Many factors need to be implemented in an organization to assist in bringing effectiveness to staff performance. Some of the factors include application of strategic business skills, leadership and communication skills and competency in identifying succession of planning techniques that create value in the team and assist in the problem solving. Healthy organizations are those that are considered to have strong leadership and effective work processes. They are also involved in productive training of employees as well as efficient design and engagement of employees and accomplishment of staffing strategies (Shutan, 2003). Successful organizations are also those that emphasize on the process improvement through workflow design, human resource, employee life cycle processes and alignment of performance management systems.
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Despite these measures to bring effectiveness in the management of employees in an organization, it has been difficult to determine methods that can be used to ensure that employees are retained in an organization when they are not motivated to work in those organizations. It has been observed that the main cause of resign of competent employees was related to the matters pertaining to incentives and benefits which proved to be not equal to the amount of effort and expertise they input in those organizations (Nelson, 2004). The employee engagement has been associated with higher financial gains from an institution and efficient implementation of organizational strategies. Consequently, it has been considered significant to come up with the ways of promoting retention of competent employees through efficient benefits and incentive structures. This is because organizational effectiveness can be created only when leaders focus on aligning and engaging people, management systems of the people and structure of payments that is useful in achieving organizational capabilities (Lynch, 2003). This paper provides study of the benefits that are associated with the use of efficient benefits and incentive structures in an organization. It also provides a proposal that can be used to manage benefits and incentive structures for large scale business that is faced with the challenge of lack of satisfaction from the most competent employees in the organization. Besides, it provides a framework of the employment benefits and incentive structures that large scale organizations need to implement to assist in addressing the benefit demands for their workers. It also includes a recommendation on the need for top managers to provide their employees with high incentives and benefits.
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1. How Effective Compensation and Benefits Strategy Brings Organizational Effectiveness
The role of Human Resource in the management of payroll systems of an organization is considered significant in accomplishment of employee needs and ensuring their satisfaction with the way they are treated in the organization. Human resource is considered to bear responsibilities for every action taken by an organization and every work that comes as a result (Keller, 1999). This has been brought by the need to manage employees efficiently and bring motivation to them through provision of the best remuneration and compensation based on the industry standards. The efficient compensation will also be useful in attracting and retaining the best employees thus maintaining productivity and profitability of an organization. This is because organizations that have not implemented the right benefits and compensation schemes for their employees risk losing them and it can be very difficult to obtain similar kinds of employees. Most organizations have made mistakes by rushing into answers when no careful consideration of other issues has been done (Jimenez, 2009). In the organizational strategic planning efforts there has also been the need for dovetailing the philosophy of compensation to support of the organizations’ strategic plans.
Compensation is considered as remuneration received by an employee because of his contribution to the needs of organization. It involves the organized practice of balancing the employee relations through provision of monetary and non-monetary benefits to the workers. It is regarded as significant point in the human resource management that is significant in motivating employees and bringing effectiveness in the organizational management systems.
It has been considered necessary to manage the compensation systems of organizations to bring motivation to employees to increase their organizational productivity. This is because compensation acts as a drive for employees to come to work in an organization (Dunham, 2003). Consequently, compensation is significant in effective running of an organization and accomplishment of organizational goals. Salary is considered as one of the compensation systems of an organization, but there are other physical and psychological needs that employees need to fulfill. This is accomplished through compensation system.
There are two visions that exist in the company. They include the employee vision and shareholders’ vision. It is argued that if a company can link its reward strategies in a manner that links these visions by fulfilling one in a similar way to the other, it is possible to have success in achieving growth goals of an organization. This is an implication that if employees have a sense that their desires to develop and implement acquired skills take part in the growth of the company and create wealth that is essential for their retirements, they will execute actions that result into production of those outcomes (Allen & Helms, 2002). When they are involved in doing so simultaneously, they contribute towards accomplishment of the owner’s and business vision.
2. The Principle Components of Compensations and Benefit System for a Large-Scale Organization
During implementation of compensation strategy, there are certain guidelines that need to be observed. For instance, it should not be assumed that compensation managers have the knowledge of the most basic compensation terms such as ranges and overall compensation. In case this is true, it is necessary to start with a basic class of compensation so that when more details are required, it would be possible to make a reference to answer the questions. This can be followed by the need to get a range of opinions from major stakeholders through collection of data relating to their views.
2.1. Compensation and Benefits Philosophy
The design process of compensation benefit schemes involves identification of desired outcomes and goals of an organization. This is referred to as the compensation philosophy. Formulation of the compensation philosophy involves consideration of a number of factors. It involves the balance of direct and indirect rewards, complexity, the role played by an employee as well as inclusion of internal and external factors of equity. It involves the ability to achieve the results that are significant for success of an organization (Shutan, 2003). This philosophy also argues that in determining the efficient rewards, there is the need to consider uniqueness of each employee. This is because people have different needs and goals for working. The most effective compensation will be focused on meeting those individual needs. Largely, the right compensation is in the mind of the employer. Having an understanding of the balance that needs to be achieved between the direct salary and indirect benefits is significant in developing the overall compensation system. There is a need for strong foundation for both the organization and employees. This allows the offer of high compensation package for newly recruited employees with respect to existing employees, or the possibility of being unable to hire because the total compensation provided is not high enough to be competitive.
