The compensation philosophy forms a basis for all compensation agreements done by a company. Developing a compensation philosophy is a tough task that requires leaders to explore many possibilities and questions that ensure the philosophy has the organization’s best interest as a priority. The compensation philosophy should aim at ensuring the company’s goals are achieved. It is, therefore, a formal statement created by an organization for employee compensation. The main aim of compensation philosophy is to motivate and retain the employees of the organization. Different organizations are known to undertake different approaches towards the matter based on factors such as financial history and state of the industry.
Maersk is a company known to employ simple and effective approaches to compensation that has rendered it successful and kept it in the limelight when it comes to competition in the market. The company takes an investigative approach when it comes to salary increments and cuts. A team is tasked with the review of an employee’s performance for a set period that was agreed upon. Objectives and targets given to the reviewed employees form the fundamental law for the wage change. Utilizing the industrial approach, the company embraces a system in which employees are assigned different jobs based on the job group classification. The compensation policy, therefore, works on the basis of payment through the measure of group demands.
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A compensation philosophy is usually influenced by factors such which include, the revenue, size of the company, business objectives, industry, and expected profits. Another common factor is the market value of the company’s jobs. This essentially means that salaries, wages, and benefits earned have a significant relation to the market the workers in the different job groups attract (Olsen & Dawson, 2003). It relies on the industrial approach of having different job groups to serve different sections of the company. Attracting a higher rate of the market to the company follows that the benefits are significantly higher. Low turnover and attraction to market conversely draws lower benefits and sometimes pay cuts.
Salary surveys are information about employees and their compensation implementation which include benefits and salaries. The research done by the company is able to determine the range of employee salaries; from the maximum to the minimum salary paid to each individual (Davis, 2003). Most times the research is done by region, job classification or sector for purposes of comparability. Salary surveys are used to provide useful information that can be used by employers to employ better measures to ensure they have happy employers who feel compelled to retain their working positions. The surveys are aimed at enabling the employers to have an idea of how the payment structure of a company is in relation to the company’s overall growth and profit turnover.
The company’s management may see it fit to increase salaries to employees due to a substantially steady and profit-making period. Employees from better-performing sectors of an organization may benefit from the salary surveys since the research can match the overall contribution of an individual or team towards a business’ and the salaries or benefits they earn. This, therefore, allows for proper incentive offering to ensure employee loyalty and satisfaction. In a situation where a company seeks to create new positions in a company, analyzing the salary surveys may be used to attract more workers to the job without necessarily jeopardizing the balance in employee numbers by estimating the best possible salary. Salary surveys are also known to provide a proper negotiating ground with labor groups since planning for increases can be established. Plans can be implemented with regards to other sectors of the organization.
Discretionary benefits on employees include the benefits that an employer is not legally bounded to provide. Some of the benefits include health, pension plan, life insurance, and tuition assistance among many more. The discretionary benefits plan is typically an employer’s way of paying parts of benefits plans so that employees are able to receive coverages at reduced costs (Frankel, McNichols & Wilson 1995). Offering these benefits provide many advantages to an organization like Maersk. One of them is the positive relationships that are built in the process. Employers giving discretionary benefits to workers do this to make the employees more appreciative. Being contented tends to translate into the better work ethics and attitude towards the company. The employees may, therefore, take more pride in working for the organization and choose to have their employment last longer as opposed to leaving because of feelings of underappreciation.
In order for Maersk to be able to compete in the market, the organization tends to provide the discretionary benefits as a competitive tool to keep their employees from switching to rival companies that offer better conditions. Applying an attractive benefits package also causes more candidates to apply to the company and improve its reputation. The benefits also ensure boosted productivity in the company. Providing the health and other additional benefits to an employee keeps him or her at a state in which they need to give their optimum best to the organization thus making the overall productivity to increase. Educational benefits ensure employees are also equipped with the advanced knowledge in their fields and therefore proving to be advantageous to both the individuals and the company as a whole. Thus, the move translates to better working environments, better relationships, and overall creates a right attitude toward the fellow workers and management thereby forming a community-like workforce.
References
Davis, J. H. (2003). Salary Surveys and Antitrust: How-To Series for the HR Professional . WorldatWork Press.
Frankel, R., McNichols, M., & Wilson, G. P. (1995). Discretionary disclosure and external financing. Accounting Review , 135-150.
Olsen, S., & Dawson, D. (2003). The total compensation philosophy: New guidelines for compensation Committees. HR innovation. PricewaterhouseCoopers, LLP .
