes further to analyse and create a good and fair treatment of employees within the organisation. It is also used to know what incentives, to be apportioned to which employee according to their placement in the organisation. We will look at pay structure in two different ways, which are examined below.

External equity on the other hand is concerned with what happens out of the organisation to determine the compensation strategy to be adopted which is by using the market pricing analysis and assessing competitors. By doing so, employee compensation is created alongside the prevailing market compensation package. This paves way for a fair treatment of employees and also goes an extra mile to commit organisations in organising attractive

compensation packages to their employees in order to motivate and retain the best talents in the organisation. An example of external equity is the UBA (United Bank of Africa), branch in Cameroon. It is known for its excellent customer service and excellent interest rates with which it lends out money to its clients. Employees in this organisation work tirelessly to ensure they leave a trade mark in the banking sector. With this in mind, the management is not taking the efforts of its staff for granted. They have a team created specially to investigate the market rates that is the salaries and other forms of benefits being offered by rival banks in the area such as Ecobank and even Afriland first bank. This team brings data that is later developed and evaluated. When proven worthy, it is then implemented to restructure and ameliorate employee benefits by boosting their morals via the introduction of some promotional programs, research and development programs, and why not training workshops to enable them develop their skills in areas they are found lacking.

Internal equity looks at the job positions within the organisation taking note of the hierarchy that exist therein. In this level, the senior management levels primary objective, is how to create, develop, evaluate and implement a balance on compensation packages that will be provided to employees in relation to their job profile, their level in the organisation, and their status in relation to job Classification.

Examples of internal equity can be drawn from a micro-finance agency in Cameroon called express Union. This organisation is a micro finance that enables national to send money throughout the national territory and even to neighbouring countries such as Chad, Gabon, Congo Brazzaville and Equatorial Guinea. Since the introduction of this organisation, so many monetary problems have been terminated. People used to travel just to go and give money to family members in some remote areas where big banking institutions cannot reach. This made it easier even to people without bank accounts to send and receive money even from overseas. The benefits and profits of this business now attracted so much attention as entrepreneurs and other rich business people now came together to and opened up their own agencies. Therefore there was competition in the market and for Express Union to continue the lead; it has to set standards, which involved serious pay packages to their employees in respect to status and profile. The senior management made sure managers, assistant managers, and all cashiers

were to work overtime, transfer rates were slashed, pay rates and overtime benefits were increased. In this regard, services were improved to attract more customers and maintain status. This could not happen with the emerging agencies, they cannot bear the cost of implementing such motivation packages to their staff, and therefore they had to crumble.

Salary Survey

In our contemporary society, if you want the bestfor your staff and also wish to maintain a certain standard within the market rate compensation, you have to be able to arrange compensation package that should not fall below the organisations standard, since organisations use salary survey to set up compensation plans. Salary surveys can be seen as findings carried out in order to set up the companys compensation strategy. This can be carried out either by the management or alternatively, they might go in for an already established report on compensation strategies by a reputable research organisation. This report will be able to portray or illustrate the compensation plan of a particular company that was drawn about 2 to 5 years back. The analysis will be carried out in relation to secured and well defined objectives in research. Organisations conduct salary survey to achieve certain objectives such as, the need to know the level of their competitors in the market and what they have in stock for their employees in relation to the market rate. In order to be well informed and stay updated about the industrys standard, you have to make sure every employee is contented with the compensation they get proportionate to their performance. Its also advantageous to create and implement a good and attractive reward or compensation strategy. Two types of compensation surveys exist which organisations undertake.

Diagram 1.2

Components of Compensation

Job-Analysis

Job analysis is a well organised way of outlining the job role, requirement, evaluation, description, and responsibility. It can be used to gain information on an individuals skills, level of education, training and knowledge for a job position. It also lays out what needs to be done effectively and helps gives an exact amount of compensation package for every job position. Job analysis gives an overall summary of the company available resources and puts out plans to attain its set goals and objectives. It lays the route for recruitment, training needs and assessment, demand supply analysis and performance appraisal. We can further break down job analysis into three sub components. Job position will be the first and defines various jobs and employees in the organisation. It is very important when it comes to compensation as it gives an insight of the job in the organisation. For instance, higher level employees say managers will receive higher pay as compared to their junior employees. Equally their non -monetary benefits will vary as their responsibilities are different. Job description is the next and here it is the requirements for a particular job position that an organisation looks for in any applicant or employee. Here the level of education, level of experience needed, skills requirement are clearly spelled out. Having in mind that the roles and responsibilities attached with the job are a key determinant of a persons level of education, experience, skills it is not left out. It also helps in giving an understanding of employee performance standard. Job worth or evaluation is there to determine how much a particular job position contributes to the organisation attaining its goals and objectives. It helps to determine what is expected from every particular job profile and by so doing can easily determine what the compensation strategy to be used for the job profile in question. In all, job analysis is a very important component in determining the compensation strategy for any organisation. It should be regularly used in organisations to determine compensation packages, to determine which employees need training and also those who are lacking some

particular skills as well as to have knowledge if current employee performance is in accordance with what the organisation requires or has as its standard level of performance.

