What is the importance of compensation in an organization?
What does compensation management have to do with Human Resources? Show
The success of the HR Department in any company relies heavily on positive employee engagement. HR is responsible for hiring, firing, payroll and benefits. These five matters impact employees more than anything else. Above all, there is perhaps nothing more motivating for employees, than compensation. It recognizes them and reinforces positive feedback through tangible pay raises and perks. Benefits of compensation management Compensation management helps ensure that the salaries offered are competitive. If all the data collected tallies with market trends, hiring managers can make an offer to a prospective candidate without low-balling or being too generous. Employees may find out what their co-workers earn either online or through word of mouth, so it’s important to keep all compensation management practices fair and in line with the market rate. HR can calculate salary increases and bonuses this way too. However, there are critical arguments that denounce basing an employee’s future worth on past performance. Overall, if your compensation management system is correctly projecting salaries, increases, bonuses, discounts and other perks, then employee retention will stay steady. Happy employees stay put. Compensation management software Compensation management software facilitates effective and equitable compensation programs, those that create an engaged and productive workforce. These packages are typically an enterprise application that calculates, budgets for and maintains employee salaries. Additionally, they provide all of the information you need to know how salaries can change within an existing job role. However, it’s important not to discount employee potential when calculating salaries. Compensation management software is extremely reliable. It is important to make it work within your company boundaries. HR usually manage compensation management systems, but they can be accessed by department heads and managers too. Often, compensation management stats are accompanied by employee performance data. This combination helps determine offers, bonuses and annual increases. Employee benefits and compensation management Benefits play a major role whether a candidate accepts or passes on a job offer. Employers should consider using employee benefits as part of their compensation management program. While healthcare differs greatly from country to country, making benefits part of your compensation management plan can help employees stay healthy. The software you invest in should help you keep up-to-date with wellness incentives in the workforce. Whatever benefits you offer your employees, these can be tracked and compared to the market within a compensation management system. Since benefits play such a huge role in employee well-being, it’s vital for them to make a positive impact. Compensation management software can also help to encourage employees to take part in wellness programs, which has the potential to lower healthcare costs all around. Compensation management and payroll There is a huge difference between compensation management and payroll. Payroll is the preparation of worksheets and checks which will subtract income taxes and other deductions. It can also be used to keep track of salaries, payouts, wages and budgeting within a company and is a huge cost to most companies. Having accurate records are a must. Compensation, on the other hand, refers to all pay types (salary included) and benefits that are provided to an employee by an employer. Life insurance, disability insurance, health and dental, and retirement funds are all part of compensation. Most employers cover a portion of health insurance premiums, and help employees build their retirement fund. These are two great ways to boost employee retention. Compensation management matters The size of your business might not matter, but your approach to compensation management does. Smart compensation policies are proven to help businesses expand. This is because they help with the acquisition and retention of high-quality motivated employees. In fact, compensation management is one of the most effective ways to keep employees happy and focused on achieving personal and business goals. Employers of any size should want to keep and maintain this goal-oriented attitude from employees. Compensation: Outline and DefinitionsCompensation is a systematic approach to providing monetary value to employees in exchange for work performed. Compensation may achieve several purposes assisting in recruitment, job performance, and job satisfaction. Chapter Highlights
How is compensation used?Compensation is a tool used by management for a variety of purposes to further the existance of the company. Compensation may be adjusted according the the business needs, goals, and available resources. Compensation may be used to:
Recruitment and retention of qualified employees is a common goal shared by many employers. To some extent, the availability and cost of qualified applicants for open positions is determined by market factors beyond the control of the employer. While an employer may set compensation levels for new hires and advertize those salary ranges, it does so in the context of other employers seeking to hire from the same applicant pool. Morale and job satisfaction are affected by compensation. Often there is a balance (equity) that must be reached between the monetary value the employer is willing to pay and the sentiments of worth felt be the employee. In an attempt to save money, employers may opt to freeze salaries or salary levels at the expence of satisfaction and morale. Conversely, an employer wishing to reduce employee turnover may seek to increase salaries and salary levels. Compensation may also be used as a reward for exceptional job performance. Examples of such plans include: bonuses, commissions, stock, profit sharing, gain sharing. What are the components of a compensation system?Compensation will be perceived by employees as fair if based on systematic components. Various compensation systems have developed to determine the value of positions. These systems utilize many similar components including job descriptions, salary ranges/structures, and written procedures. The components of a compensation system include
Compensation will be perceived as fair if it is comprised of a system of components developed to maintain internal and external equity What are different types of compensation?Different types of compensation include:
What are regulations affecting compensation?
Compensation PlansDevelop a program outline.
Designate an individual to oversee designing the compensation program.
Develop a compensation philosophy.
Conduct a job analysis of all positions.
Evaluate jobs.
Determine grades.
Establish grade pricing and salary range.
Determine an appropriate salary structure.
Develop a salary administration policy.
Obtain top executives' approval of the basic salary program.
Communicate the final program to employees and managers.
Monitor the program.
What compensations and benefits are important to you explain why?Compensation and benefits are two important aspects of human resources. Compensation includes wages and salaries, while benefits include things like health insurance, vacation time, and pension plans. Compensation and benefits are important because they can help attract and retain talented employees.
What do you mean by compensation explain its importance with various types in detail?Compensation refers to any payment given by an employer to an employee during their period of employment. In return, the employee will provide their time, labor, and skills. This compensation can be in the form of a salary, wage, benefits, bonuses, paid leave, pension funds, and stock options, and more.
Why are compensation decisions so important?Often it is used as a retention strategy whereby most valued employees are awarded reasonable compensation which makes them want to stay more. Equitable compensation is therefore vital in engendering trust and credibility in an organization's management (Timothy, 2009).
|