Compensation is the direct and indirect rewards that an employee gets in return for the contribution he provides to an organization. Organizations develop a compensation and rewards program to determine compensation. Compensation and benefits is an area of human resources that focus on staff compensation and benefits policy-making. To identify the best compensation package for various roles in a company a job evaluation has to be done. Job evaluation is the process of identifying the appropriate pay rate for a particular role by comparing it with other roles within the organization. It evaluates the actual importance of a position to come up with the most equitable compensation package (Welbourne & Trevor, 2014) .
In our case study, the position will be that of a finance manager of a large cement-manufacturing firm. The incumbent is in charge of the finance and accounting division of the company, and several people are under him including departmental accountants, financial controllers, finance officers and budget officers. His primary role is to ensure proper and accurate financial reporting besides his many supervisory and managerial roles. The amount of pay for this role is similar to that of the chief manager IT and that of the chief manager operations. The job evaluation used for this position is the point method; this is because the three roles require someone with excellent people skills, ten years of relevant experience, masters’ degree in their field and professional certification. Regarding responsibility, the role has a managerial responsibility, and the incumbent is highly accountable to deliver in his key performance indicators. The effort required is massive as the holder of the role might be needed to work over the weekends and endure long working hours and he has the task of ensuring that all his juniors carry out their work according to policy and for the overall benefit of the company.
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Direct financial compensation refers to all money paid directly to employees for the services so provided to the employer. They range from wages, salaries, allowances, bonuses, tips and commissions (Bryant & Allen, 2013) . The role of the finance manager comes with an attractive package. The incumbent is entitled to a basic salary, house allowance, responsibility allowance and traveling allowance. Further to this, he also enjoys an overtime allowance for extra hours worked beyond the official time, also enjoys loan, and advances at a preferential rate from the employer. All these are direct financial compensations for the employee as they are aggregated and credited to the office holder’s account after tax.
Indirect financial compensation is other benefits that accrue for an employee working for a specific company. They usually do not result in the employee receiving cash monthly or weekly but rather the benefits can be enjoyed after a specified period. These include medical benefits, insurance covers, and retirement benefits. In addition to the direct compensation, the finance manager enjoys medical protection for him and his spouse and all his children, Life insurance cover for him and his family and a pension plan where he contributes five percent of his basic pay and the employer provides twice his amount.
Non-financial compensation differs from indirect and direct, as it has no financial connection to it. It is not part of the employees pay, and it is just an incentive for maybe employees who have been in a position for long. It is usually a benefit for people who are comfortable with their salaries. They revolve around making the role more fulfilling by providing an exciting working environment, creating opportunities for recognition by offering awards, providing advancement opportunities by paying for training and seminars, workspace or office upgrade, paid parking space and many more. The role of the finance manager in the company is considered as an executive role, and therefore he is provided with parking space and a driver. He is also eligible to get a badge of honor if he works for the company for over ten years.
Designing of a compensation plan is imperative to an organization as it might attract or even lead to the loss of the best people for a specific role. Key considerations have to be put into aspect, which includes; company budget allocation, salary ranges/audits, benefits package, performance management system, legal compliance and structured administration (Cascio, 2018). . In order to design an effective compensation for this role of a finance manager, the first consideration would be the overall financial muscle of the company. The pay should be within the financial limits of the organization. Secondly, a comparison of the industry standards to ensure that the position is not underpaid resulting in loss of critical employees.
Some employees stay in organizations due to the benefits that accrue to them rather than the actual pay, and it is, therefore, paramount that a competitive benefits package is considered. Some employees might enjoy an excellent compensation package without actually delivering and accordingly to design an attractive package it should incorporate the aspect of performance management. In formulating a compensation plan legal complications adherence has to be observed, for instance the taxation system of a nation. Finally, the plan should be structured in a way that creates room for reviews, periodic increments and adjustments. In light of the above in designing the most competitive package for our role of a finance manager, all the above parameters should be observed.
In conclusion, employee compensation and benefits play a very critical role in an organization. The reason that most people get employed is to get a salary for sustenance. When an employer is coming up with a compensation plan, she has to consider various variables. A competitive package attracts the best workforce and also ensures low employee turnover. Job evaluation is also very critical as determines the worth of a position to an organization thereby giving guidance to compensation. Compensation or benefits can, therefore, make or break an organization.
References
Bryant, P. C., & Allen, D. G. (2013). Compensation, benefits and employee turnover: HR strategies for retaining top talent. Compensation & Benefits Review , 45 (3), 171-175.
Cascio, W. (2018). Managing human resources . McGraw-Hill Education.
Welbourne, T. M., & Trevor, C. O. (2014). The roles of departmental and position power in job evaluation. Academy of Management Journal , 43 (4), 761-771.
