Compensation practices refer to the process by which a company provides equal and fair returns and remunerations to the various employees of the organization. Compensation is given to employees based on the services they have offered the organization towards the achievement of their goals and objectives. The remuneration is given in monetary terms and as a token of appreciation. There are several compensation strategies than an organization can use. However, the plan selected by an organization depends on the objectives and targets of the company. A business entity may carry out compensation practices to attract talent, motivate the staff, act as an appreciation to valued behavior, and ensure that there is equity. Various compensation strategies define the intended policies of an organization and provide well equipped and a motivated workforce that will work towards the achievement of the company's objectives. Compensation increases the motives of employees to carry out their work with competence and extra hard. However, compensation can also be non-financial (Intrinsic Rewards). They include praise, rewards, and incentives to workers and even the utility that is obtained from work done. The essay will discuss the compensation strategies used in Toyota Company, compensation challenges they face, ways in which law and labor unions affect compensation practices in the company, and how the exercises are used in the determination of impacts to the company and stakeholders.
Toyota Motor is an automotive company located in Japan and has approximately 364, 455 workers in the entire world. They specialize in the production of Automobiles, luxurious vehicles, vehicle engines, and vehicles used for commercial purposes. The company uses the Base pay compensation strategy for its employees. Base pay compensation strategy involves lump sum payments such as overtime, bonuses, benefits and raises in the employee's salary (Miranda, 2010). However, one should understand that a company may decide to use more than a single compensation strategy on different levels of management. Some of the best practices that Toyota Motors are applying with regards to compensation include; One determination of the value of the position of an employee based on the time energy needed to carry out the job. Two, carrying out research on the mean rate of payments in the industry to attract employees by paying them a much higher pay for competition. Also, they apply the practice of considering the benefits where the basic salary of the employee will be the most basic package of the compensation. Minimization of the financial risks of the workers is one of the compensation challenges the company faces creating difficulties in the application of the compensation strategy. Promotion of differentiation is another compensation challenges faced by Toyota Motors. Different employees perform different tasks in the company and thus will need a different level in compensation which creates a problem.
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Toyota Motors applies the various compensation practices in the determination of the positive and negative impacts on itself and the stakeholders. The company carries out its compensation practices according to factors such as legislation Acts, jobs with obligation and those without, the behavior of the employees, competition form the external environment and level of consistency of the employee. First, Toyota Motors establishes the impacts of adhering to the Acts of legislation towards the stakeholders as having a negative effect. The organizations reflect on losing it will encounter in case it adheres to the salary and Acts of compensation. Subscribing to the Acts implies that the law prohibits the company from giving employees law payments (Spain, 2009). Secondly, Toyota Motors determines the amount of money it pays its employees based on the obligations a job requires. For instance, Toyota Motors pays high salaries to employees handling tasks with senior requirements as they need technical skills and adverse knowledge. Such rare skills and knowledge present in the top management will require high salaries, most importantly the CEO of the company. Thirdly, the company allocates the payment to the employees based on their behaviors. Employees with good practice and have consistency in their excellent work benefits the most. The workers will receive a high pay as they play an essential responsibility of maintaining a high public profile for the company. A good profile is of positive impact on the company, and thus, well-behaved workers receive high salaries (Spain, 2009). Lastly, competition from the external environment may have a positive or negative effect on the level of performance of the company. Stiff competition makes employees in the company work extra miles even overtime to maintain their standards in the market. That will attract reasonable compensation such as bonuses and incentives to uplift the working spirit of the employees.
