Compensation Strategies to Attract and Retain Employees Essay

The most of import plus in any organisation is the people. Human resources refer to the people working in an organisation. It can besides be used to connote the direction of the staff working in a certain organisation. This can be in signifier of using, ending and finding wage of employees. Further, there are extra functions a human resource director will set about including proficient and statistical analyses holding to make with operations, staffing, counterbalancing, forces dealingss and human capital handling. These maps are complex and necessitate frequent usage of new thoughts and engineering that have been on the rise in modern times. Human resources section must be composed of competent people who understand the of import function employees have in organisations and how to pull off them.

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The intent of this study is to look at assorted schemes in topographic point today and which are used by organisations to pull and retain their employees. Compensation becomes a necessary portion in geting capable work force since this is what determines their public presentation in the company. Since it is built-in that adult male works in order to accomplish wagess in this instance pecuniary wages equivalent to services rendered. In order to accomplish this balance, there are factors that need to be considered when finding the sum to pay an employee. The first policy should be to reflect on the relationship bing between wage and occupation being done. This is done internally in an organisation. Another factor to see is external and involves what other organisations are paying their employees in similar places and offering similar accomplishments. These two are core factors when puting wages and rewards.

A policy of honoring employees based on their public presentation is besides indispensable since it creates betterment in public presentation and maintains morale. All these nevertheless must be in line with current budgets set by organisations. Decisions will depend on top executives and their apprehension of all these factors ( Bohlander & A ; Snell 2009 ).


Compensation is a agency of supplying pecuniary value for work performed by employees. It depends on an organisation demands, resources and ends they want to accomplish. Compensation hence goes a long manner in guaranting being of an organisation by assisting employees to acquire recruited, and have occupation satisfaction. There are assorted utilizations of compensation which include ; increasing employment morale, enlisting and keeping of qualified employees, honoring best performing artists, cut down employee turnover and promote trueness, formation of brotherhoods and accomplish both internal and external equity.

One thing compensation seeks to get is employer keeping in the face of competition from other organisations or companies. This is achieved by holding in topographic point award strategies and programs such as fillips, committees, net income sharing amongst others. However these benefits are based on other factors and may non be automatic to each employee. To accomplish the best signifier of compensation, this besides should be fair in all criterions, a systematic attack demand to be followed. This takes the signifier of holding occupation descriptions, occupation analysis, occupation rating, payment constructions and timely salary studies in line with the company policy and ordinance.

There are different compensation types as discussed and each excessively has virtues and demerits. Their application besides differs from one company to another every bit good as to different occupation descriptions. Some of these types are basal wage, committees, overtime, stock options, travel allowance, lodging allowance, insurance, medical and retirement benefits.

Each company or organisation must hold good defined occupation descriptions saying the accomplishments each employee has and the direct part he or she has on the company in general. Analyzing each single alternatively of making so jointly will besides give a better image as to what they are worthy in footings of wage ( Armstrong & A ; Murlis 2007 ).

Research Findingss

We are now traveling to look deeper at each of these schemes and where they are most applicable. Base wage includes rewards and wages awarded to employees as a basic compensation. This can be based on the figure of hours worked with a definite sum per hr. The rate is so multiplied by the entire figure of hours worked say in a twenty-four hours to get at the sum to be paid. Most frequently, eight hours are considered normal and any extra hr regarded as overtime. A derived function can besides be added due to assorted displacements an employee may be working ( Hernandez, 2009 ). A legal model called Fair Labor Standards Act ( FLSA ) oversees that this type of compensation is enforced reasonably. Those having basal wage are called salaried employees and comprise bulk in the work force today.

Apart from basal wage as a direct compensation scheme, there exists variable wage which is incentive based wage. Such may be in signifier of fillips and committees ( Mathis & A ; Jackson, 2007 ). Variable wage, therefore, as the name signifies takes different sums harmonizing to wages and the place an employee holds. The form of scene of having variable wage is done over a fixed period of clip ; monthly, yearly or a mixture. This is ranges from short term to long term based on the public presentation on those it is due. Executive places particularly have a better laid form under which they receive their fillip unlike junior employees who may have fillip on unequal periods ( Davis & A ; Edge 2004 ). Since it is the function of human resources directors to supervise execution of such grosss, they should guarantee equity under all fortunes.

