Compensation and Benefits

An employee is a vital component to an organization. Management of this component is essential for an organization to achieve success. The main objective of an organization is making profit and be successful in keeping her competitors at bay.

Firms which have been able to unite brains have been able to achieve their set goals. Organizations need to ensure that the positions in the organization are filled and anytime there is a vacant position, appropriate actions need to be undertaken to ensure the positions remain filled (Stoner, Freeman & Gilbert, 2003).

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This will ensure that there is no backlog of work and that the firm’s systems are operational at any given time. The employee is responsible for the implementation of the firms plan. Sound human resource policies are important in the selection and recruitment of employees. This will ensure that the firm has the right people to fill various positions (Koontz, 1961).

Good working conditions and a competitive salary is also vital to motivate the employees towards achieving the organization dream. Human resources, a body responsible for hiring and firing employees, are tasked to prepare salary scales of the workers to be approved by top-level management. The article aims to discuss compensations and benefits system. In addition, the importance of Holland Enterprises to increase its expenditure base to enhance organizational success is also discussed.

How an effective compensation and benefit system contributes to organizational effectiveness

Compensation and benefits system of an organization is vital to cope with the day-to-day competition posted by competing firms. This scheme helps ensure employees are motivated at all times.

According to recent researches, employee motivation is directly related to the level of production in that the more an employee feels he is cared for the more he will be induced to contribute fully to the firm’s revenue (Bonner et al., 2006).

An effective benefit system ensures that all company employees are taken care of as far as their salaries, enumerations and benefit schemes are concerned. In addition, an effective system ought to be in line with the market levels. Compensations are either monetary or non-monetary.

Monetary compensation has money value attached to it while the non-monetary compensation entails recognition and improving working environment. The appreciation of an achievement is enough to retain a worker in the firm. Firms with a strong reward system have managed to keep employees in their systems for long as compared to firms with weak or no compensation systems at all (Bell, 2007).

Organizational culture is a necessity in the success of a firm. An effective compensations and benefits system helps nurture this culture. The designation of a compensation system is in accordance to the company objectives and goals.

Therefore, given the reinforcement of the organizational culture, companies will relatively realize massive success. Compensation and benefits system is designed primarily incorporating the objectives of the firm (Bell, 2007). The aforementioned initiative is meant to entwine a benefit with a goal; a benefit is attached to the achievement of a goal.

In addition, the harmonization of an organization compensation strategy enables the firm to retain the already attracted talent. This retained talent is important to the success of the firm in that it has massive experience to be used to the advantage of the firm. In accordance to the recruitment requirements of most organizations, trainings are part of the process. Losing of these brains to the competitors is a double tragedy to the firm as important information about the firm will be lost to the competitors.

Organization information in the hands of a competitor is harmful to the company-formulated policies as the competitor can counter the firm’s moves. Retaining the trained and talented staff is paramount to maintain the organization’s secrets and use them to the company’s advantage. This is achieved through the establishment of a sound compensation and benefits systems that covers all the employees.

Attracting and retaining the right personnel in the firm enhances success. This is because of the competence that transforms the daily operations in the firm. The competent individuals streamline the systems resulting to customer satisfaction, hence the increase of business. Employees are sensitive to the equitability in the salary scales, and for firms to realize massive motivation. Compensations systems help root out inequitable systems that lower morale hence increasing organizational success.

The principle components of a typical compensation and benefit system for a large-scale organization

Organization compensation and benefits philosophy helps a firm to attract and retain competent well skilled employees. Constant review of this philosophy is important to ensure it is in line with the market and individual performance. In giving a competitive package in terms of salaries and other initiatives, an organization is able to attract brilliant brains from competing firms.

This is vital to the thriving of the firm’s activities. The philosophy review ought to address the individual unrelenting service to the firm in each level. This ensures the recognition of individual contribution to the success of the firm. Performance of individuals is related to the business unit success. The company philosophy ensures that successful units are both recognized with monetary or non-monetary rewards.

This encourages competition within units of the company hence enhancing the amount of revenues. Moreover, a firm’s philosophy is about the wellbeing of the employee; this is looked in terms of the health, and other retirement benefits. A nice philosophy is sensitive to the life of an employee and how the worker skills can be improved in terms of additional training in the field of specialization (Bonner et al., 2006).

Compensation benefits systems need to be sensitive when designing an all inclusive pay structure. A well-designed structure needs to factor in both internal and external salary grading. The system’s compliance with the labor legislations together with the market salary wave is important (Bonner et al., 2006).

Salary scales need to match with those in the market. Subsequent benefits need to be better than for the traditional competitors. The pay structure that addresses the expectations of the employees is a necessity if a system is to be stable. The difference between job grades need to be based on merit and the level of responsibility to ensure that employees do not feel discriminated. This will maintain mutual respect and avoid sabotages at the work place.

Ratio of base pay to incentive pay is an important component of a compensation and benefits systems. An organization system rewards need to be based on the dedication of employees to service. The ratio between base pay and incentives vary between employees of different levels.

