Introduction
The vibrant asset an organization can have its satisfied and happy workforce. When employees feel appreciated by the organization they develop a positive attitude towards the organization and they put all their efforts to achieve the organization goal. There are so many factors that give the employees motivation in a place of work, among them are the compensation packages and benefits. In this paper I will look on what makes effective compensation plans, compensation systems both internal and external, methods organizations uses to find out employees satisfaction with the pay structure, ways used to evaluate competitiveness of health and pension plans in organizations and the discretionary benefits that organization offer to their employees but they add value to the profit earned.
Components of an effective compensation plans
The elements of an effective compensation plan should set the right direction of recruiting and retaining the best minds. An organization compensation plan can make it be the employer of choice or be an organization that does not lure the best talents that can make the business to scale high. In order for a company to have effective compensation plan the following factors should be taken into consideration:
a) Job descriptions.
An effective compensation plan should take into account the duties of an employee and the conditions in which the worker carries his or her responsibilities. For example, employees whose duties are almost similar should be paid the same salary, but, if the working conditions are different the pay should differ (Bogardus, 2006, 97). For instance, employees working in cities with a high living standards, hostile climates or places with insecurity cases should be paid more. An organization should value the role a job position plays in its success. Also, the more responsibilities a job has should be paid well.
b) Job evaluation
When setting the compensation of a specific job, it is important to consider the significance of the job to the organization. It is good to note, it is not the staff that is evaluated but the contribution of the position to the organization. The jobs that are vital to the success of an organization should be rewarded well. For example, in banking sector loan officers should be paid more than bank tellers because they advise clients on loan products that suit them and credit is core in banking. The worthiness of a job to an organization is determined by quantitative justifications of internal and external equity (Bogardus, 2006, p. 98).
c) Pay grades and ranges
Pay grades are mostly determined by experience, level of education and importance of the job to the organization. The experienced employees are on the high range, and the entry jobs are on the lower scale (Bogardus, 2006, p.101). But, in some occasions entry jobs that are core to the business and require a wealth of experience are included on the higher side of the pay scale. Also, the relevance of the job makes employees though in different department to be paid the same. For example, marketing and account coordinators may be classified as doing jobs of equal value to the organization and therefore may fall on the same pay grade.
d) Communication plan
The employees should be made aware of how their pay is determined without offending them. No single employee should feel that his roles are not important to the organization. Instead, the employees should be made to appreciate diversity of their duties to the success of the organization (Bogardus, 2006, p. 151). If the compensation plan is not delivered in a wise way it may be seen as discriminative especially by the employees who are paid less amount according to their duties in the organization. This may create destructive groups within an organization which may result to failing to achieve business goals due to the demotivated team.
Beneficial ratio of internally consistent and market consistent compensation systems
Internally consistent compensation systems are more of explaining the relative value of every job within a company in comparison with other jobs in the organization. A job that demand more academic qualifications, vast experience and has more responsibilities and duties are paid more than jobs that do not demand such qualifications, experience, and has less tasks and obligations. For an organization to attain internal consistency in its compensation the employees must accept as true that jobs are paid according to their worth to the organization.
When there is a balanced internal ratio of compensation in an organization every employee is satisfied. But, if for instance employees with lower qualifications, experience and with few duties are paid more or equal to seasoned employees who hold key roles in an organization, the latter will definitely develop a negative attitude towards work. They will not be motivated and as a result will not contribute much in achieving business targets.
A compensation system may be good internally but compared with the industries in the same field or market it may not be able to attract, retain and motivate the best talents. It is important for organizations to use available market data in designing its compensation system. The market compensation systems should guide an organization in defining its pay structures. This is to enable the organization to have a competitive advantage in the sector. An organization should not compensate its employees without considering how other industries in the field are doing. This is to ensure the compensation expense is not too high and at the same time the employees are not exploited.
Finding a consistent compensation ratio that is operational both internally and externally in organization is an uphill task. Organizations make a compromise. They ensure they reach the industry minimum basic pay and incorporate other benefits, such as, health policy, pension plan, paid vacations and educational grants that attract, retain and motivate their workforce.
Methods companies use to assess employee satisfaction with their pay structure
The employee satisfaction with the pay structure is important in an organization. It makes the management have an easy time supervising the employees. In case, the employees are not satisfied the organization will experience high rate of staff turnover. Factors that lead to job satisfaction are competitive pay in the local market, a better base pay, and existence of variable pay like commissions and bonus, and employee being given an opportunity to own the organization stock (SHRM, 2015). Organizations can use the following methods to evaluate if the employees are satisfied with the pay structure:
a) Anonymous survey
Employees can be provided with questions related to satisfaction with the organization pay structure. The employees can rate the extent of satisfaction and be provided with an opportunity to explain or give reasons where they are not satisfied. This is a good method but questions must be well framed because it does not have a room for clarification (SHRM, 2015). This can be done online but staffs may fear being monitored using IP address of their computers and other gadgets.
b) Focus groups
This is another method that can provide rich information, but, due to lack of anonymity and privacy it may limit employees from giving actual views that may lead to their discrimination and broken relationships with their seniors. It is better in that employees can add to their fellow colleague’s opinions. The facilitators of such groups must be from outside the organization and must be skilled in controlling groups as the focal employee can lead the group to his or her direction (SHRM, 2015).
c) Individual interviews
This method is good for small organizations, but very expensive in large ones. The employees can rate their individual satisfaction but since its does not have anonymity employees may shun from giving information that may not appeal to the organization management. This can only work if the management is not biased and is well versed in separating individuals and their jobs.
