ALL ABOUT COMPENSATION AND BENEFITS

 

Compensation and benefits are the rewards that an employee get from the organisation and Armstrong (2009), has defined reward management as the process which articulate and implement suitable policies and strategies to reword the employees based on their value to the organisation with fair, equal, and continuous manner. Thus, it is important for the organisation to value the employees and this can be done through evaluating their performances. Further to have fair, equal, and continuous process the performance management process should be also should be a fair, equal, and continuous process. Further Weiss and Hartle (1997), have stated that performance management as a process which creates a common understanding about what and how to achieve where the employees will managed in a manner to increase the probability of achieving success.

With a proper performance management system, the organisation can have a clear understanding on the dimensions which the employee will value with a common understanding. The performances can be evaluated against the agreed achievements and due to the fact that the all the employees will evaluate under this process the organisation can have an equality on managing the performances of employees. Further the fairness will create through the common understanding of the employee and the employer where both are agreed on duties for a specific period of time. Since the performance management process is conducted annually against the agreed tasks the continuity will be secure. Therefore, it is important for a company to have a proper performance management system which leads to create appropriate recognition and rewards of the employees.

Based on the expectancy theories of motivation developed by Vroom (1964) and Porter and Lawler (1968), it was stated that motivation or the effort of an employee is depending on the ability to achieve the given task and the value of the reward that the employee will get by achieving the task. Therefore, there is a link between the task and the reward whereas the task should be achievable, and the reward should be worth enough to put such effort where in such a situation the employee will be motivated. There for it is clear that if the employee will get a reward which is worth to have and the efforts that he has to put in getting the reward is achievable the employee will try as much as possible to get the reward whereas the appropriate compensations and rewards will motivate the employee and increase the employee engagement.

Even though the compensation and benefits motivate the employee that is not the only way and the most suitable way to motivate the employees to reduce employee attrition. At a time that the employee feels that the reward is not sufficient, or the task is not possible to achieve will lead to reduce the motivation and the level of employee engagement within the employee and thus it is important to identify other factors that have an effect on motivation of an employee. O’Neal (1998) has stated that organisation should not consider only rewards but should consider in total reward where total reward consists with everything that an employee values in an employment relationship with the employer. Further WorldatWork (2000), has stated that total rewards are the all the tools which are available with an organisation that can be used to attract, retain, motivate and satisfy employees.

Further, Manus and Graham (2003) have defined total rewards as all the types of rewards which are direct as well as indirect and intrinsic as well as extrinsic which further can be consider as financial and non-financial rewards where the financial rewards are the transactional rewards and non-financial rewards are relational rewards.

Figure 1: The components of total reward

(Source: Adopted from Armstrong, M. (2009), Armstrong’s Handbook of Human Resources Management Practice, 11^th Edition, London; Kogan Page, pp. 743)

Thus, it is clear that compensation and benefits are not sufficient and are not the only way of motivating an employee and reduce attrition, but the organisations should consider the non-financial intrinsic rewards such as learning and development where the employee feels the organisation always take care to offer opportunities for him to learn and develop within the organisation and to have an enjoyable working environment for employee to feel better in working such an environment.

References

Armstrong, M. (2009), Armstrong’s Handbook of Human Resources Management Practice, 11^th Edition, London, Kogan Page.

Manus, T. M. & Graham, M. D. (2003), Creating a Total Rewards Strategy, New York; American Management Association.

O’Neal, S. (1998), The phenomenon of total rewards, ACA Journal, 7 (3), pp 8–14.

Porter, L. W. & Lawler, E. E. (1968), Managerial Attitudes and Performance, Homewood; Irwin-Dorsey.

Vroom, V (1964) Work and Motivation, New York; Wiley.

Weiss, T. B. & Hartle, F. (1997), Re-engineering Performance Management, Breakthroughs in achieving strategy through people, Boca Raton; St Lucie Press.

WorldatWork (2000), Total Rewards: From Strategy to Implementation, Scottsdale; WorldatWork.