QUESTION:³IF 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 1940¶s and 1950¶s 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

but they virtually mean the same thing and basically express the same meaning. 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. One of such plans put in place. 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. paid time off. boost and elevate their morals which helps to enhance productivity. Mindful of the definition of employee benefits. Benefits and compensation maybe different sides of the same coin. 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. is providing benefit plans that are flexible. wage. ideas and characteristics.employee benefits were once fairly standardized and free of government regulation. Employees in all companies are seen to be its priority and most cherished asset. Although benefits areviewed as illustrated. and maybe fringe benefits. domestic partner benefit. since they cannot provide for these benefitsthey are only left with one option which is taking into consideration alternative means of reducing benefits.we are told that benefits are sub-categorized into Tangible and Intangible benefits. Employee Benefits . Employee benefits could include life insurance. retirement plans. Despite their eligibility or qualifications for these privileges and rare opportunities. salary structure and programs which will be in relation or in accordance with the job description. bonuses. Compensation therefore includes aspects such as salary. Therefore. and disability insurance. In a situation where an employee performs well. some of them are requirements from the state recommended for employees from their employers which may sometimes include both workers and unemployment compensation. commission and merit related programs. 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. vacation. he/she needs to be appreciated and rewarded which makes the emergence of compensation very glaring. health life insurance. taking in consideration that without them the company cannot be functional.

because people have no incentive to work for something they virtually take for granted. other than wages for time worked that are provided to employees in whole or in part by their employers. On the other hand. like a year and taking note of . vacation retirement plans and many more. Medicare. temporary disability insurance. These can¶t be earned because they require no effort on the recipient¶s part. With this approach put in place. possibility for promotion. an accident. Sometimes we could have a fringe benefit which practically refers to both forms of benefits. Employees only reap this benefit from hard work. they help to build a work ethic. and base pay. workers compensation insurance etc. sickness retirement or unemployment. Benefits that must be earned are incentives. the broadest definition of employee benefit includes all benefits and services. ina nut shell for executing their job excellently. Intangible benefits are considered to be less direct and will include benefits such as a boss¶s reward and appreciation. life insurance disability insurance. It should be noted that employers must be competitive and avoid too much generosity.This is a form of compensation or benefit provided by the employer in case of death. Benefits that are given are known as entitlements. Some examples are social security. The widely known forms of compensation are salaries. 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. Compensation is equally sub-categorized into two different categoriesthrough which it could be transferred onto some other person as variable pay. Entitlements destroy a work ethic. 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 company¶s goals. social security and Medicare. there is still confusion on whether the definition should include those benefits that are financed by employer contributions but provided under social insurance. and a comfortable office. Tangible benefits are considered or referred to as direct benefit which can be seen in the form of health life insurance. wages and tips.

Furthermore. and finally employee contributions to the costs of some benefits which mostly includes retirement and medical insurance. professionals and the other skilled jobs. With jobs that include the management. . the salary ranges are fixed with particular amounts of money expected within a time frame and it¶s normally a stated amount during the end of the month. Employees can as well get paid for overtime worked such as public holidays. 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. the exempt and non-exempt. state income tax social security contribution. it is not a surprise to start receiving certain compensations and benefits much higher than that of non-exempt jobs. Here. all these can be classified under one group known as exempt jobs. Once here. Even though they obtain this extra compensation and benefits. Non-exempt jobs will usually consist of unskilledor entry-level jobs which is usually rewarded hourly.when the targeted goals and objectives are achieved. 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. In such a situation. part of their salary or payroll is withheld and it is used as a contribution towards the federal income tax. 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. 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. Organisational jobs are classified into two main forms. and certain days of the week. implying that no one is entitled to receive more money for performing that same task. 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.

Types of Direct compensation. The organisation gives them allowance to visit any destination of . be it a car or a cab. Studying the diagram above. To retain its best. An example of this type of compensation will consist of loan fees. that isprovided by employers in return for the work and services they have rendered to the organisation. conveyance. Direct compensation is alsodefined as what a service provider receives for services rendered to an organisation or an individual on behalf of the organisation. These monetary benefits will therefore include salary. house rent allowance. cherished and most productive employees. an organisation schedule leaves and travel allowance to these group. basic salary is money an employee receives at the end of the day week or month for the tasks or jobs he¶s performed and also money he will receive from his employer for services rendered.Diagram 1. bonuses and special allowances which are only given at specific time period. leave and travel allowance. Direct Compensation Direct compensation is defined as monetary benefit which employees earn or receive. for the employees to facilitate their arrival at work. expenses put on forfeited account that will have to be linked to specific participant¶s accounts. medical reimbursement. Conveyance will entail the provision of a transportation medium.

