Employee Compensation Plans for Companies Research Paper

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Employee Contributions 30/05/2015

Two methods an HR professional could use to determine incentive pay

Legally mandated benefits that the company must currently offer to its employees

Additional benefits that should be considered for its employees

Efficiency of common techniques for communicating compensation plans to employees.

Ethical risks of incentive pay and recommendations to mitigate the risks.

Two methods an HR professional could use to determine incentive pay

There are a number of methods that are generally used by companies to link work, output and expertise to the remuneration of the employees. In this section we examine two methods that can be used by the company to create more loyalty among the employees to stay back in the company through the increasing in pay.

The reward management practices would help the company to determine the amount that would be paid to the employees. The underlying principal is that the company would be able to develop a policy that would enable the company to determine what they consider as most valuable and important contribution and the related transformation of such contribution into finances and remuneration. The advantage of this system is that it can be applied to individuals, groups and the organization as well (Schraeder & Becton, 2015).

Production Pay: the company can adopt the system of paying employees by the amount of work they produce. This can be related to the departments like sales, customer services etc. where the work output can be calculated and that can be linked to the incentive pay in addition to the base pay that is given to the employees. The justification is that while the employees would be rewarded with more money the company would also get better motivated employees (Schraeder & Becton, 2015).

Commissions: This is one of the most common forms of incentive pay where the remuneration would be linked to the work done in the form of percentage of either the base pay or the financials that are associated with the results of the action. The principle is that work output is easy to measure and there can be no confusion about the remuneration as the output would be directly linked to the percentage number. There can also be a number of factors that the company can spread the percentage points to suit the work output of separate departments (Schraeder & Becton, 2015).

Legally mandated benefits that the company must currently offer to its employees

The laws in general mandate certain benefits that companies must provide to employees who are of a permanent nature. Such benefits to be mandatorily given to employees are:

Social Security: the company needs to pay social security taxes at the same rate as is paid by the employees. The social security tax also includes payment of the employer's contribution for Medicare. The combined rate of payment is 7.65%. This is generally paid through payroll taxes to be paid by the employer.

Unemployment Insurance: this legality for employee benefits generally vary from state to state and hence would depend on the place wherever the business is located. This mandatory requirement is essentially made to provide payments to unemployed employees so that such persons are able to make ends meet until employment is available. This tax is also payable through a payroll tax (Rosenbloom, 2011).

Workers Compensation: this is a benefit that employers need to pay to those workers who have been rendered disabled by occupational illness or injury. The rates and the mandatory nature of this tax vary from state to state.

Family and Medical Leave: the employers are entitled to provide up to have 12 weeks of job-protected, unpaid leave during any 12-month period to employees according to the Family and Medical Leave Act. This leave can be for a variety of reasons like the birth and care of the eligible employee's child or when an employee wants to place bid for foster care or adoption of a child. The leave can also be availed in case of need of taking care of an immediate family member who could be ailing with some form of serious ailment or for the serious health condition of the employee himself/herself.

COBRA Benefits: this benefit is applicable to companies who had 20 or more employees in a preceding year on more than 50% of its typical business days. this is called the Consolidated Omnibus Budget Reconciliation Act of 1985 and ensures employers to provide continuation of the health coverage at the rates of group health insurance prevailing in the company for former employees (Rosenbloom, 2011).

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Additional benefits that should be considered for its employees

Additional benefits to employees are those benefits that companies offer to employees that are not mandatory by law but are given to secure the retention of the employee and to attract the best talent in the industry in addition to the financial remuneration that is offered. Such benefits can be:

Medical insurance: this is in addition to the social security medical benefit that is mandatory by law. This can related to additional medical coverage for employees by the employer and can be extended to cover medical benefits to spouse or siblings this allows employees to have a full health care package that can include services that are beyond the basic medical care. The schemes are often designed to enable employees to purchase at a discounted rate as much of coverage as warranted.

Life insurance: employees can get complete or partial life insurance coverage for employees, especially in industries where there is a risk to life during jobs. This can also include accident benefits to employees.

Voluntary Funds management: this includes offering deductions from pay roll, money that can be invested on behalf of the employee to various matter like studies of children or retirement plans. This benefit is apt for those employees who have difficulty managing their money for such issues.

Discounted Benefits: these can relate to some discounted services like gyms, health clubs and phone service plans.

The concepts of designing of benefits for employees include the concept of protection of the employees and this concept requirement is fulfilled through the giving of benefits like accidental and life insurance, medical insurance, unemployment, old age and disability assistance to employees.

There is also the concept of time off with pay that allows an employee some time off work and for social and family engagements without having to compensate on the pay or remuneration. The granting of employee benefits also flows from the concept of ensuring continuous and effective services from the employee where it is assumed that increased or adequate benefits would encourage employees to function better and create a good work and off-work environment.

All these concepts and options can be employed for the formulation of the incentive benefits for the employees of the company in the case (U.S. Department of Labour, 2014).

Efficiency of common techniques for communicating compensation plans to employees.

The effective communication of compensation to the employees through the common techniques has to take in to consideration the selection of the audience. This means that the effectiveness of the communication would depend on the proper selection of the audience. For example, the compensation communication to managers and supervisors would be relatively different than those targeted at general workers to get the efficiency of the communication. Other target groups that would require different communication techniques include the prospective or future employees and family members of employees.

The effectiveness of the common techniques that are used to effectively communicate the compensation and benefit plans also depends and can be assessed through the mode of communication. For example, a face-to-face interaction and communication with employees would provide real time interaction and instant feedback. On the other hand a meeting would ensure that the communication of compensation has more information that can be both verbal and non-verbal in nature. Assessment of the effectiveness can also be made by judging other methods that are used for communication like workshops, paper-based brochures, booklets and newsletters and through letters and official memos.

The effectiveness can also be assessed through the observation of the changes in morale of the employees, the increase or decrease or further compensation related queries to the HR department, the increase in dialogue with the manager or supervisors or other authorities of companies about compensation and the way employee react to changes in compensation at work or at other places.

Ethical risks of incentive pay and recommendations to mitigate the risks

There are several Ethical risks that can be associated in case the company in the case decides to lay total emphasis on incentive payments and makes incentive pay the most important component of the pay package.

Taking such an initiative would essentially have the potential of misuse of the fund that the company would require to fulfill the initiative. The company can or may utilize funds for incentive programs that could have otherwise been better used to benefit employees. The ethical consideration is that whether the funds being used be able to serve….....

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