How companies determine whether their employer-sponsored retirement plans and health insurance programs are competitive.
Organizations providing these benefits to their employees need first to understand the composition of their workforce. For example, health insurance premiums may not be too appealing to the young generation that only require basic health care, but, to baby boomers health care plan is paramount to them. An organization can study industry trends and standards and the location of the business to know what other businesses in the same industry and of the same size are offering to their employees. These benefits can attract, retain and motivate employees.
The employees should also be given an opportunity to talk these programs since they are the direct consumers. An organization may be paying well for these program but the employees may be getting substandard services from the selected provider. For example, in many organizations that gives their employees’ health insurance cover, the employee’s ends up getting poor services from the selected healthcare providers.
Discretionary benefits given to employees
Discretionary benefits are benefits that are given employees by the employer at will. They are not regulated by labor laws and they differ from one organization to another. These benefits include sick leave, educational assistance, paid holidays and vacations and so forth. An organization uses these benefits to their advantage. For example, educational assistance enables employees to pursue courses that add value to their duties in the organization. These benefits are meant to help employees maintain healthy lifestyles and develop themselves (SHRM, 2021). This enables an organization to have learned and healthy employees.
Discretionary benefits are able to meet the needs of a diverse workforce. For instance, the younger generation may be interested in furthering their education and the sick leave may be beneficial to the older generation that has health issues. In the long run, these benefits add value to the bottom line of an organization. They motivate the employees to work to the good of the organization which result to high productivity.
All in all, compensation packages and benefits are not the only factors that attract and retain the best employees (Forbes.com, 2017). There are other non-monetary factors that organizations can use to attract and retain the best performers. These include; a corporate culture that value and respect employees, flexible working schedules, giving employees a chance to grow career wise, employees being company advocates, providing a product or service with a legacy and organization having a brand power.
The vibrant asset an organization can have its satisfied and happy workforce. When employees feel appreciated by the organization they develop a positive attitude towards the organization and they put all their efforts to achieve the organization goal. There are so many factors that give the employees motivation in a place of work, among them are the compensation packages and benefits. In this paper I will look on what makes effective compensation plans, compensation systems both internal and external, methods organizations uses to find out employees satisfaction with the pay structure, ways used to evaluate competitiveness of health and pension plans in organizations and the discretionary benefits that organization offer to their employees but they add value to the profit earned.
Components of an effective compensation plans
The elements of an effective compensation plan should set the right direction of recruiting and retaining the best minds. An organization compensation plan can make it be the employer of choice or be an organization that does not lure the best talents that can make the business to scale high. In order for a company to have effective compensation plan the following factors should be taken into consideration:
a) Job descriptions.
An effective compensation plan should take into account the duties of an employee and the conditions in which the worker carries his or her responsibilities. For example, employees whose duties are almost similar should be paid the same salary, but, if the working conditions are different the pay should differ (Bogardus, 2006, 97). For instance, employees working in cities with a high living standards, hostile climates or places with insecurity cases should be paid more. An organization should value the role a job position plays in its success. Also, the more responsibilities a job has should be paid well.
b) Job evaluation
When setting the compensation of a specific job, it is important to consider the significance of the job to the organization. It is good to note, it is not the staff that is evaluated but the contribution of the position to the organization. The jobs that are vital to the success of an organization should be rewarded well. For example, in banking sector loan officers should be paid more than bank tellers because they advise clients on loan products that suit them and credit is core in banking. The worthiness of a job to an organization is determined by quantitative justifications of internal and external equity (Bogardus, 2006, p. 98).
c) Pay grades and ranges
Pay grades are mostly determined by experience, level of education and importance of the job to the organization. The experienced employees are on the high range, and the entry jobs are on the lower scale (Bogardus, 2006, p.101). But, in some occasions entry jobs that are core to the business and require a wealth of experience are included on the higher side of the pay scale. Also, the relevance of the job makes employees though in different department to be paid the same. For example, marketing and account coordinators may be classified as doing jobs of equal value to the organization and therefore may fall on the same pay grade.
d) Communication plan
The employees should be made aware of how their pay is determined without offending them. No single employee should feel that his roles are not important to the organization. Instead, the employees should be made to appreciate diversity of their duties to the success of the organization (Bogardus, 2006, p. 151). If the compensation plan is not delivered in a wise way it may be seen as discriminative especially by the employees who are paid less amount according to their duties in the organization. This may create destructive groups within an organization which may result to failing to achieve business goals due to the demotivated team.