. the organisation cannot reach its target nor achieve its goal. It could include treatment bills and health-insurance reimbursement. 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.These include overtime policy.leave policy and travel assistance limits. For those employees who adore going on trips. Therefore based on the company¶s engagement and demands. organisations provide their employees with medic-claim for them and their entire families. hospitalization. out station allowances if you are on a mission and what have you. organisations are bound to provide social security and motivate their employee that is through the provision of benefit programs or plans such as. Besides their wages. An example of such benefit program can be seen in MTN Cameroon (mobile telephone Network Company). A healthy body means a perfect job done. insurance. special allowances in the forms of overtime. house rent allowance is allocated to employees who are nationals as well as foreigners. club membership. breakfast and launch are also part of this benefit program all in the name of motivation. organisations motivate their employees with bonuses and also provide them social security. Finally. Most of the employees are given allowances for their housing. car policy andinsurance. believing it will boost their morals to work hard. The management of this organisation is aware of the fact that without human resource. other allowances like transportation. paid holiday schemes are available for them after a hard and tiring session of work which definitely yielded positive results to the company¶s credit. It can also bedefined asµany 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¶. and mindful of this principle. Indirect Compensation Indirect compensation is defined as non-monetary benefits apportioned to employees as appreciation for their services offered to the organisation. special compensation packages are being arranged for employees. Some examples of indirect compensation will be discussed below. risks in certain operations. deliver and lead the organisation to its target.their choice with their families but this is relative and dependent with the employee¶s position in the organisation. mobile allowances. During festivity periods. meals and travel expenses. To provide social security and motivate its employees. holiday homes and retirement benefits.

For such holiday trips. µAll work without play. they are also being covered by insurance that is both their property and life¶s . 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. the employee will might just become dull and it might also lead to brain fatigue. 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. or beach just to catch fun and see new places. value and allowances during overtime periods.Making sure their employees give in their very best performances. 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 CEO¶s should bear in mind that. the company offers accommodation in a classy four star hotel of the employee¶s choice and their meals for the duration of this holiday. security. 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.With such forms of motivation. makes Jack a dull guy¶. Caught in such a circumstance. Added to this. 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. 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. Too much work load and thoughts of deadlines could hinder the time laid aside for rest. A vivid example of indirect compensation is Orange Cameroon another mobile telephone company. It should equally be extended to the families thus assuring them of social and emotional security. The Frenchman is known to be a holiday fan that is moving from on continent. Holiday homes are provided by organisations to their employees and these are mostly in highly wanted holiday locations. they visit the doctor with their families on the organisations account. This will go a long way to relief them of work stress and acting as a refresher for any task when they resume work. they still receive their monthly pay and might come back to a big promotion if they actually performed well throughout that business year. organisations need to provide them with their basic facilities (Maslow¶s hierarchy of needs). island. 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. Hospitalisation will include employees given allowances for yearly check-ups. When they are sick.

this basically sets up the compensation package. It has as its base demand ± supply analysis. This supermarket has virtually all the products you can think of. responsibilities and evaluation. compensation management and training need assessment and performance appraisal.1 below will show how they are positioned. skills. female and children. the job worth is also revealed that is measurable effectiveness of the job and the contribution of the job to the organization. Diagram 1. and knowledge and training that will suit the job position to insure competency and performance. It is also used in discovering if the applicant or the potential employee has the required level of education. Therefore to recruit a staff or an employee for such and Organisation. In a nut shell. Diagram 1. its requirements. Through this. the management has to be sure if they are the right . From house hold equipment¶s to clothing¶s for male. A good example of job analysis can be drawn from one of the biggest supermarket in Cameroon SKT. Its importance is that it enables resources to be analysed while establishing strategies to accomplish the business objectives.1 Types of Indirect Compensation Components of Compensation Job-Analysis Job analysis is a systematic approach used in defining the job task. recruitment.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.

This we can tell are very important points worthy to note when running a successful organisation. they now move on to the next decision which is the pay structure for employees. You need to maintain the standards and also the performance level especially in the domain of customer services. external and individual equities are the most important and well known pay structures practised by most organizations. trust and hard work. job description will help in the pre. Sometimes illiterate. respect for clients. Pay structure is known as the process whereby the pay load of jobs in an organisation is determined. to be apportioned to which employee according to their placement in the organisation. employee compensation is created alongside the prevailing market compensation package. knowledge and attitude which suits the job position. 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. The job description goes further to give a vivid understanding of a job and its worth. By doing so.selection process. are a hallmark of all staffs besides their educational achievements and relevant work experiences.the organisations goals and long term objectives cannot be met. 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. Internal. Pay Structure When organisations sort out job analysis. More so. We will look at pay structure in two different ways. 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.people for the job. Consequently. In this light SKT ensures humility. 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. This paves way for a fair treatment of employees and also goes an extra mile to commit organisations in organising attractive . This takes into account internal and external analysis in order to build up a compensation package for any job within the organisation. It is also used to know what incentives. 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. which are examined below.