Base pay increase needs to be based on the extra hours an employee has sacrificed on behalf of the firm. The reward will encourage additional dedication from the employee and induce others to follow suit. In addition, the system can give a pay rise in relation to the job skills of an employee. The increase in incentive pay is meant to trigger performance. A higher pay will highly motivate employees.

Equity is the nerve of a compensation and benefits systems. Employees need to be treated with utmost respect and need to feel equal with their fellow employees and colleagues in competing firms. This is a sensitive issue to balance and it calls for extensive research to ascertain the salary and remuneration levels applied in the market.

Employees feel motivated when they feel they are considered equal with their colleagues. Any act of inequality will affect the firm’s success negatively as it demoralizes the worker. Transparent systems nurture trust among employees and also their trust towards the organization. Avoidance of secrets in the compensation system is paramount to nurture motivation and prevent worker exits.

Compensation and benefits systems are manmade and therefore prone to errors. However, the strategy is to enable it fully comply with the postulated legislations which guide workers. The strategy of this system is to keep the competitive advantage of a firm while maintaining the satisfaction of employees. The system rewards effort and endurance by workers. Pay and rewards increases with increase in the performance levels.

The employees’ life is important and the certainties of the future through sound retirement policies are important to motivate and keep employees in an organization for long periods (Bunderson, 2003). In accordance to the vivid explanation, it is paramount for Holland enterprise to increase the margin of its compensation and benefits expenditure. The initiative is prudent as the discussion elaborates the benefits to be accrued when an employee is taken care of.


Bell, S. T. (2007). Deep-level composition variables as predictors of team performance: a meta-analysis. Journal of Applied Psychology, 92: 595-615.

Bonner, B. L., Baumann, M.R., Lehn, A. K., Pierce, D. M. and Wheeler, E. C. (2006). Modeling collective choice; decision making on complex intellective tasks. European Journal of Social Psychology, 36: 617-33.

Bunderson, J. S. (2003). Recognizing and utilizing expertise in work groups: a status characteristics perspective. Administrative Science Quarterly, 48: 557-91.

Koontz, H. (1961). The Management theory jungle. In Journal of the Academy of Management, December.

Stoner J., Freeman R., & Gilbert, l R. (2003). Management, Sixth Edition. New Delhi: Prentice-Hall of India.

Compensation and Benefits

Benefits plan is crucial for the competitiveness of any company since it enables to attract and retain the most talented and productive employees.

At the moment, the benefits package of this company consists of health indemnity plan, disability insurance, and life insurance which are required by law. However, it does not meet the best standards established in various industries. This paper aims to work out a new benefit package and make several recommendations that can improve the compensational policies in this organization.

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The management of this enterprise should not disregard the importance of the discretionary benefits that include retirement plans, paid sick leaves and vacations, tuition reimbursement, child and elder care, as well as vocational training (Schermerhorn, 2010, p 302; Condrey & James, 2010, p 819).

To some extent, these benefits allow the management to convince the personnel that the company genuinely values them. There are several legislative acts which the management should take into account, in particular, Family and Medical Leave Act of 1993, Social Security Act, and Pregnancy Discrimination Act (Beatty & Samuelson, 2007).

The knowledge of laws will allow the management to avert numerous legal conflicts, for example, lawsuits for illegal termination of the employment, or alleged pregnancy discrimination. The new benefit program must be tailored strictly in accordance with these laws so the company could avoid potential legal issues.

The second question is how to distribute discretionary benefits which are not mandatory. The management should set some eligibility criteria for the employees. These benefits should be provided only to those people who have stayed with a company for a long time, for instance, more than two years.

They can also be distributed on the basis of employee’s performance throughout the previous year. If the management adopts such an approach, they will establish a merit-based compensation system. So, the new benefit program can offer a powerful incentive to those workers who have just joined the company.

On the whole, the adoption of this benefits plan will enable the company to achieve several important objectives. First, it will allow them to decrease the turnover and reduce the cost of hiring and training new employees. It is quite probable that these organizational expenses significantly deteriorate the financial performance of the company. Secondly, the new remuneration police will provide a powerful stimulus to the employees to work more productively.

Finally, the competitors of this company will not be able to entice the employees by providing them a more advantageous benefit plan. Therefore, one may argue that the plan will bring two kinds of improvements quantitative (reduction of costs) and qualitative (better organizational performance).

There are several ways of communicating the new benefit program to the personnel. In this case, one should mention orientation programs which are launched for new employees. Such programs normally take place during the first two weeks and this period is the most crucial one since at this stage new-hires form their opinion about the company. Hence, the advantages of the benefit program should be explained clearly to them.

The management should also send each worker a pamphlet describing the benefits that he/she would receive. Furthermore, it is advisable to hold employee seminars which will allow the management to answer the questions, posed by the workers. In this way the management will increase employees’ awareness about the new policy and convince them that the company values their work.

Reference List

Beatty. J. & Samuelson S. (2007). Essentials of Business Law. Cengage Learning, 2007.

Condrey S. & James P (2010). Handbook of Human Resource Management in Government. NY: John Wiley and Sons.

Schermerhorn. J (2010). Management. NY: John Wiley and Sons


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