Professional Documents
Culture Documents
on
Important issues of compensation management- A critical
analysis
Course Title: Compensation Management
Course code: HRM 412
Section: 02
Submitted To
Submitted By
Name ID Participation
Mehenaj Sultana Bithy 2017-3-10-037 20%
Ummun Mosharrat Lamia 2017-2-10-146 20%
Syed Tanjil Ahmed 2018-1-10-039 20%
20%
This paper will help you to know about the proper concept of necessity of compensation
planning. This paper address what a company must do when it comes about their employee
compensation issue. In this paper, you will get to know about how a HR department works for
organizational development and profitability through employees’ compensation. It will help you
to know that, how to assess the employee pay structure and also in which manner make a layout
of compensation programs for different categories of employees. After overviewing this paper,
you will learn the whole concept of compensation management & related issues.
The objective of the assignment is to learn about the impact of Compensation programs on
improving organizational overall performance. Also, after doing this assignment we have learned
how effective compensation can help HR managers to boost employee motivation and use the
motivating factors in an organization. One of the major objectives of this assignment is to get a
clear knowledge about the connection between HR Planning and other HRM activities. Also, we
have learned about the connection between Compensation strategies, Business level strategy, and
corporate strategy in detail. Lastly, we have learned how and why strategic compensation
planning needs to be developed according to the changes in different business-level strategies
and corporate strategies.
2. Main Body
2.1 Literature Review:
1. Overall effective organizational performance can be ensured through providing enough and
competitive compensation package
a. In today’s speeding world, developments have made it more essential than ever for
businesses to make sure they have a strategic, holistic and integrated tactic to compensation.
To participate in a tough ground, now organizations need the support of some
knowledgeable, involved and motivated employees more than ever. Here, compensation and
benefits is a primary motivator and rewards for employees. Compensation can be an effective
influence only if it is essential to people and it is seen to be tied to their performance in ways
that are supposed to be credible and direct. Without rewards, a company is planting seeds for
high turnover, low productivity and long-term failure.
The possibility of this study is all about the connection between the compensation and
benefits with the job satisfaction among staff. This study will conduct an inspection to
support the judgement. The data gain from this study will be able to offer valued
understanding on the impact of compensation and benefits in the direction of job satisfaction
among staff. From the outcome of the study, we can have a clear idea and perception of the
association between compensation and benefits and job satisfaction among the staff. Besides,
we also can classify clearly the variable of the job satisfaction among the staff.
Broad study has shown that job satisfaction has a straight impact on the performance of
employees in different levels of profession. It is linked to employee motivation and
performance. For the business, job satisfaction of its employees means a work force that is
motivated and committed to first-class performance. Then again, to the worker, job
satisfaction carries a pleasant emotional state that often leads to a progressive work approach.
A satisfied employee is more likely to be innovative, flexible, creative, and trustworthy. For
that reason, the concern of job satisfaction among personnel must be explored and discussed
adequately.
b. Compensation for employees addresses one of an association's greatest and most vital
concessions. With a perfect structure, the compensation strategy can lead the organization to
a supreme profitability. On the contrary, misleading structure of compensation management
can turn the organization into a failed one in the competition. Any pay procedure should
emphasize on the exceptional necessities, objectives, qualities, and culture of the association.
To stay in the competitive world, one organization must design a clear, well-planned design
to acquire talented employees who will be able to bring variety in the working process. Also,
to retain them, very premier level of compensation structure will be needed. This can boost
the employees’ performance to take the organization one step ahead by contributing more in
their workplace. Perhaps the most ideal way organizations can give effective rewards that
show clear arrangement with organization esteems and objectives is to give HOC rewards.
So, the structure to provide compensation of any organization muse be focused to create
uniqueness of the organization. [ CITATION CarolynKick \l 1033 ]
2.2 Analysis
a. Identify the relationship between competitive compensation and organizational overall
performance.
