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HR Compensation & Benefits
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HR Compensation & Benefits
Human resources (HR) are the set of individuals who make up the workforce of an organization, business sector or economy. The term Human Capital is also used synonymously with human resources, although human capital typically refers to a more narrow view of the knowledge the individuals embody and economic growth. Likewise, other terms sometimes used include manpower, talent, labor or simply people (Deb, 2009). Human resources in organizations are designed to maximize employee performance in service of an employer’s strategic goals. Human resources are concerned with the management of workers in organizations, focusing on policies and systems. Their departments and units in organizations primarily undertake some activities including employee benefits design, employee recruitment, training, performance improvement and rewarding.
Compensation is a sub-discipline of human resources, focused on employee compensation and benefits policy-making. It is also known as the total reward in the United Kingdom. Employee compensation and benefits are categorized into four main branches: Guaranteed pay – it is a fixed monetary reward paid to an employee by an employer. The most common form of guaranteed pay is the base salary (Shields, 2007). Variable pay – this is a non-fixed cash reward paid to an employee that is contingent on performance or results acquired. The basic forms of variable pay are incentives and bonuses. Benefits – programs an employer uses to supplement employees’ compensation, such as paid time off, medical insurance, company car, and more. Equity-based compensation, stock or pseudo stock programs an employer uses to provide actual or perceived ownership in the company that ties an employee’s compensation to the long-term success of the company. The most common examples are stock options.
The compensation strategy is derived from the human resource Strategy; it defines the position of the organization on the work market. The compensation strategy is the method approved by the Board of the organization. The compensation strategy is one of the main supporting documents for the HR Strategy (Martocchio, 2004). The HR Strategy has to be developed and designed with having the respect to the situation in the compensation area in the organization. The HR Strategy cannot set the ambition that is not suitable for the organization. The compensation strategy acts as the mother document driving the compensation and benefits processes. The compensation policy may change on the regular yearly basis, but the strategy is consistent over a longer duration. The compensation strategy is not supposed to be read by the employees, but they can read the compensation policy. According to Deb (2009), “One of the most important factors in human resource management is compensation management and growth of the organization.”
Compensation structures are leading issues for HR departments in all size organizations. In small businesses, the issue takes on greater significance as many small business budgets are limited and thereby, compensation packages may be limited as well. Small-business owners are challenged with providing a competitive pay rate, attracting top talent and still maintaining fiscal responsibility (Shields, 2007). Google as an example is not only faced with the problem of attracting, motivating and retaining the best talent but also with encouraging their employees to value their company equity programs and believing in the program’s worth. Reward management is concerned with the formulation and implementation of strategies and policies that aim to reward people fairly, equitably and consistently by their value to the organization. Reward management consists of analyzing and controlling employee compensation and all of the other benefits for the employees. This aims at creating and efficiently operating a reward structure for an organization. Reward structure usually consists of pay policy and practices, salary and payroll administration, total reward, minimum wage, executive pay and team reward (Deb, 2009). Extrinsic and intrinsic are the two kinds of rewards. Extrinsic rewards are concrete rewards that employees receive. Bonuses, salary raise, gifts, promotion and other tangible goods are examples of the rewards. Intrinsic rewards tend to give personal satisfaction to individual; they include information, recognition, empowerment or trust.
Referencess
Martocchio, J, J. (2004). Strategic Compensation: A Human Resource Management Approach.
United States, U.S: Pearson Education.
Deb, T. (2009). Compensation Management. India, New Delhi: Excel Books India.
Shields, J. (2007). Managing Employee Performance and Reward: Concepts, Practices, Strategies. New York, N.Y: Cambridge University Press.
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