You are on page 1of 8


Before analyzing the cost of benefits which employees undervalue and
replacing it by direct compensation it is advisable to discuss about the benefits and
compensation first. Let’s start from a question, why does one work? There may be
many idioms to answer this question like to get experience, to update self
according as the demand of time, expand the knowledge, for security, for
socialization, for self esteem and to get self actualization. But apart from these the
most important and first answer, common to all, will be to get something which
directly compensates the employee. According to Maslow’s Hierarchy of Need,
human nature and performance is based on different needs. So to fulfill these needs
anyone is pushed by internal drive. So an employer always should take an account
of the needs of the employees and make the policy of motivation. So, one of the
motivations is benefits which an employee deserves on the basis of organizational
culture of human resource management. Employee benefits are various non-wage
compensations provided by the employers which are in addition to their normal
wages or salaries. An employee exchanges wages for some other form of benefit
which may refer to as a salary exchange. Some of the common benefits are legally
required benefits, unemployment insurance, vacation and holidays, sick leave,
parental leave and family leave etc. For example, I work for a nursing home which
provides me the paid annual leave for 5 weeks in a year.
Any forms of the pay provided to an employee by an employer in return of
their work are referred as the employee compensation. Employment compensation
can be either direct financial payments or indirect financial payments and other
facilities. As the direct financial payments an employee may obtain wages, salaries,
incentives, commissions and bonuses whereas as indirect financial payments one
may obtain free insurance paid by employer, vacation and so on. The direct
financial compensation is made on two ways. They are on basis of time and on
basis of work performance. In today’s time most of the organization made their
payments to employees on time basis. Even compensation made on time can be
categorized in different types. One is the daily or hourly wages specially paid to
clerical and lower level employees and sometime even high level employees, and
the managerial level payment is made on either weekly or monthly or yearly

what are the foundation on which compensation system is based. employee networks. For example. another way of paying an employee is on the basis of amount or number of production he/she makes. Similarly. how many organizations use the compensation providing strategies in different situations and who should be the responsible if a company makes the decision to drop out the benefits and emerge only direct compensation will be discussed on next chapter. health and wellbeing benefits. is direct benefit system is suitable in all organization. discounts. Similarly. Indirect compensation depends upon the human resource management culture and awarding system of the related organization. The regulation of United Kingdom doesn’t allow them to get annual payment. different flexibilities. share purchase etc. 2 . on performance base of payment one should complete the minimum number of production or sales in given period of time and he or she will be paid extra if the number exceeds the limit. most of the students who are working legally in UK get their direct financial compensation on hour basis.leaving some exceptions. For example. Barclays provides indirect compensation to its employees in different ways like: Remuneration. what are its loopholes and strengths. So there is always a system of allocating the compensation to an employee What may be the reason because of which an employee undervalue the benefit and what may be the alternatives to cope with the issues.

This doesn’t cover only the marketing strategy or financial strength or sales success in the relevant market environment. Human resource management is one of those departments which are always seeking the innovation on their functions and responsibilities. Suppose an employee is getting $8 per hour on as the basic pay for first forty hours in USA. Highly growing competition on market has compelled an organization to come with a distinct strategy which gives the specific values to the mission and vision of the organization. The compensation to an employee in any responsible organization can not be put straight away according to the perception of the owner or the management.1 Legal Consideration This includes the laws which specify the aspect of compensation like minimum wages. the company should pay $12 per hour for the extra hours which the employee does in a week. 2.1 Basis of determining the compensation provided to an employee. For example in most of the developed countries the time limitation for working hour is 40 hours per week and there must be the facilities of extra payment in case of overtime work to be done by an employee which is under Fair Labor Standards Act.2. They must go through the certain complied criteria.1. The common fundamental bases are discussed as follows: 2. Any organization future can not be predicted if it is not run with different alternatives plan in the entire departments. Literature Review In today’s time compensation has become a challenging issue for many organizations. Usually if an employee is asked to do more then the limited hours then the company should pay 50% more on the payment that the company is paying on minimum pay rate. overtime rates and benefits. In the first part of this chapter it is tried to make clear on what basis compensation is made which helps to interpret regarded issue of the assignment. It is already mentioned that an organization can only indicate the compensation or pay rate if it fulfills the common regulations and system in the relevant market. If a company doesn’t follow such regulation then it may be pulled on 3 .