Compensation strategy should be able to guarantee the retaining of the employee, employee’s
satisfaction, the development as well as performance the employee. Over-all findings showed
that it holds positive notable connections among incentive allowances, bonuses, fringe benefits,
and salary. In brief, there is a co-bonding between these variables, which undoubtedly consider
performance as a connection among the compensation benefit schemes, levels of employee
contentment, and turnover rate. This concluded that organizations with upgraded compensation
system may have an impact on their employees. This will psychologically encourage them to be
in the organizations. Linking “compensation to performance” is one of the strategies being
followed all over the world in all sectors for talent management and employee retention.
Generally, it is called "Pay for Performance" or "Performance-based pay" to describe that
compensation depends on the performance of the employees and their contributions to attain the
organizational goals. The vigorous relationship between the compensation elements schemes
leads to a strong assumption of employee retention.
Nevertheless, several organizations only focus on satisfying the customers and tend to neglect
the attention in satisfying their employees. In reality, customer’s satisfaction can be attained if
the employees are satisfied. A satisfied employee will always do more work and therefore,
makes it easy to satisfy the customer. Besides, motivation can also influence an employee’s
performance. For instance, if employees are motivated and satisfied with the compensation
offered, they will perform with full commitment and as a result, the performance level will
significantly improve.
b. Show and explain why rigorous assessment and continuous improvement is needed to design
compensation system to attain its effectiveness.
A good and better compensation is a must for every company, as it provides an employee a
reason to stay with the organization. The followings are some reasons for compensation
management that why rigorous assessment and continuous improvement is needed to be
effective-
Improvement of compensation system is necessary because, it tries to give accurate return to the
employees for their contributions to the organization. It expresses a positive monitoring on the
efficiency of employees and encourage them to perform better and acquire the standards.
Without rigorous assessment of compensation system manager cannot originate a basis for
complacency and satisfaction of the workforce that limits the labor turnover, otherwise turnover
rates may increase. When compensation pay system stays fixed for a long-time, High-level
performers leave for other jobs, more prospects turn down job offers because of better offers
from competitors. Therefore, updated pay plan is necessary with improvement. It should be
designed in a such way so that there are no conflicts between the employee union and the
management, as better pay plan creates a peaceful relationship between the employer and the
employees. An effective pay system helps the organization to receive suitable staff and keep
qualified personnel. That’s why to have an effective pay plan it should be rigorously assessed
and improved continuously.
Retain Employees
Administrative Efficiency
Effective
Control Costs
Compensat
ion System
Ensure Equity of Each
Employee
Reward Behavior
Acquire talented
employees
c. Explain and give examples to prove that how different factors influence the decision of
adopting several compensation strategies by any organizations in the same market.
Many organizations want to offer attractive total compensation packages to remain competitive
in the war for talent. But after they run operation, they realize they can’t afford it. In this
situation, strategic compensation becomes even more important.
Use an employee benefit compensation to communicate with employees about the realities of
their compensation:
Be transparent about what is possible and what’s not. Let employees know you’re doing all
you can to provide the best possible compensation package.
Be an employer of choice in other ways. You may not be able to offer the top salaries in the
industry. Still, you can offer other employee benefits, such as flexible work hours, access to
easy environment, or subsidized transportation or lunch benefits.
Be practical in your rewards. Once you set the standard high for compensation strategies, it’s
difficult to get back if you face tough financial times.
Be intentional about how compensation supports your overall human resource strategy. Look
for ways to tie your compensation plan to tenure, individual performance, team performance,
or a combination.
This realistic approach helps set expectations with existing employees, as well as enables you to
attract and retain talent. Organizations are more effective for candidates when recruiters and
hiring managers have defined pay grades they can provide, as well as information about a robust
total compensation package to share during an interview. Don’t overlook the impact a strategic
compensation plan can have throughout the entire employee lifecycle.