Laws, labor unions and market factors impact the company's compensation practices in various ways. Some laws affect Toyota Motors compensation practices such as laws on employment, laws on safety issues, and the law on discrimination. For Toyota Motors company it is complex as it has to stick to the laws and regulation of each country it's doing business. The rules affect Toyota Motors through the regulations on business actions. Requirements in employment are essential in establishing a power balance between the boss and the workers (Joseph, 2013). Examples are the laws on child labor, minimum wage payment, and the overtime payment. Unions, on the other hand, do not prefer the technology companies like Toyota Motors as they do not have representation. For example, Toyota Motors lack any union representation. Information companies like Facebook are not represented in any unions which may look bad for those who are in support of the unions. However, not being in a union is not a bad thing for Toyota Motors. They are in a better position to provide more benefits to their employees that those who are represented in unions.
Market equally have a contribution to Toyota Motors especially in the case of a competitive market. Since we are in the generation of automobiles, many other companies compete with Toyota Motors such as Nissan, Hyundai, and Ford to name a few. Toyota Motors have to provide its employees with compensations and salaries that are competitive. However, not only will they offer good salaries but adverse benefits which entails not only the ordinary discretionary benefits such a house and health allowances but also nonconventional incentives that will satisfy the utility of the employees and gain their loyalty (Miranda, 2010). That's the secret that Toyota Motors uses to retain and absorb more talent and remain competitive in the global market. Competition is essential for the survival of a company. Thus, a company should thrive to surpass the standards of the competing to have a competitive advantage in its level of performance than the others. Equally, the objectives of the organization towards the market should be established (Joseph, 2013). For instance, an organization may be seeking to enter into a new market and not to compete creating a difference in the compensation practices to be used upon being successful.
Some of the traditional bases for payment for Toyota Motors include the worker's experience, the skills that the worker possess, and the nature of the task being carried out. Humans errors are experienced more than usual which can be as a result of an increase in difficulties in making decisions. Based on various research, one strategy can be used in situations of multi-choice choices which is the compensation strategy. The procedure was crafted by specialists who try to analyze several assessments of a single option in estimating another. The satisfaction arising from each option should be in comparison with the strategic model. A comparison of the achievement of each opportunity in some different criteria should be made separately, and the differences are added together to obtain the additive difference in the strategic models. More so, the traditional pay system has been of the basis of seniority and longevity and not on the level of performance of the tasks at hand. The system had an assumption that the more an employee stays in an organization, the more he or she becomes valuable. That is a critical met of the system that modern systems such as incentive-based and person- based compensation lack. That is because the employee gains new skills and becomes more experienced (Joseph, 2013). Equally, the traditional method is advantageous as the organization is in a better position to acquire a steady workforce. Also, the system of obtaining the employees is more straightforward as it is based on a formula. The fact that the traditional method is based on seniority possesses a challenge to the company as the work-force will not have a high performance.
In conclusion, individuals in the top management level should take part in making relevant decisions on the compensation practices to employ in an organization. Each decision coming from the management should be towards the achievement of the future goals of the company and satisfying the utility of the employees. The compensation strategy used by a company can either attract or shun away employees. Thus, the approach of compensation is in a direct relationship with the efficiency and effectiveness in the performance of a firm. Any company operating in the current business market should take a long stride towards using the best compensation strategy and practices so as not to go into bankruptcy when it losses all the employees. Toyota Motors is carrying out a well-established competition compensation practice that according to me it is the best across the globe. They always involve their relevant stakeholders and consider their contribution enabling them to engage with the company for an extended period happily. The company has laws that ensure each employee receives a fair compensation based on the tasks they perform. However, that should not be a hindrance for the company to take a step and look for much better compensation strategies and practices for its employees. After carrying out my research on the Toyota Motors compensation strategies and programs, I can say that the compensation programs are suitable for the well-being of the employees, the stakeholders and the company itself in the achievement of its goals and objectives.
References
Joseph, J. (2013). Strategic Compensation: A Human Resource Management Approach, Seventh Edition.
Miranda, J. (2010). Challenges of Development and Management of People. Journal of Management Practices, Vol. 2, No 42. Pp. 11-43.
Spain, C. (2009). Resource Management Human. International Journal of Human Resource, Vol. 12, No 3. Pp 32-45.