2.2. Pay Structures (pay grades, pay ranges and pay width)
Pay grades refer to a sequence of grades, bands or levels into which a group of jobs is broadly compared and placed. A pay structure refers to different levels of pay jobs or a range of jobs with respect to their internal values based on the job evaluation, external relativities based on the market surveys as well as job rates that have been negotiated (Nelson, 2004). A pay structure acts as a scope for pay progression based on the performance competence and contribution of service. During the process of designing the pay structures, the compensation team should ensure that the structure is appropriate to the organization and its employees, capable of facilitating the management of relativities of achievement of fairness, consistency, and transparency in managing grading and payment. The pay structure should also provide the scope based on the performance, contribution and results into increase in skills and competence (Lynch, 2003). It should also make clarity of the lateral developments and career opportunities and should be constructed with high logic and clarity so that their basis of operation can be communicated to employees. The following is a method of setting a pay scale for employees in an organization. Some of the common methods that are used to establish pay scales include:
· The going rate: this involves determining what other businesses in the same industry and region are paying for similar positions and structuring your pay in accordance to it.
· Job evaluation and grading of pay: this is where the job is evaluated based on a number of factors, such as its effects on the bottom-line, its danger, the kind of training required and then developing an appropriate pay range (Keller, 1999).
· Broadbanding: This is a state where jobs are grouped into one band such as administrative staffs, and pay range is assigned to that band, but it is not based on the title.
· Job width: This involves the scope related to the pay regression and is equal to the pay considerations by considering that wide ranges result into inequalities. The number of grades should also be decided on to prevent wider job widths. It also includes a cover of the market rates and job evaluation scores that cover the assimilation costs.
2.3. Ratio of Base to Incentive and Bonus Pay
The employer can decide to implement the bonus payment to employees who work for their organization exceptionally well. These are payments that can be given above and beyond the basic salaries to the employees to act as recognition for their achievements. It is important that organizations provide all their employees with bonuses. If some people are rewarded while others are not, it will be possibly ruin the company or limit the chances for success. When all the employees’ efforts are targeted towards the same goal by contributing towards success of the business, there sure will be better chances of continually observing positive results (Jimenez, 2009). The amounts of bonuses given to employees should not be limited or they should not be made to sit back and fell comfortable with their current positions.
The wages and benefit structures can also involve provision of employees with incentives. This is dependent on the payment structure and is considered the most productive for sales companies. When income is based on how well a person performs, then the person is likely to do better. When the right people are hired to begin with, there are those who are capable to live with the challenge and are capable of going as far as they are allowed to go. There is the need to include additional payments to commissions if there is a possibility of loss sight of the customer’s ultimate needs. This calls for the need to have a balance between base pay and sales commissions.
2.4. Emphasis on the External Equity Principle
Equity in compensation is considered a significant component of creating successful compensation system. It is a condition where all the employees in an organization are treated fairly. External equity refers to a condition where employees have a feeling that they are rewarded well in an organization in relation to those who perform similar jobs in other organizations (Dunham, 2003). External equity can be implemented by comparing organization’s pay rates to the average pay rates in the organization’s market. This ensures that employers are able to pay what is necessary to find and motivate the employees who have adequate qualifications. Creation of compensation structure starts with implementation of competitive basic pay.
Internal equity refers to a condition where employees feel that they are being rewarded fairly based on the relative value of their jobs in the organization. It is a perception of an individual of their responsibilities and reward systems that are considered fair and equitable when compare with other employees in a similar position within the organization. The most important factors that are considered are efforts, levels of skills and efforts and responsibility in addition to the working environment.
Companies can apply internal equity study to determine if there is a pay equity between similar positions and whether all roles in the organization are controlled by the same compensation structure. Each role is assigned to a pay range that corresponds to the criteria that determines the placement of an employee in the organization.
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2.5. Types of Benefits
a. Deferred compensation match
This is the process where an organization sets aside part of salaries that are paid to the employees for the retirement purposes through the Retirement Corporation. It involves a contribution of as little as possible and allocating the contribution into one or all of the offered funds (Allen & Helms, 2002). Following the enrollment, there is a possibility of change in the allocation and amounts contributed.
b. Health insurance
This is a scheme, which assists in protecting employees from high medical costs. Most employees have been able to get health insurance policy from their employers (Shutan, 2003). The employer who pays for that insurance in a managed plan has done this. The plans contract health practitioners and medical equipment that are useful in provision of care to their members at reduced costs.
c. Vacation and sick leave
Vacation leave is provided by employers to specify categories of workers who are eligible for vacation leave on full time or temporary basis. It involves description of how and the rate at which vacation leave is earned and whether companies allow a carryover of vacation leave from one year to another and also whether companies allow employees to benefit from unused vacation leave when they are out of the company (Nelson, 2004).
Sick leave specifies the types of employees who are allowed to accrue a paid sick leave on the full-time and part-time basis. It involves a description of how and when and the rate of earning sick leave and whether a company allows carryover of sick leave from one year to another and whether the company pays employees for the sick leave.
3. Recommendation For Top Managers to Increase Compensations and Benefit Expenses
Top managers need to be aware that compensation is regarded as one of the factors that can contribute to motivation of employees. It also ensures that competent employees are not demotivated to move into their companies. Thus top manager in large-scale organizations must ensure that they create a sound benefits and compensation schemes for their employees. This can be gained through a number of compensation structures discussed in this paper. The pay structure must be relevant to the input of an employee while the employer is to make sure that compensation structure is favorable to all employees. Through an efficient employment benefits and compensation structure it will be possible to retain the most competent employees.