Pay Structure

When organisations do sort out job analysis, they move to the next decision which is the pay structure for employees. Pay structure is known as a process whereby the pay load of jobs in an organisation is determined and takes into account internal and external analysis to draw up the compensation package for all internal jobs. Internal, external and individual equities are the most important and renowned pay structures used. The job description goes further to give a vivid understanding of a job and its worth. Pay structure is very important in an organisation because it determines employee value within the company and goes further to analyse and make for good and fair treatment of employees within the organisation. It is also needed to determine which incentive should be allocated to which employee according to their placement in the organisation. Pay structure will be assessed in two dimensions, which are examined below.

Internal equity looks at the job positions within the organisation taking note of the hierarchy that exist and it is mainly concerned with putting a balance on compensation provided to employees in relation to their job profile, their level in the organisation, level of status and job classification

External equity on the other hand is concerned with what happens out of the organisation to determine the compensation strategy to use by using the market pricing analysis and assessing their competitors. By doing so, employee compensation is formulated alongside the prevailing market compensation package. This gives way for fair treatment of employees and also goes a long way to make organisations to give very attractive compensation packages to their employees so as to motivate and retain the best talents in the organisation.

DATA ANALYSIS

A companys success and failure depends on the treatments, employees obtain. If they must be satisfied, in order to enhance productivity, they must be valued and well compensated for their efforts. As such, companies have developed benefit schemes as a means of appreciating their employees for their contribution in the companys success. Some employees are retainedand spaces are also created for experts leaving other rival companies. The benefits act as incentives and encourage hard work which builds job satisfaction. Several advantages are derived from instituting employee benefit schemes which is not only limited to the employee who gets an additional non cash benefit but stretches to the employers who can cut a part of their salary and rather provide their employees with additional benefits.

Employer Benefit

Employers believe benefits schemes offered to their employees will ease their flow of cash. It will be evident in a situation where an employer uses a salary sacrifice system, meaning the employee gives up part of their salary inreturn for benefits. Considering a situation where there exist a large work force, negotiations could be made for discounts with benefit providers since the provision of non-cash benefits will be cheaper and less costly for the employer, other than providing part of the salary which would have been given to the employee. The provision of benefits is also profitable to employers given that when more benefits are offered to employees, the company gets a number of tax evictions which will secure the company some money an increase its relation with its employees. Though it is subject to barriers and taking its complex nature into consideration, it saves money that can back up the companys finances

Employee Benefits or Advantages

Quite a number of merits are obtained for accepting employee benefits such as a company car, pension schemes whichdoes not need the employee to do them in person. Therefore, in case certain activities and utilities an employee pays for are inclusive and provided as

benefits e.g. mobile handsets, it will be better placed and have a clear picture of their cash flow, relieving them of stress to always set aside money to cater for these items. Thiswill increase their savings and expenditure on other things of interest. Via negotiation and cooperation with employers, employees do obtain benefit packages which provides them with tax advantages as this is not just limited to the employee but stretches to the employer, implying both parties are favoured. An example could be if an employee gets benefit from the employer which pays for their mobile phone it will be treated as a nontaxable benefit. After a yearly period, items like this will indicate a significant tax saving.

MOTIVATION THEORIES

Expectancy Theory.

These theories are sometimes classified in opposing camps, because psychologists consider human behaviour to be reflexive and instinctive governed by stimulus response. This explains how individuals are basically rational and purposive in choosing their objectives and also how their behaviour can change at any time. An American psychologist named Edward C. Tolmanis credited with formulating it first in the 1930s and he stipulated that human behaviour is motivated by conscious expectations more than response to stimuli. This means action in prospect will lead to a desired goal or outcome, hence the term expectancy theory. An example is an employee in need of cash for his sons fee, will work very hard if he is promised to receive an increment in salary.

MASLOWS Hierarchy of Needs

Abraham Masl

s hi rarchy of needs renders the theory of moti ation so important which

has gi en managers an idea on how they could influence their employees Maslow suggests that people are moti ated not by desires such as rewards but by their personal needs In all Maslow is tal ing about employee benefit as they are gi en in relation to what humans need and desire Below is an illustration of Maslows hierarchy of needs

Looking at the diagram, we discover that each set of needs gives rise to the next, implying when a particular need is met, the individual automatically starts craving for the next set of needs up the ladder The basic needs of mankind which are found at th bottom of the table e are known as physiological needs which when satisfied, the need for safety gradually crops up The next is the need for social belonging, and love With the love, safety and physiological needs are obtained Humans ill then take a step towards esteem needs and when that has been achieved, they will head for the final stage which is self-actualisation Maslow in his hierarchy of needs lays out the ground route for benefits to be made available to every person entitled to one, given that once a person attains a certain level and fills confident with , he will want to move forward to satisfy other desires which at that stage in time they cannot provide

CONCLUSION.

While money is not a primary long- term motivator, poorly structured compensation packages will demotivate employees. Money will also heavily impact your ability to attract and keep good employees. Its beneficial to examine your companys compensation package to determine if it helps or hurts your efforts to manage. Therefore, most employees will prefer to go in for packages with more benefits than direct payments, due to its privileges and security especially when you are a hard worker, skilled, educated, dedicated, flexible and above all trust worthy.

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