Introduction
In the contemporary society, many companies are facing stiff competition and thus being forced to adopt strategies which are aimed at making them more innovative, productive as well as effective. As such, many companies are maximizing all the available resources in order to maximize their operations and obtain more profits (Noe et al., 2014). Notably, in every organization, employees are considered to play the most crucial part in determining the success of the company. Thus ensuring that the companies remain competitive and sustainable, compensation plans such as incentive programs are devised to align the objectives of the company with the individual motivation. Essentially, incentives are given for the purpose of increasing the performance of the employees which in turn sustains the employees in the organization and also increases the profit margin significantly.
Methods Used By HR to Determine Incentive Pay
Performance Measurement
As a Human Resource Professional, there are two methods which one can use to determine incentive pay. To begin with, there is the regular performance measurement in which the performance of the employees is checked now and then (Noe et al., 2014). The company sets fixed incentives to be given to the employee who is able to accomplish particular objectives. With this method, an HR can be able to collect, analyze and report the performance of an individual, a group or the organization. Ideally, the measurement of performance basically involves checking the performance against some set standards by the organization which is fixed. Therefore, the actual performance of the employees is checked against the objectives of the company. When an employee is able to meet and exceed the set standards, they are given rewards.
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In setting metrics which are suitable for any incentive plan, it is important for the company to establish core values that govern the process. For instance, the incentive plan should in itself be self-financing (Noe et al., 2014). This is to imply that the plan should pay for itself by ensuring that it generates added worth for all the shareholders in the company. Also, the general enhancements of profit levels show the optimal objective of the incentive plan. Taking into consideration such values ensures the incentive plans adopted by the company are practical and beneficial.
Variation of Group Bonuses
The second method which can be used in determining the incentives pay by an HR includes a variation of the group bonuses (Noe et al., 2014). Undoubtedly, this method would increase the motivation of the individual employees and encourage them to be a productive part of the entire team as well as increasing the location productivity though dangling of all the bonus structure in various groups. In this case, both the retail stores and also the internet divisions would be more competitive to receive better bonuses. Consequently, the competition will result in more sales and as a result, this will lead to increased revenue for the company. As such, this creates a win-win situation, in which both the company and the individuals and also other stakeholder get to profit.
Examine the Core Legal Requirements Affecting Employee Benefit in Today’s Competitive Environment. Determine the Legally Mandated Benefits that the Company Must Currently Offer To Its Employees
Benefits play a fundamental role in the lives of employees as well as their families. As such, benefits are used by HR as recruitment and also retention tools which are usually a part of the entire compensation package. Therefore, when a company offers to its employee the competitive benefits, for instance, long and short-term disability insurance, health insurance sick leave, pensions, paid vacation and child care benefits, this influences the decisions of potential employees and motivates them to work for the company (Rabin-Margalioth, 2002).
There are benefits which are currently mandated by the law for every company to offer to its employees. They include Social Security, Worker’s Compensation, Unemployment Insurance, Family and also Medical Leave as well as healthcare which are accredited to the Obamacare health laws. Additionally, the Fair Labour Standard Act states that employees should be paid for overtime. Notably, these mandated laws ensure that retired workers are supported together with laid-off employees, and those get injured on the job. Also, it ensures that employers provide unpaid leave to their employees in cases of a family as well as medical needs.
Recommend at least four (4) additional benefits that the organization should consider providing to its employees. Suggest at least three (3) important concepts that a company must consider when designing benefit plans. Provide a rationale for your response.
The four additional benefits that I would consider include medical insurance paid time off, retirement plan and Employee Assistance Plan.
Medical insurance is critical to the employee for a couple of reasons (McKeeby & Nunley, 2009). To begin with, in the contemporary society, individuals without medical insurance cover experience a lot of delays and less medical attention as compared to those with a cover. Additionally, the medical insurance acts as a security for the employees as they know that they can be attended to in case of emergency. Consequently, this brings psychological peace and the employees can be able to focus on their job.
