Proposed Methods to Determine the Incentive Pay
The incentive payment scheme is normally implemented using the following two methods. The performance-based technique and payment technique based employee’s position in the organization. Therefore, these two techniques are examples of incentive payment methods that the human resource manager can use to improve the payment criteria for its employees. Employee compensation is the most sensitive concept that can have a detrimental impact on the organization’s performance. Therefore, there is a need for the human resource manager to evaluate all the possible ethical and legal issues before committing to given payment plan ( Dhar, 2015) .
The performance-based technique provides clear guidelines on who should benefit thus minimizing the confusion that could arise. It also helps to emphasize that the benefits are not guaranteed to the employee but based on his or her performance. In a situation where the end of year bonuses are given out regardless of the performance, very little or no impact on the employee and organization performance is guaranteed. This is because the strategy lacks a motivational factor which plays an integral role in boosting the performance of both an individual and the company. Therefore, the performance-based payment technique should strictly be reserved for those employees who surpass the daily targets. In such a case, the company will also benefit since it meets its daily profit goals. This payment method may have a positive impact both on the employee and company’s performance. It may also have a huge impact on other employees who will have to beef up their efforts so as to achieve the required performance levels. In the end, the incentive plan may lead to the development of a motivated and well-performing group of employees. This helps the company to have a competitive edge in the market.
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Determining the incentives pay based on the employee position is another sensitive concept in human resource management. The payment plan should correlate with the employee's hourly rate wages. The implemented incentive should have a huge bearing on the employees overall pay for it to have any impact on the employee performance. However, the benefits granted to these positions should be sensible enough so that the least positioned employee does not feel demoralized. In addition, the commissions and other benefits tied to these positions should be based on the employee performances so that the company can also benefit from the initiative. Research has corroborated that most of these positions become a success when the employee is motivated enough to meet the threshold pertaining a given bonus ( Dhar, 2015) . Therefore, the company should structure its payment scheme in the sense that there are various incentives tied to the correlated targets that the employees need to achieve. In such a plan, the company may have a motivated group of employees driven by the urge to achieve the set targets. This may have an overall advantage on the company’s performance in the market.
Legal Requirements Affecting Employees Benefits
In today’s competitive business environment, the legally stipulated employee benefits are being used by the companies to recruit and retain certain members of their staff. There are some basic employee benefits that are not optional for the organization to guarantee its workers. Social security, unemployment insurance, disability insurance and the worker's compensation insurance are among the most legally approved benefits that each company must provide to its employees. However, these are basic federally mandated benefits which in some cases may have an impact on the employee performance. Therefore, failure to meet the basic legally mandated benefits, the employees may have an option to look for other places where better benefits are provided. In addition, the company may find it hard to provide both the legally mandated and the optional benefits to its workers thus having a negative impact on the employee’s performance and cooperation at work. For a company that is experiencing a drop or gradual growth in its profit margins, provision of all benefits to its employees may be difficult. This may end up shooting down the employee’s motivation in running the organization’s activities. Therefore, the legally required benefits may have an effect on the worker's motivation more so in a situation where close competitors are offering their staff members better incentives ( Giles et.al, 2014 ).
Organizations’ Legally Mandated Benefits
In order to meet the requirements stipulated by the federal and state government, the organization may have to currently offer its employees the following benefits: Social security taxes, unemployment insurance, medical leave and compensation insurance to its workers. These are legally mandated benefits that are very essential in motivating the employees. The social security insurance plan coerces the organization to pay taxes at the same rate as its employees. This helps to enhance clarity and equity in the social security plan. Unemployment insurance scheme is a legal mandate benefit that each business must honor by registering with the federal workforce organization. The leave and health care benefits follow the federal medical act that permits the organization to offer its employees with incentives related to injury and any kind of sickness. Disability and workers compensation is another important benefit that the organization is obligated to provide to its employees. Therefore, these federally mandated benefits have an impact on the employee motivation and may have a corresponding effect on company performance in the market ( Shields et.al, 2015) . Additionally, the legally mandated benefits provide support for the retired, laid off and injured workers. These incentives are the major factors that dictate the employee motivation and performance.
