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Introduction
Before analyzing the cost of benefits which employees undervalue and
replacing it by direct compensation it is advisable to discuss about the benefits and
compensation first. Lets start from a question, why does one work? There may be
many idioms to answer this question like to get experience, to update self
according as the demand of time, expand the knowledge, for security, for
socialization, for self esteem and to get self actualization. But apart from these the
most important and first answer, common to all, will be to get something which
directly compensates the employee. According to Maslows Hierarchy of Need,
human nature and performance is based on different needs. So to fulfill these needs
anyone is pushed by internal drive. So an employer always should take an account
of the needs of the employees and make the policy of motivation. So, one of the
motivations is benefits which an employee deserves on the basis of organizational
culture of human resource management. Employee benefits are various non-wage
compensations provided by the employers which are in addition to their normal
wages or salaries. An employee exchanges wages for some other form of benefit
which may refer to as a salary exchange. Some of the common benefits are legally
required benefits, unemployment insurance, vacation and holidays, sick leave,
parental leave and family leave etc. For example, I work for a nursing home which
provides me the paid annual leave for 5 weeks in a year.
Any forms of the pay provided to an employee by an employer in return of
their work are referred as the employee compensation. Employment compensation
can be either direct financial payments or indirect financial payments and other
facilities. As the direct financial payments an employee may obtain wages, salaries,
incentives, commissions and bonuses whereas as indirect financial payments one
may obtain free insurance paid by employer, vacation and so on. The direct
financial compensation is made on two ways. They are on basis of time and on
basis of work performance. In todays time most of the organization made their
payments to employees on time basis. Even compensation made on time can be
categorized in different types. One is the daily or hourly wages specially paid to
clerical and lower level employees and sometime even high level employees, and
the managerial level payment is made on either weekly or monthly or yearly
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2. Literature Review
In todays time compensation has become a challenging issue for many
organizations. Highly growing competition on market has compelled an
organization to come with a distinct strategy which gives the specific values to the
mission and vision of the organization. This doesnt cover only the marketing
strategy or financial strength or sales success in the relevant market environment.
Any organization future can not be predicted if it is not run with different
alternatives plan in the entire departments. Human resource management is one of
those departments which are always seeking the innovation on their functions and
responsibilities.
The compensation to an employee in any responsible organization can not be
put straight away according to the perception of the owner or the management.
They must go through the certain complied criteria. In the first part of this chapter
it is tried to make clear on what basis compensation is made which helps to
interpret regarded issue of the assignment.
2.1 Basis of determining the compensation provided to an
employee.
It is already mentioned that an organization can only indicate the
compensation or pay rate if it fulfills the common regulations and
system in the relevant market. The common fundamental bases
are discussed as follows:
2.1.1 Legal Consideration
This includes the laws which specify the aspect of compensation like
minimum wages, overtime rates and benefits. For example in most of the
developed countries the time limitation for working hour is 40 hours per week and
there must be the facilities of extra payment in case of overtime work to be done
by an employee which is under Fair Labor Standards Act. Usually if an employee
is asked to do more then the limited hours then the company should pay 50% more
on the payment that the company is paying on minimum pay rate. Suppose an
employee is getting $8 per hour on as the basic pay for first forty hours in USA,
the company should pay $12 per hour for the extra hours which the employee does
in a week. If a company doesnt follow such regulation then it may be pulled on
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court for allegation. For example we can take the payment of $640 million made
by Wal-Mart on January 2009 to settle 63 wage and hour suits alleging for failing
to pay overtime and break time facilities. Similarly, there are some more acts like
equal pay act, employee retirement income security act and other legislation
affecting compensation.
2.1.2 Influences of Union on compensation Decision
In many countries before making the decision about the compensation or benefit, a
company may have to go with the related union of the similar organization or the
employees. As an example: In Nepal the Union of reputed schools have negotiation
that they will increase the pay rate to their employees by fifty percent more than
what government makes the rise in its pay to government employees. In many
countries an organization should provide written explanation to the union about the
pay plan to the employees.
2.1.3 Impact of Competitive strategies, corporate policies and
compensation
What can an
organization do
to accomplish
the specific
mission
Determining the
behaviors or
actions required
on employees
to complete the
mission
What is the
measurement
of comparative
fulfillment of
current
Required
compensation
program to
reinforce those
behaviors on
employees
The measurable
relationship
between the
compensation
provided and
Fig: 2.1 Developing an Aligned Reward
goal
its Strategy
own mission
and values. To achieve
accomplishment
An organization has
that it creates the
overall reinforcement package through direct compensation or pay or benefits and
so on. The organization has certain strategy which helps to make the effective pay
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system and called as aligned reward strategy. Aligned reward strategy has effective
impact on the pay policy. Figure 2.1 shows how an organization should create the
reward policy.
2.1.4 Impact of equity on determining pay
Equity
Internal Equity:
Pay made to same
level but in
different
department
External Equity:
compared to
organization
outside.
Individual Equity:
compared to the coworker who have very
similar work
responsibility.
Procedural Equity:
The fairness on
the process of
allocating pay.
Primark
What we offer
Salaries are competitive and subject to annual review. Other benefits include:
Store Management
23 days' holiday (increasing to 25 days after 3 years' service)
Health insurance (Assistant Manager level and above)
Bonus scheme (Deputy Manager and above)
Retail assistants
Variety of shift patterns available to suit your lifestyle
Tesco
Share our Success
At Tesco, we like to ensure our staff are cared for financially. So whether you have been with us
3 months or 3 years we run three successful share schemes, all helping you end up with more
cash in your pocket.
Shares in Success
So, to thank our people for the success they've brought the business, we give free shares to
everyone who's worked here for one year at the end of the financial year (February). We share a
proportion of our profit amongst our staff, based on salaries. These Tesco shares are held in trust
for 5 years, and after that you can take them, tax-free.
Staff Privilegecard
To reward you for your loyalty, after a year working at Tesco you will be given your Privilegecard
- the staff loyalty card that gives you 10% discount and Clubcard points on most Tesco products.
And eligible staff also have access to exclusive staff discounts with Tesco Personal Finance and
Tesco Telecoms
Pension
We look after your future too
None of us know what the future holds, but you can be sure that peace of mind and financial
security for our staff is very important to us. Planning ahead to your retirement is easy with our
award winning, Tesco pension scheme.
With a Tesco pension you are able to understand how financially secure you will be when you
decide to retire. As well as pension provision you have access to a life assurance scheme that will
provide financial protection for your family.
There are discounts on theme parks, holidays and gym membership that are available all year
round. There are also special offers throughout the year, to make sure there's always something
for everyone.