Benefits and Compensation : Issues And Challenges

Companies provide a variety of compensation and benefits to employees for performing their jobs as success or failure of these companies are largely depends on the performance of their employees.

The Society for Human Resource Management (2012) has defined compensation as a systematic approach to provide a financial value in exchange of work performed by the employees. Financially, salaries must be competitive and fair according to employees' contribution.

Compensation & Job Satisfaction

Armstrong (2006) defined "job satisfaction" as positive and favorable attitudes people have towards the job and it is commonly believed that job satisfaction and morale are affected by compensation. Therefor compensation is a primary motivation factor for any kind of employee.

Janelle Gale, VP of HR at Facebook stated that compensation fairness is a important factor & they are spending quite a lot of time on deciding them to keep employees happy & motivated.

Figure 1-How Facebook Decides an Employee's Salary

According to MBAskool magazine(2011) there are 4 components of compensation and benefits.

1. Fixed Pay - This is clearly stated in the employment contract and it is considered as basic salary or wage paid to the employee irrespective of any other factor.

2. Variable Pay - It is an additional compensation paid to the employee based on the performance levels of the employee & employer.

3. Equity Pay - Employees are awarded shares of the company at a discounted prices and they can make money out of them with the appreciation of  stock prices.

4. Other Benefits - Benefits such as medical facilities, insurance facilities, company owned car or flat are included to other benefits category.

As per Mulligan & Finkelstein, (2007) employee pay levels may vary across national borders due to the market and industry factors,  traditional practices and values included in the concept of salary. Nevertheless, compensation and benefits are regularly among the top three factors, affecting employee job satisfaction across the world. Therefore,it is commonly believed that offering a competitive salary and benefits or reducing the gap between employees' salary expectations will immensely help to upkeep the valuable human resource and attract more diverse people to the organization.

References

Armstrong, M.(2006). A Handbook of Human Resource Management Practice, London: Kogan Page

Society for Human Resource Management (2012). Employee Job Satisfaction and Engagement. Available at :
www.shrmstore.shrm.org.

MBASkool (2011).Human Resources Terms. Available at :
https://www.mbaskool.com/ (Accessed on 01st July 2018 at 4.30pm)

Mulligan, I. & Finkelstein, D. (2007). Innovations in International HR. Available at :
https://cdn.ymaws.com/www.shrmmorrisnj.org/resource/resmgr/imported/globalcomp[1].pdf