The organization’s Recommended Additional Benefits
In this organization’s incentive structure, I would recommend the company to provide its employees with the following core benefits: healthcare insurance, sick leave, time-off guaranteed benefits and workers discount. The time-off benefits allow the employee to have a break in situations where the work schedule is more tedious and stressing. The employee may have the opportunity to take a break and come back motivated. Research has corroborated that those companies who don’t give their employee enough break normally suffer due to workers fatigue ( Giles et.al, 2014) . In the year 2012, time-off guaranteed benefits were the most popular in the United States. Survey has established that during that time most private companies benefited from the scheme. The sick leave insurance allows the employee to recuperate well before returning back to work. Healthcare insurance is the most beneficial incentive that each organization should grant its employees. This is because, in most countries, individuals with no healthcare insurance normally receive the poorest medical attention. This may have an effect on the employee’s motivation. Therefore, healthcare insurance provides the worker with an opportunity to receive a professional medical attention that may prevent him or her from future illnesses. Finally, the workers discount helps to provide an additional pay which may have a positive implication on the employee's performance and motivation at work. The organization should consider this incentive since most employees are normally sensitive to their overall pay. Therefore, the implementation of this incentive may motivate the employee to deliver more than is expected of him or her.
Ethical Risks
There are two major ethical risks that the company may face and these include; the executive’s option of inflating the stock prices and accounting malpractices that may occur. The employees may indulge in these malpractices so as to improve their chances of receiving hefty bonuses. These practices highlight the ethical issues that an organization should consider when determining the employees to be awarded the bonus. These unethical practices may have negative implications for the company’s overall profit margins.
The ethical risk of inflating the organizations stock prices and value is a malpractice that some executive may use to earn bonuses and benefits. This applies to an organization that provides benefits to its employees based on stock market performance. In this ethical risk, the executives and other employees stretch the organization's norms thus violating the stipulated guidelines that lead to the company’s realization of the goals. Therefore, by making the incentive pay a major compensation variable, it is logical that some employees may indulge in some mischievous and unethical practices that may harm the company’s growth. Inflating the stock prices may also lead to a depreciation of the company’s sales since customers may seek affordable alternative offers from close competitors. This practice may also have a negative implication on the ethical image of the company in the market. Therefore, it provides the organization’s close competitors with a competitive advantage ( Rode, Gómez-Baggethun & Krause, 2015) .
Inflation of the company’s stock value by using accounting manipulations is an ethical risk that may have negative implications for the company’s growth. In situations where the company prioritizes the incentive pay as a major compensation scheme, most executives will look for a way to earn a hefty bonus and commission. Accounting malpractice is the easiest and efficient way of achieving these retrogressive aspirations. On the employee's account, it may be a bonus but the company will suffer since it is not a ‘win-win’ situation. This may have overall negative effects on the company’s growth and realization of goals. Therefore, organizations should look for ways to mitigate such ethical risks for prosperity in the competitive business environment.
Recommendations To Mitigate The Ethical Risks
In order to avert the above ethical risks, it is recommended that the company carries out stocks audit and restricting the executives to permitted accounting procedures ( Luthans, Luthans & Luthans, 2015) . These unethical practices can also be prevented by restricting the executives from carrying out internal trading activities. Therefore, the company’s shareholders and CEOs should clearly provide these directives to all employees and impose strict affirmative actions for those found practicing such unethical activities.
The development of a stock auditing system will help in ensuring that the executives only sell products as per the company’s stipulated prices. This will help in mitigating the malpractice. However, this process should be carried out with some kind of regularity so that up to date checks on stock balances and the values accrued are documented. This helps to seal all the loopholes that executives may use to earn hefty bonuses in return. However, in order to achieve this strategy, the organization needs to have a clear framework in which the auditing process needs to be carried out. The guidelines should be ethically formulated to reduce any impact that the auditing process may have on the employee’s motivation. This is an important issue since most companies will use this strategy as a “witch hunt” in order to oust inefficient employees. This may have an overall effect on other employees’ motivation and performance.
The ethical risk of accounting malpractices can be mitigated by developing a system of checks from a private professional. This will help to boost the legitimacy of the process. However, this process can also be mitigated by introducing other benefits that are not entirely based on the stock performance. This will help in shifting the executive’s focus thus coercing them to abandon the practice. However, this process should be carried out with much attention so as to ensure that the strategy to be implemented benefits both the company and the employee.
References
Dhar, R. L. (2015). Service quality and the training of employees: The mediating role of organizational commitment. Tourism Management , 46 , 419-430.
Giles, E. L., Robalino, S., McColl, E., Sniehotta, F. F., & Adams, J. (2014). The effectiveness of financial incentives for health behaviour change: systematic review and meta-analysis. PloS one , 9 (3), e90347.
Luthans, F., Luthans, B. C., & Luthans, K. W. (2015). Organizational Behavior: An evidencebased approach . IAP.
Rode, J., Gómez-Baggethun, E., & Krause, T. (2015). Motivation crowding by economic incentives in conservation policy: A review of the empirical evidence. Ecological Economics , 117 , 270-282.
Shields, J., Brown, M., Kaine, S., Dolle-Samuel, C., North-Samardzic, A., McLean, P., ... & Plimmer, G. (2015). Managing Employee Performance & Reward: Concepts, Practices, Strategies . Cambridge University Press.