Beneficial ratio of internally consistent and market consistent compensation systems
Internally consistent compensation systems are more of explaining the relative value of every job within a company in comparison with other jobs in the organization. A job that demand more academic qualifications, vast experience and has more responsibilities and duties are paid more than jobs that do not demand such qualifications, experience, and has less tasks and obligations. For an organization to attain internal consistency in its compensation the employees must accept as true that jobs are paid according to their worth to the organization.
When there is a balanced internal ratio of compensation in an organization every employee is satisfied. But, if for instance employees with lower qualifications, experience and with few duties are paid more or equal to seasoned employees who hold key roles in an organization, the latter will definitely develop a negative attitude towards work. They will not be motivated and as a result will not contribute much in achieving business targets.
A compensation system may be good internally but compared with the industries in the same field or market it may not be able to attract, retain and motivate the best talents. It is important for organizations to use available market data in designing its compensation system. The market compensation systems should guide an organization in defining its pay structures. This is to enable the organization to have a competitive advantage in the sector. An organization should not compensate its employees without considering how other industries in the field are doing. This is to ensure the compensation expense is not too high and at the same time the employees are not exploited.
Finding a consistent compensation ratio that is operational both internally and externally in organization is an uphill task. Organizations make a compromise. They ensure they reach the industry minimum basic pay and incorporate other benefits, such as, health policy, pension plan, paid vacations and educational grants that attract, retain and motivate their workforce.
Methods companies use to assess employee satisfaction with their pay structure
The employee satisfaction with the pay structure is important in an organization. It makes the management have an easy time supervising the employees. In case, the employees are not satisfied the organization will experience high rate of staff turnover. Factors that lead to job satisfaction are competitive pay in the local market, a better base pay, and existence of variable pay like commissions and bonus, and employee being given an opportunity to own the organization stock (SHRM, 2015). Organizations can use the following methods to evaluate if the employees are satisfied with the pay structure:
a) Anonymous survey
Employees can be provided with questions related to satisfaction with the organization pay structure. The employees can rate the extent of satisfaction and be provided with an opportunity to explain or give reasons where they are not satisfied. This is a good method but questions must be well framed because it does not have a room for clarification (SHRM, 2015). This can be done online but staffs may fear being monitored using IP address of their computers and other gadgets.
b) Focus groups
This is another method that can provide rich information, but, due to lack of anonymity and privacy it may limit employees from giving actual views that may lead to their discrimination and broken relationships with their seniors. It is better in that employees can add to their fellow colleague’s opinions. The facilitators of such groups must be from outside the organization and must be skilled in controlling groups as the focal employee can lead the group to his or her direction (SHRM, 2015).
c) Individual interviews
This method is good for small organizations, but very expensive in large ones. The employees can rate their individual satisfaction but since its does not have anonymity employees may shun from giving information that may not appeal to the organization management. This can only work if the management is not biased and is well versed in separating individuals and their jobs.
How companies determine whether their employer-sponsored retirement plans and health insurance programs are competitive.
Organizations providing these benefits to their employees need first to understand the composition of their workforce. For example, health insurance premiums may not be too appealing to the young generation that only require basic health care, but, to baby boomers health care plan is paramount to them. An organization can study industry trends and standards and the location of the business to know what other businesses in the same industry and of the same size are offering to their employees. These benefits can attract, retain and motivate employees.
The employees should also be given an opportunity to talk these programs since they are the direct consumers. An organization may be paying well for these program but the employees may be getting substandard services from the selected provider. For example, in many organizations that gives their employees’ health insurance cover, the employee’s ends up getting poor services from the selected healthcare providers.
Discretionary benefits given to employees
Discretionary benefits are benefits that are given employees by the employer at will. They are not regulated by labor laws and they differ from one organization to another. These benefits include sick leave, educational assistance, paid holidays and vacations and so forth. An organization uses these benefits to their advantage. For example, educational assistance enables employees to pursue courses that add value to their duties in the organization. These benefits are meant to help employees maintain healthy lifestyles and develop themselves (SHRM, 2021). This enables an organization to have learned and healthy employees.
Discretionary benefits are able to meet the needs of a diverse workforce. For instance, the younger generation may be interested in furthering their education and the sick leave may be beneficial to the older generation that has health issues. In the long run, these benefits add value to the bottom line of an organization. They motivate the employees to work to the good of the organization which result to high productivity.
All in all, compensation packages and benefits are not the only factors that attract and retain the best employees (Forbes.com, 2017). There are other non-monetary factors that organizations can use to attract and retain the best performers. These include; a corporate culture that value and respect employees, flexible working schedules, giving employees a chance to grow career wise, employees being company advocates, providing a product or service with a legacy and organization having a brand power.