A benefit is an indirect wages to an employee. Benefits derived from compensation schemes are ; dental, medical, holiday, leaves, insurance, retirement and revenue enhancement inducements. Dental and medical insurances, besides known as wellness benefits, are applied by employees in order to provide for their human resources wellness. In instance an person falls ill in the class of their responsibility, insurances cover the cost of intervention undergone without supercharging the affected individual or the company every bit long as the insurance footings are met. As an inducement therefore, employees are likely to experience motivated in work and besides to seek organisations which offer the highest and best insurance screen ( Mathis & A ; Jackson 2007 ).

Retirement programs are besides portion of benefits which guarantee that after the employer retires from the company they can bask their life holding been enabled to salvage monies. By supplying foliages and holidaies at the disbursal of the company, an employee feels recognized and this increases productiveness once they return to work after leave.

The whole bundle of compensation includes basal wage, variable wage and benefits and this is really of import for any organisation to pull and retain its cherished employees. Planning is of extreme importance so that the best combination can be achieved and one that is acceptable even under authorities ordinances.

In order to hold a definite working program, a figure of stairss need to be in topographic point ( Singer & A ; Francisco 2009 ). A compensation program begins with holding identified an aim of what the organisation wishes to carry through. Target day of the months under which such achievement is supposed to hold been complete are indispensable every bit good as the budgeted figure. This plan lineation must be good formulated and followed to the missive.

In add-on, for everything to be successful at that place must be an single charged with the duty of supervising the whole plan come to fruition. The plan caput should be competent and good versed in human resources direction, and besides be to the full committed to accomplishing this end. Having a designated caput in topographic point, it is good to hold a compensation doctrine in topographic point, a sought of commission working under the laid down nonsubjective and cognizant of current facts taking to its formation. These facts include current wage rate in the market and how they are distributed across different places in the company. Their authorization is to make up one’s mind whether to put compensation at below, par or above the remainder of similar organisation and market.

A occupation analysis is the following measure towards accomplishing the aim. A serious in-depth analysis of all occupation places must be done particularly in each section to acquire a image of who really deserves accommodation. A occupation description will assist to group similar classs together so that they can be sorted together ( Mathis & A ; Jackson 2007 ).

Measuring and analysing occupation descriptions follows, whereby ranking is made from the topmost to the lowest and this can be good achieved by pulling organisational charts. As the flow becomes clear, flow charts are drafted which show which countries require accommodation harmonizing to predominating market values. This should be done and redone to accomplish the best agreeable result between all parties. Rating employees in footings of senior status may help in finding different compensation strategies to follow. Wages and rewards can hence be based on these classs ; junior, center and senior, for illustration, with accent on cardinal occupations.

A salary construction which shows scope and spread for each class should be the following measure. A minimum-maximum scope determines the degrees which apply without piquing any other factor. This may besides bode good with a salary disposal policy using to every other employee in the organisation. A policy could be general or specific to a certain group and its reappraisals should follow suit. Proper certification of the policy is really critical since it is a binding papers. These certifications constitute the compensation program and if ready are taken to the top executives for blessing. The concluding phase is to put to death the program if approved and maintain monitoring to happen flaws and adjust consequently ( Farley, 1964 ).

Communication is really of import in accomplishing a compensation program that is acceptable by every person in a company. The commission working on it has the authorization to inform every employee including departmental caputs and top executives on what they are working on. This creates trust and allows critical information which can be embedded on the concluding bill of exchange and be of benefit. To accomplish the best signifier of communicating, all the necessary agencies need to be integrated in the procedure.

The Human Resources Information System ( HRIS ) for illustration comprises the best processs to set about and therefore should be used. Detail is of import in order to cover every portion of the procedure and hence usage of flow charts, slide shows, films and every signifier of literature is necessary. These signifiers though must be in apprehensible signifier and design so that any one interested can analyze them every bit good. An in agreement upon format therefore comes in ready to hand be it in print signifier or sound. ( HR Guide to Internet -web )


Compensation schemes are of import ingredients in employee attractive force and keeping as already discussed. However, the methods for finding this as already seen may be complex and hence attention should be taken in constructing the best on the job solutions. This is because of the nature of concern an organisation may be set abouting. For case an enterpriser company may happen troubles in keeping the compensation to its staff in instance the concern fails to make good in one period. This may do a downward reappraisal particularly in fillips in one twelvemonth merely to increase it the undermentioned twelvemonth.

Such a system may look awkward and do employee keeping unstable. For large long-run companies though, they normally would stabilise base wage since their gross revenues markets are turning continuously. Another quandary that may confront an organisation in chase of better compensation program is lack of comparable organisation in the similar concern. Some companies are alone plenty that their occupation description and place may neglect to be in similar companies in the vicinity. The manner out is to happen the following closest comparings and work from at that place.

