Total Compensation Methods Application Essay

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Total Compensation Methods

Compensation is widely considered as a primary source of motivation for the employees within an organization.in most scenarios people look for jobs which not only suite their creativity and talents but those which compensate them in terms of salary and benefits. Compensation is one of the fastest changing fields when it comes to Human Resource as companies are going ahead with investigations of various ways that can be used for rewarding employees commensurate to their performance. Within any organization there is need to ensuring that the turnover ratio is well maintained while at the same time retaining the best employees. Compensation and benefits are two sure ways that a company can use to achieve such things. This paper therefore looks at some of the common compensation strategies that are found within organizations, analyses the impact of various compensation methods used and also highlight how the salaries and benefit administration relates to the organization culture and performance.

Compensation and benefits strategies

These are ways through which organizations use to pay, recognize and reward the contribution of employees to the success of an organization. Compensation is a systematic approach used for providing a monetary value to the employees in exchange for their work performance. There are internal and external factors which influence either directly or indirectly the compensation rates and programs that are implemented in an organization. The external factors include labor market conditions, average wage rates in the market, the cost of living, collective bargaining and so on. The internal factors on the other hand include the worth of a job, employer compensation policy and the employer's ability to pay. The compensation programs and policies have to be communicated thoroughly and clearly to the employees. Employees normally want to clearly understand what they are expecting in terms of their compensation and appraisal. Therefore, employers are urged to ensure that they have details of the compensation programs written down in order for the employees to familiarize themselves with these details.

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Compensation may achieve various purposes such as assisting in recruitment, job performance and job satisfaction. There are different types of compensation methods which could include; traditional compensation which involves a particular pay level that has been set with increases made regularly. The increases can be given for various reasons such as promotions, increase in cost of living, or merit increases. Most people are familiar with this base pay system which normally includes salaries or wages that have been set, a set schedule when it comes to merit increases as well as a set benefit package.

Another compensation system is "pay-for- performance" which is quite effective in today's competitive environment that strives to raise productivity and lower the cost of labor. This system requires that managers tie some reward to the effort and performance by employees. If this standard does not exist then employees will not have any motivation to perform resulting in high wage cost. This term "pay-for-performance', refers to various compensation options such as merit pay, incentive pay, cash bonuses, and other gain sharing plans. This include commission which is given to those employees who sell a particular number of items or even based on a particular amount of profit that is brought in by the employee.

Overtime pay is another compensation mode in this program which is different in various companies and can be beneficial to the people who are not on the salary pay. Bonuses are normally awarded when a specific goal has been met or reached by an employee. Each of these systems of compensation seeks the differentiation between the pay of an average performer and that of an outstanding performer. Studies have shown that employee's increase their output by between 15% and 25% when an organization uses the pay-for-performance system (Answers Corporation, 2014).

Benefits are a very important part of….....

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