Finally, compensation planning requires a cross-functional strategic approach. Now that you
have all the steps for an effective compensation strategy, it’s important to gather stakeholders
together to review what’s most important for your organization. Once you have a compensation
plan, find effectively communicate so that employees understand their pay grade, the opportunity
for growth, and career advancement. Having a well-defined approach to compensation will
ultimately encourage a company culture of trust and transparency and create a higher job
satisfaction rate among employees.
d. Give and Explain several compensation strategies based on variety of business level
strategies by using literature review contents.
Alignment of Compensation strategies with business level strategies:
Creating
Plan
Intimating
Company's
Vision
Less Improved
Employee Organization
al
Turnover Performance
Compens
ation
Strategies
Bringing Increasing
Competitive Employees'
Advantages Loyality
Versatality
in HR
To ensure the organization's future success, it is critical to create a fair, competitive, and
lucrative compensation structure. Giving proper awards is perhaps the most effective approach
for firms to deliver effective rewards that show clear alignment with the organization's values
and objectives. As a result, any organization's compensation system must be centered on
ensuring the organization's distinctiveness. The departmental objectives must be closely aligned
with the expected behavior of field level employees in order to build an accurate compensation
structure.
Case solve:
a. Explain how this case demonstrates usefulness of compensation as a method for improving
employee satisfaction and motivation.
At first Green Life organization faced high turnover because of financial problem. That means
they were not getting enough compensation. Therefore, to fix this problem the organization CEO
and president implemented a new strategic plan that contained various components to satisfy and
motivate employees. Such as they developed physician leadership cabinet to improve personnel
interaction. These strategies only work when employees are given enough compensation.
Personnel interaction is necessary to do the job in a team. Almost organization prefer team work
more than individual task. Thus, when a group of people give their best performance then they
can get some percentage of from profit as bonuses.
Top managers also focused on improving individual satisfaction to increase productivity. To
improve individual satisfaction organization must provide pay for performance to each
employee. They also implement beneficial performance management plan which includes how
managerial talent could be developed. They conduct Job recognition for doing well and give
motivation, when any employee gives their best performance, they should get recognition in
front of everyone, and it can be monetary or non-monetary as well. Thus, it will give him
motivation and other employees also want to give better performance. The company assess the
pay market twice to be competitive regarding compensation, otherwise turnover will not be
reduced.
They frequently redesign their pay plan, which includes reviews of job content periodically,
conduct annual appraisal performance, and based on their rate of performance employee get 5%
merit pay. They also do the assessment of experience and education to adjust compensation
amounts, because employee’s degree and experience have economic value.
b. Identify some of the ways that can be used as competitive pay programs which would be
suitable for the Green Life to retain employees for a longer time
1) Get a Pulse on Your Market
After a series of wage declines in 2009 and 2010, a number of industries are now seeing
continual salary growth across multiple industries and locations. If your company’s
compensation plan is based on the trends in those leaner years immediately after the recession,
it’s probably time to revisit your pay strategy. Or you may be at risk of losing talent to
competitors who’ve more quickly adapted to shifts in the market. Keep an eye on the Pay scale
index to keep track of quarterly trends in pay by location, industry and job category.
2) Benchmark Your Job Positions
It’s great to have a pulse on the overarching pay trends in your industry and area, but it’s another
thing to have confidence that you’re actually paying top employees at the right rates for their job.
By engaging in at least once-per-year salary benchmarking, you’ll be able to identify employees
who are at a “high flight risk” of turnover, and be able to make smarter decisions about where
you allocate your labor budget. Download PayScale’s How to Perform Compensation
Benchmarking and Salary Ranges whitepaper for more information.
3) Develop a Compensation Plan
Often times, businesses fear that having a compensation plan will limit their ability to make good
business decisions, so they skip building a compensation plan in favor of fewer rules and less
structure. But without a formalized compensation plan, companies often miss an opportunity to
structure their pay decisions in a way that support business goals. As companies grow, the costs
of compensation continue to rise, and without a formalized plan in place, companies often
experience problems with pay inequities, employee retention, and engagement. Simply put, it’s
easier, and more cost-effective to take small steps toward developing a smart compensation
plan now, than it is to alter your course later down the line.
