In any organization, employees are entitled to getting compensation for their labor input. Compensation refers to the proper and deserved resources given to an employee by the employer. They include things such as salary, wages, bonuses and commissions, and tangible benefits such as health insurance, retirement benefits, and company services such as the company car. Rewards, on the other hand, encompass various components such as compensation, career development, work-life benefits, performance recognition, and benefits such as health insurance plans. The human resource department is responsible for ensuring all employees are accorded their rightful reward. To ensure the process is done effectively, there are specific strategic and practical components incorporated.
Strategic and Practical Perspective and Implementation
Rewards and compensation work well under a well-established plan which involves exploring all factors that affect the process and what components to pursue as rewards and compensation. They are determined by both external and internal factors (Business Jargons, 2016). Internal factors are both employee-related and organization related. Organization related factors include things such as the company's ability to pay its employees, the business strategy used and the job appraisal which entail the job workload and skills required. Employee-related factors include their skills, productivity and performance assessment which involves their outcomes put against the expectations. External factors, on the other hand, include factors such as the labor union requirements, the government rules, and regulations concerning rewards, the prevailing labor pay rates, and the cost of living (Business Jargons, 2016). Before determining what each employee is going to receive as their reward or compensation, the above factors have to be put into consideration to avoid conflicts and unfairness.
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To put the strategies into practice, the company has to agree on the methods to use. For compensation, it can be done through salaries which is the basic pay given to an employee after deduction and addition of every other necessary thing. Wages which refer to the payment given to someone daily after completion of a particular task within a specific agreed period, bonuses or commissions which are additional pay granted to an employee on top of the fixed wage or salary due to an extra activity they have done (Breashy, 2018). Compensation could also be given in the form of benefits such as being given health covers, having a retirement benefit plan for them and providing them with services such as the company car, the company phone among others.
Rewards could be executed through the provision of career development plans where employees are given the opportunity to further their studies, skills, and abilities, through work-life benefits such as paid vacations and holidays and performance recognition where employees are recognized for their outstanding performance which may not necessarily involve being given a tangible resource. Compensation and benefits such as health insurance covers are also a part of rewards (Breashy, 2018).
Why Pursue the Strategy
Total rewards and compensation strategy is pursued specific reasons. The approach increases employee loyalty towards the organization's goals by reducing the chances of having to recruit new candidates due to increased turn-over hence, employee retention (Dewar, 2016). Rewards and compensation strategy is also a recruitment factor. Reasonable compensation and reward components help in attracting top skilled candidates against the competitors. Employees are motivated by these kinds of elements hence establishing them effectively will attract the best candidates during recruitment. The strategy is also a strong basis to ensure fairness when compensating employees is observed, and biases are avoided (Dewar, 2016). This is because the procedure ensures that employees are rewarded and paid as per their legal skills and with the correct conditions having been observed.
Considerations, Risks, Barriers, and Outcomes
In implementing the reward and compensation strategy, there are specific outcomes that an organization is deemed to face as they try to keep up the risks and challenges as they try to keep their employees satisfied. The forms of payment are one of the difficulties experienced when instituting a reward and compensation strategy (Woodside, 2017). Most organizations have gotten used to rewarding only financial benefits. Consequently, when they decide to adopt a non-financial benefit strategy, employees do not appreciate the change and they tend to be against it. Pay competition is also another factor where companies try to outdo each other to get the best candidates. This might hurt organizations whose ability to pay is lesser and still wants to employ the best as they may end up offering high rewards even if their profit levels are low. The issue of comparing the worth and its equitable pay is also a problem (Woodside, 2017). It gets quite challenging to equate the employees’ performance and organizational performance in the most efficient way. If employees did not perform well, they still expect a high pay due to the prevailing external conditions which may affect the company negatively.
Implications
Total rewards and compensation strategy has had specific effects on the employees' productivity, work engagement, organization's commitment, employee behavior and job satisfaction (Leonard, 2018). Organizations have become more aggressive in ensuring they provide rewards as required as it affects them in the long term. Employees have proven to be more productive and loyal in organizations where rewards are favorable but do not cooperate in less desirable companies where they even prefer leaving. Depending on the awards and compensation offered, employees tend to be satisfied if they are happy with what they get which improves their morale and motivation to work.
How to Maximize Outcomes Associated with Total Rewards and Compensation
To ensure rewards and compensations provide better results, certain things should be incorporated. This involves components such as employees should be included in the formulation and implementation of the strategy and come up with a way to ensure employees understand that rewards are earned (Talkdesk, 2013). The human resource department should also always provide they put a clear definition of the relationship between performance and rewards. It should also incorporate both financial and non-financial rewards into its system, and no accomplishment whether small or large should go unrecognized. To ensure that rewards are worth it, the department should come up with a long-term reward program where employees will be striving to achieve specific organizational goals in exchange for a certain reward and which in the long run will contribute to the organization's productivity (Talkdesk, 2013).
References
Breashy, A. E. (2016). Total compensation vs. Total rewards "The difference." Linkedin . Retrieved from https://www.linkedin.com/pulse/total-compensation-vs-rewards-difference-ali-el-breashy-assoc-cipd/
Business Jargons. (2016). Factors affecting employee compensation . Retrieved from https://businessjargons.com/factors-affecting-employee-compensation.html
Dewar, J. (2016). 3 Reasons to pay attention to your employee compensation strategy. Lever . Retrieved from https://www.lever.co/blog/3-reasons-to-pay-more-attention-to-your-employee-compensation-strategy
Leonard, K. (2018). Importance of compensation in the workplace. Chron.com . Retrieved from https://smallbusiness.chron.com/importance-compensation-workplace-38470.html
Talkdesk. (2013). 20 Ways to increase employee motivation using rewards. Retrieved from https://www.talkdesk.com/blog/20-ways-to-increase-employee-motivation-using-rewards/
Woodside, P. (2017). Challenges of compensation management. bizfluent . Retrieved from https://bizfluent.com/list-6828678-challenges-compensation-management.html