2.1 Developing an Aligned Reward goal its Strategy own mission and values.3 Impact of Competitive strategies. The organization has certain strategy which helps to make the effective pay 4 . In many countries an organization should provide written explanation to the union about the pay plan to the employees. corporate policies and compensation What can an organization do to accomplish the specific mission Determining the behaviors or actions required on employees to complete the mission What is the measurement of comparative fulfillment of current Required compensation program to reinforce those behaviors on employees The measurable relationship between the compensation provided and Fig: 2.1. Similarly. As an example: In Nepal the Union of reputed schools have negotiation that they will increase the pay rate to their employees by fifty percent more than what government makes the rise in its pay to government employees. For example we can take the payment of $640 million made by Wal-Mart on January 2009 to settle 63 wage and hour suits alleging for failing to pay overtime and break time facilities.court for allegation. there are some more acts like equal pay act.2 Influences of Union on compensation Decision In many countries before making the decision about the compensation or benefit. 2. employee retirement income security act and other legislation affecting compensation. To achieve accomplishment An organization has that it creates the overall reinforcement package through direct compensation or pay or benefits and so on. a company may have to go with the related union of the similar organization or the employees.1.

1 shows how an organization should create the reward policy.2 Equity Internal Equity: Pay made to same level but in different department External Equity: compared to organization outside.1. The public image of the organization may be affected by equity on determining pay. Individual Equity: compared to the coworker who have very similar work responsibility. 2. low-paid job with few prospects’.system and called as aligned reward strategy. Figure 2.2 Forms of equity 2. The four forms of equities to be considered in determining the pay as shown in the fig 2. Mc Donald has fought unsuccessfully to get it back on the comparative market and get removed from the Oxford dictionary where it is defined as ‘an unstimulating . Staff turnover may be affected by the strategic pay plan in a company. For example. The direct compensation includes the pay made according to their level or res 5 . Fig: 2. Aligned reward strategy has effective impact on the pay policy.3 Why direct compensation is made to employees. They always perceive the input or contribution made to organization and the reward they are getting in return. Procedural Equity: The fairness on the process of allocating pay.4 Impact of equity on determining pay The motivation of employees is highly affected by the comparative pay made to them.

all helping you end up with more cash in your pocket.Primark What we offer Salaries are competitive and subject to annual review. we like to ensure our staff are cared for financially. 6 . Other benefits include:   Structured training and development programmes Promotional opportunities for everyone  Contributory pension scheme  Childcare Voucher scheme Store Management 23 days' holiday (increasing to 25 days after 3 years' service) Health insurance (Assistant Manager level and above) Bonus scheme (Deputy Manager and above) Buying & Merchandising 20 days' holiday (increasing to 23 days after 3 years' service) Flexi-time scheme Health insurance (Assistant Buyer level and above) Bonus scheme (Buyer level and above) Retail assistants Variety of shift patterns available to suit your lifestyle Tesco Share our Success At Tesco. So whether you have been with us 3 months or 3 years we run three successful share schemes.

Staff Privilegecard To reward you for your loyalty. To help with this we have negotiated discounts and special offers that are available exclusively to Tesco staff. and after that you can take them. tax-free. Planning ahead to your retirement is easy with our award winning.Shares in Success So. based on salaries. And eligible staff also have access to exclusive staff discounts with Tesco Personal Finance and Tesco Telecoms Pension We look after your future too None of us know what the future holds. You can use your savings and bonus to buy Tesco shares at up to 20% less than the market price. stop or change the amount you invest at any time. And if you keep the shares in trust for 5 years you'll get even more tax advantages. 7 . You buy shares at the market price every 4 weeks. With a Tesco pension you are able to understand how financially secure you will be when you decide to retire. Tesco pension scheme. saving tax and National Insurance on the salary you use to do this. or take the cash. we give free shares to everyone who's worked here for one year at the end of the financial year (February). As well as pension provision you have access to a life assurance scheme that will provide financial protection for your family. to thank our people for the success they've brought the business. but you can be sure that peace of mind and financial security for our staff is very important to us. Your leisure time Our staff work hard. We share a proportion of our profit amongst our staff.the staff loyalty card that gives you 10% discount and Clubcard points on most Tesco products. after a year working at Tesco you will be given your Privilegecard . Save As You Earn Every October those people who've been here a year get the option to save up to £50 every 4 weeks for either 3 or 5 years and receive a tax-free bonus at the end. Buy As You Earn After three months working with us you'll have the chance to join the BAYE scheme. so we believe they should be able to make the most of their leisure time. These Tesco shares are held in trust for 5 years. You can start.

holidays and gym membership that are available all year round. we have some great discounts with top healthcare companies. to help take the burn out of healthcare costs. From saving money with childcare vouchers to taking time off work for a career break or extended holiday. There are also special offers throughout the year. so we've introduced a range of policies that will help you find a better balance between your work life and home life.There are discounts on theme parks. Protecting your health To ensure that staying fit and healthy doesn't cost our people an arm and a leg. dental cover and private medical insurance. at Tesco there are a variety of options available to support your lifestyle. to make sure there's always something for everyone. 8 . Supporting your lifestyle We recognise that Tesco staff have busy lives outside of the workplace. We offer exclusive discounted rates for staff on health cash plans.