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. which involved serious pay packages to their employees in respect to status and profile. It is known for its excellent customer service and excellent interest rates with which it lends out money to its clients. The senior management made sure managers. Employees in this organisation work tirelessly to ensure they leave a trade mark in the banking sector. 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. evaluate and implement a balance on compensation packages that will be provided to employees in relation to their job profile. so many monetary problems have been terminated.compensation packages to their employees in order to motivate and retain the best talents in the organisation. their level in the organisation. Therefore there was competition in the market and for Express Union to continue the lead. This organisation is a micro ±finance that enables national to send money throughout the national territory and even to neighbouring countries such as Chad. is how to create. the senior management level¶s primary objective. Gabon. With this in mind. the management is not taking the efforts of its staff for granted. When proven worthy. Since the introduction of this organisation. People used to travel just to go and give money to family members in some remote areas where big banking institutions cannot reach. In this level. Congo Brazzaville and Equatorial Guinea. 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. it has to set standards. An example of external equity is the UBA (United Bank of Africa). and all cashiers . research and development programs. This team brings data that is later developed and evaluated. branch in Cameroon. assistant managers. Internal equity looks at the job positions within the organisation taking note of the hierarchy that exist therein. and why not training workshops to enable them develop their skills in areas they are found lacking. develop. it is then implemented to restructure and ameliorate employee benefits by boosting their morals via the introduction of some promotional programs. This made it easier even to people without bank accounts to send and receive money even from overseas.

they cannot bear the cost of implementing such motivation packages to their staff. you have to make sure every employee is contented with the compensation they get proportionate to their performance. 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. you have to be able to arrange compensation package that should not fall below the organisation¶s standard. Two types of compensation surveys exist which organisations undertake.were to work overtime. they might go in for an already established report on compensation strategies by a reputable research organisation. 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. transfer rates were slashed. Salary surveys can be seen as findings carried out in order to set up the company¶s compensation strategy. and therefore they had to crumble. . services were improved to attract more customers and maintain status. The analysis will be carried out in relation to secured and well defined objectives in research. if you want the bestfor your staff and also wish to maintain a certain standard within the market rate compensation. pay rates and overtime benefits were increased. This can be carried out either by the management or alternatively. since organisations use salary survey to set up compensation plans. Organisations conduct salary survey to achieve certain objectives such as. In this regard. This could not happen with the emerging agencies. Its also advantageous to create and implement a good and attractive reward or compensation strategy. In order to be well informed and stay updated about the industry¶s standard. Salary Survey In our contemporary society.

2 Components of Compensation Job-Analysis Job analysis is a well organised way of outlining the job role.Diagram 1. level of experience needed. Equally their non -monetary benefits will vary as their responsibilities are different. For instance. demand supply analysis and performance appraisal. description. level of education. We can further break down job analysis into three sub components. to determine which employees need training and also those who are lacking some . It can be used to gain information on an individual¶s skills. Having in mind that the roles and responsibilities attached with the job are a key determinant of a person¶s level of education. It should be regularly used in organisations to determine compensation packages. and responsibility. experience. Job worth or evaluation is there to determine how much a particular job position contributes to the organisation attaining its goals and objectives. evaluation. 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. job analysis is a very important component in determining the compensation strategy for any organisation. 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. higher level employees say managers will receive higher pay as compared to their junior employees. Job position will be the first and defines various jobs and employees in the organisation. training needs and assessment. requirement. It is very important when it comes to compensation as it gives an insight of the job in the organisation. Here the level of education. skills requirement are clearly spelled out. skills it is not left out. In all. It lays the route for recruitment. It also helps in giving an understanding of employee performance standard. training and knowledge for a job position. 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.

employee compensation is formulated alongside the prevailing market compensation package. they move to the next decision which is the pay structure for employees. 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. 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. . The job description goes further to give a vivid understanding of a job and its worth. Pay structure will be assessed in two dimensions. which are examined below. Internal. their level in the organisation. Pay Structure When organisations do sort out job analysis. By doing so. It is also needed to determine which incentive should be allocated to which employee according to their placement in the organisation. 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. external and individual equities are the most important and renowned pay structures used. 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.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. 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.