On the other hand, paid time off are essential as they enable the employee to take some time off and attend to pressing personal matters. For instance, one could be having a child who is sick, or a relative admitted in the hospital that requires special care. Notably, the period which they get away from job helps them to be refreshed and is able to resume their jobs with vigor.
Furthermore, retirement plans enable the employees to provide their services without the insecurities of the future (McKeeby & Nunley, 2009). This enables them to concentrate on their job and be efficient which in turn improves the productivity of the company. In addition to this, Employees Assistance Plans, help the employees to overcome a lot of challenges at work which can work as a hindrance to their productivity.
The three most important concepts that a company must consider when designing benefit plans are budget, an organizational goal as well as the expectations of the company’s current and future employees. With a poor budget, a company ends up making losses which undermine the company’s effectiveness. Similarly, the organizational goals ensure that the plan made at par with what the company desires to achieve in the future (McKeeby & Nunley, 2009).
Assess the efficiency of common techniques for effectively communicating compensation and benefit plans to employees. Support your answer.
In every organization, the compensation plan should be effectively communicated to the people. This is because when there is a better understanding of the compensation structure, the employees get motivated to work. The communication strategy which is used by the organization should be at par with the human resource strategy and get adequate support from the management (Calomiris, 2011). Thus some of the common techniques which effectively communicate the compensation plan to the employees include workshops, meetings, compensation statements, and newsletters. These strategies ensure that there is transparency and as such no employee and take advantage of the subordinate staff. Also, it ensures that all the employees are able to get all the data concerning the benefit plan.
Suggest two (2) ethical risks of making incentive pay a large portion of employees’ total compensation. Propose two (2) recommendations for ways the company might mitigate or reduce these risks.
Companies need to evaluate the ethical risks and concerns of making incentive pay a large portion of employee’s total compensation. Some of these ethical needs are appended below.
First, the bonuses and also the stock may contribute to some unethical behaviour of the employees. That is, when the company designs high incentive plans, a majority of employees may cross all ethical as well as moral boundaries for the purposes of attaining the incentives. Greed can be a motivating factor for people to cross the ethical line. Secondly, the incentives may also cause pay inequalities thus making the turnover rate in the company to be raised. As stated by Calomiris, (2011), many executives are likely to leave their companies due to the pay inequalities which can be as a result of financial incentives.
There are a couple of recommendations which can be beneficial in helping companies mitigate their risks. For instance, the organization can design an internal sound system to ensure that there are checks and balances which help in identification of error and fraud made by the employees. Also, the organization should develop a strong code of conduct to ensure that it can develop a corporate culture that ensures the codes are implemented by every individual.
Conclusion
In conclusion, incentive plans are critical as they make a company be appealing and help motivate employees to continue working. However, as an HR professional, it is critical to use the right method in designing an incentive plan as it can compromise the sustainability of the company. The incentive plan adopted should ensure that all the stakeholder benefit as it should be self-financing. Care should also be taken in choosing the right communication strategy to ensure that the plan is communicated appropriately. More so, the incentive company should adopt the recommendations above to mitigate risks which are likely to arise due to the incentive plans.
References
Calomiris, C. (2011). An Incentive-Robust Programme For Financial Reform. The Manchester School , 79 , 39-72. http://dx.doi.org/10.1111/j.1467-9957.2011.02266.x
McKeeby, C., & Nunley, R. (2009). Employee Benefits: The Age of Accountability. Compensation & Benefits Review , 41 (5), 60-65. http://dx.doi.org/10.1177/0886368709337921
Noe, R., Hollenbeck, J., Gerhart, B., Wright, P. (2014). Fundamental of Human Resource Management 5th Edition: McGraw-Hill Education
Rabin-Margalioth, S. (2002). Cross-Employee Redistribution Effects of Mandated Employee Benefits: SSRN Electronic Journal http://dx.doi.org/10.2139/ssrn.334081