Since wage rise must conform to equal addition in productiveness, some organisation may experience lost out in instances where they are bound to reexamine wages upwards, yet the employees have non achieved any end as required. A work civilization in topographic point is the best attack to such companies so that wagess are done as per achievement. All in all a combination of these procedures are recommendable to any organisation instead than holding one peculiar manner of accomplishing a compensation program. ( Compensation Strategies and Structure – Web )


In decision, compensation schemes are critical in the running and success of any peculiar organisation. A bad determination in this cardinal procedure can do alone harm to the organisation either in signifier of losingss or eventual closing. It is portion of Human Resources Strategy and hence critical in direction.

The compensation and benefits scheme execution squad must be accorded power and means to recognize ends therefore. Surveies have shown that variable wage is the most sought after unlike base wage when it comes to employee keeping. This is because variable wage is based on single public presentation and hence those entitled to it be given to set excess attempt so that they may accomplish inducements. Amid vigorous competition, employees try to out make each other so as to accomplish the highest inducements and this is a good pattern in concern since it increases productiveness. On the contrary, stressing merely on base wage appears humdrum since it is likely that a figure of persons have similar sums at the terminal of the month regardless of whether they worked difficult or non.

Market fight ensures that different companies are seeking to be the best in the industry by raising both base and variable wage of their employees. Such competition is healthy particularly if the economic system and political systems of a state are favourable. At the terminal of the twenty-four hours both the employee and the employer gets satisfied if compensation schemes work in harmoniousness.

This study recognizes the of import function a compensation scheme dramas in any organisation. It is now the work of any competent Human Resources member to hold thorough apprehension of how this works and enterprise to accomplish an first-class system.

Annotated Bibliography

Armstrong, M & A ; Murlis, H. ( 2007 ) Reward direction: a enchiridion of wage scheme and pattern Kogan Page Publishers.

They expound on issues to make with honoring employees in order to increase public presentation. The accents are on looking at single public presentation and do determinations on how to honor them.

Banker, R. D. et Al. ( 2000 ). An empirical analysis of go oning betterments following the execution of a performance-based compensation program [ PDF ] from aˆ¦ – Journal of Accounting and aˆ¦, Elsevier.

The article researches on how to implement compensation program and goes farther to do a follow up to see whether the program works. Otherwise uninterrupted reappraisal is necessary.

Bohlander, G. & A ; Snell, S. ( 2009 ) Pull offing Human Resource ‘s Cengage Learning.

Compensation Schemes and Structure. Retrieved from hypertext transfer protocol: //

A book about policy of honoring employees based on their public presentation which is indispensable since it creates betterment in public presentation and maintains morale. All these procedures nevertheless must be in line with current budgets set by organisations

Davis, M. L. & A ; Edge, J. T. ( 2004 ). Executive Compensation: The Professional ‘s Guide to Current Issues & A ; Practices Windsor Professional Information.

A book about how executive places particularly have a better laid form under which they receive their fillip unlike junior employees who may have fillip on unequal periods.

Farley, J. U. ( 1964 ). An optimum program for salesmen ‘s compensation. Journal of Marketing Research. JSTOR

An article covering with compensation related to salesmen. Emphasis is on the best variable wage methods to use such as committees.

A Hernandez, S. R ( 2009 ) Strategic Human Resources Management in Health Services Organizations Cengage Learning.

Excellent stuff on finding of basal wage includes rewards and wages, awarded to employees as a basic compensation. This can be based on the figure of hours worked with a definite sum per hr. The rate is so multiplied by the entire figure of hours worked say in a twenty-four hours to get at the sum to be paid.

HR Guide to the Internet: Compensation: Outline and Definitions. Retrieved from hypertext transfer protocol: //

An article on human resource direction on compensation and how to come up with compensation program. It offers suited readings for any serious Human Resource Manager.

Mathis, R. L. & A ; Jackson, J. H. ( 2007 ). HUMAN RESOURCE MANAGEMENT. A Cengage Learning.

This is a book offering first-class stuff on human resource direction and its application.. A complete compensation platform and different schemes that are in usage in many organisations are discussed in item.

A Singer, P. M. & A ; Francisco, L. L. ( 2009 ). Developing a compensation program for your library ALA Editions.

This wide book brings insight in to the procedure of doing a feasible compensation program. All the stairss that are necessary, with illustrations, to follow are covered in item.


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