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. The provision of benefits is also profitable to employers given that when more benefits are offered to employees. they must be valued and well compensated for their efforts. The benefits act as incentives and encourage hard work which builds job satisfaction. other than providing part of the salary which would have been given to the employee. 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. Some employees are retainedand spaces are also created for experts leaving other rival companies. employees obtain. As such. it saves money that can back up the company¶s finances Employee Benefits or Advantages Quite a number of merits are obtained for accepting employee benefits such as a company car. Employer Benefit Employers believe benefits schemes offered to their employees will ease their flow of cash. companies have developed benefit schemes as a means of appreciating their employees for their contribution in the company¶s success. Therefore. It will be evident in a situation where an employer uses a salary sacrifice system. Though it is subject to barriers and taking its complex nature into consideration.DATA ANALYSIS A company¶s success and failure depends on the treatments. If they must be satisfied. Considering a situation where there exist a large work force. the company gets a number of tax evictions which will secure the company some money an increase its relation with its employees. in case certain activities and utilities an employee pays for are inclusive and provided as . pension schemes whichdoes not need the employee to do them in person. meaning the employee gives up part of their salary inreturn for benefits. in order to enhance productivity.

relieving them of stress to always set aside money to cater for these items. hence the term expectancy theory. Thiswill increase their savings and expenditure on other things of interest.g. This explains how individuals are basically rational and purposive in choosing their objectives and also how their behaviour can change at any time. will work very hard if he is promised to receive an increment in salary. These theories are sometimes classified in opposing camps. Via negotiation and cooperation with employers. mobile handsets. An American psychologist named Edward C. MOTIVATION THEORIES Expectancy Theory. After a yearly period. it will be better placed and have a clear picture of their cash flow. items like this will indicate a significant tax saving. An example could be if an employee gets benefit from the employer which pays for their mobile phone it will be treated as a non±taxable benefit. implying both parties are favoured. This means action in prospect will lead to a desired goal or outcome. Tolmanis credited with formulating it first in the 1930¶s and he stipulated that human behaviour is motivated by conscious expectations more than response to stimuli. because psychologists consider human behaviour to be reflexive and instinctive governed by stimulus ± response. An example is an employee in need of cash for his sons fee. MASLOW¶S Hierarchy of Needs . 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.benefits e.

safety and physiological needs are obtained Humans ill then take a step towards esteem needs and when that has been achieved. 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. he will want to move forward to satisfy other desires which at that stage in time they cannot provide . given that once a person attains a certain level and fills confident with . we discover that each set of needs gives rise to the next. and love With the love. the need for safety gradually crops up The next is the need for social belonging.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 Maslow¶s hierarchy of needs Looking at the diagram. 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.

most employees will prefer to go in for packages with more benefits than direct payments.term motivator. due to its privileges and security especially when you are a hard worker. flexible and above all trust ±worthy. educated. 1989. dedicated. Human Resource Planning. Its beneficial to examine your company¶s compensation package to determine if it helps or hurts your efforts to manage. While money is not a primary long. p229-238. poorly structured compensation packages will demotivate employees. Vol. Organisational performance and the strategic allocation of indirect compensation Robert M. Therefore. skilled.. Money will also heavily impact your ability to attract and keep good employees. 12 Issue 3. 10p(Journal) .CONCLUSION. BIBLIOGRAPHY The global workforce: international and comparative employment law:cases by roger Blanpain McCaffery.

GBR: Kogan Page Ltd.London. Patterson Armstrong. Reward Management. Vol. Winter72. 15 Issue 2. Laura. Donna.Derek. Prentice Hall.. 2010 / THE CPA JOURNAL. Drucker. Eaton and Ryan J. 2004.2000 Armstrong. 2008 Sullivan. . By Tim V. Deeprose.. Stephen. http://site.California Management Review. p65-76. John F. 2004. Reward Management. White. p 415. p 415. Jan (Editor). . GBR: Kogan Page Ltd. Geoff (Editor).com/lib/westminsterintl/Doc?id=10131913&ppg=113 .Routlege. Human Resource Management.ebrary.12p Under water stock compensation. Reward Management : A Critical Text.London. How to Recognize and Reward Employees : 150 Ways to Inspire Peak Performance. Torrington.

Benefits. Blacklick. USA: McGraw-Hill Professional Publishing. Bruce R. 2010 by amy delpo.Saranac Lake. Lisa Guerin . Blacklick. Copyright © 2007. Documentation. p 89.. Ellig.(McKeown. OH. p 58.McGraw-Hill Professional Publishing. NY. Complete Guide to Executive Compensation. 2007. p 232. The Wenatchee Business Journal BUSINESS TOOL BOX October 2008 The manager¶s legal Hanboook. Leslie J. All rights reserved. USA: AMACOM Books. USA: McGraw-Hill Professional Publishing.. 2002.. 2009. OH.Retaining Top Employees. and Everything Else You Need to Know. 5th Edition .

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