4) Identify Pay Inequities
Some people live by the motto, “What you don’t know won’t hurt you.” That’s a motto your
organization cannot afford to live by when it comes to internal pay inequities. Without a
formalized comp plan, it’s often common for pay inequities to develop across organizations and
departments. Those pay inequities can most definitely hurt you and your organization in the form
of heightened turnover, over payment, and even litigation. Learn how to identify and resolve
these inequities with PayScale’s guide to pay inequities.
5) Communicate Your Compensation Strategy
If you go through the process of creating a compensation plan, don’t forget to let your employees
know about it. In theory, your compensation strategy should reiterate and support your business
goals. So, it’s important to communicate to employees how their work aligns with the goals of
the organization, and how their compensation reflects that. If you share with your employees,
and make your investments in talent clear to them, you’ll be surprised by the positive effect it has
on employee morale. Check out PayScale’s Four Tips for Communicating Your Compensation
Plan to Employees to help you get started.
3. Findings
From the analysis of the literature review we find some key dimensions to mention. They are:
To ensure the organization's future success, it is critical to create a fair, competitive, and
lucrative compensation structure.
Organization must invent the employees’ hidden talents & nurture them
It can be difficult to align incentive pay with standard employee pay
Organization must create fair, competitive, and lucrative compensation structure
Among the most effective approaches for firms to design fair, competitive, and lucrative
compensation structures is to give proper awards to employees
Appropriate compensation management can bring the organization a competitive advantage
through unique human resources.
Organization should have linked employee compensation with their employee’s extra
performance.
If company give average or less compensation than others, then organization should must
focus on extra benefits that employee become happy with company’s extra service.
Conclusion
Every choice regarding compensation gives an immense effect on the organization. Life each
issue, framework, arrangement, execute, plan, preparing, improvement. Thought each
compensation system has their singular objective and work that assist an association with
accomplishing their objective. Each decision ought to be dependable and versatile with center
standards. For the appropriate preparing, plan HR needs to venture out and pick the worker for
the preparation. The accurate compensation strategy makes the workers more productive &
influenced. Preparing that gives a positive effect on the work builds the general exhibition of the
representative. Compensation arranging is interlinked with the other HRM exercises. The level
of the linkage of the two is to be set up. Preparing and improvement significantly affect
hierarchical execution. Every one of these has positive impacts on Hierarchical Execution. On
Occupation Preparing is exceptionally powerful and it additionally saves time and cost. The
elements of compensation management, more than various limits, are locked in with and impact
the movement and execution of the wide scope of different business limits. Accordingly, suitably
changing the compensation philosophy to the organization’s business strategy is fundamental to
achieving its ultimate goal.
Every choice regarding compensation gives an immense effect on the organization. Life each
issue, framework, arrangement, execute, plan, preparing, improvement. Thought each
compensation system has their singular objective and work that assist an association with
accomplishing their objective. Each decision ought to be dependable and versatile with center
standards. For the appropriate preparing, plan HR needs to venture out and pick the worker for
the preparation. The accurate compensation strategy makes the workers more productive &
influenced. Preparing that gives a positive effect on the work builds the general exhibition of the
representative. Compensation arranging is interlinked with the other HRM exercises. The level
of the linkage of the two is to be set up. Preparing and improvement significantly affect
hierarchical execution. Every one of these has positive impacts on Hierarchical Execution. On
Occupation Preparing is exceptionally powerful and it additionally saves time and cost. The
elements of compensation management, more than various limits, are locked in with and impact
the movement and execution of the wide scope of different business limits. Accordingly, suitably
changing the compensation philosophy to the organization’s business strategy is fundamental to
achieving its ultimate goal.
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