Reference no: EM132183091
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Compensation
Compensation is a major driver in the success of any organization and it is also true that it is one of the highest expenses for an organization. Therefore, compensation is always under heavy scrutiny by the top executives of a company. Compensation is not only carefully analyzed by the management but also analyzed by employees and prospective employees. If properly executed, effective compensation design can improve organizational effectiveness, support human capital requirements of the organization, and motivate the employees to achieve key corporate strategic and financial goals (Ellig, B. R. 2007). Effective compensation and benefits strategy is no easy task, especially with the large organizations and ever-changing demands of the workforce.
To construct the most attractive compensation and benefits package, organizations must now tackle the fundamental landscape change in workforce requirements and demands. Employees born in the 60s and 70s (generation X) have ceded place to a new generation of workers (generation Y). A flexible approach to compensation and benefits is now required to satisfy the different priorities of these generations. 'Planning for the future' has long been the motto governing Generation X's approach to their careers and so, traditionally, generous pension provision has been the key to attracting workers. But for Generation Y, priorities have changed. For instance, in a research conducted last year, just 4% of 16 – 24 years old were attracted to their employer because of their pension contribution, compared to 17% of 45-54 years old (HR magazine, March 2011). Certainly, younger workers are increasingly questioning the customs and traditions of the workplace and now pension plans, previously synonymous with security, are considered unstable.
In present environment, employees have become much more educated on the possibilities available to them with sources like online salary calculators, industry chat rooms and so on (Schneider, B., & Paul, K. B. 2011). Employees now know more about current market pay levels, new opportunities and how to successfully negotiate compensation packages. Keeping these changes in mind organizations include many other noncash components to the potential cash components to come up with a fair, competitive and an attractive compensation program (Schneider, B., & Paul, K. B. 2011).
Employee benefits are indirect forms of compensation provided by the organizations to their workforce as part of an employment relationship. To compete for quality employees in today's marketplace, employers must do more than offer a fair salary. Employees also look forward to a good benefits package; in fact, employees have grown accustomed to generous benefits programs, and join an organization expecting them. Employee benefits exist in organizations all around the world and the levels and range of these benefits vary between countries. Some of the benefits companies offer can be like company accommodation, company provided vehicles, health insurance, retirement benefits, easy loans and so on.