The Effectiveness of Compensation and Benefits on Employee Performances


Recruiting and retaining the best personnel is a major responsibility for every organization human resource (HR) department and for that one of the most significant tools in the HR professional's toolbox is the ability to propose a compensation. Therefore, workplace compensation and benefits have a direct influence on employee performance level as well as their desire to attend to work every day. In order to maintain employee productivity human resource department must guarantee that the compensation and benefits that given to the employees are attractive enough since employees will appreciate knowing that their efforts are appreciated. Therefore, human resources are the most critical component of a company's overall success hence company's employees are more likely to be satisfied and work hard towards organizational goals once they receive a proper compensation package. 

Employees receive compensation as a form of payment for their labor for a company. In return for their time and skill, employees are compensated with money, incentives such as a generous benefits package and vacation time, and other benefits. This is all part of an employee's total remuneration package, which may include monetary as well as non-monetary benefits. Types of compensations include Base Pay, Commissions, Overtime Pay, Bonuses, Profit Sharing, Merit Pay, Stock Options, Travel/Meal/Housing Allowance, dental, insurance, medical, vacation and leaves. However, benefits are a non-monetary compensation provided to an employee in recognition for their efforts such as employees are having the option of working from home, having access to a gym and provided meals, and being allowed to dress casually to work. Benefits may not provide a direct monetary advantage to an employee, but they are critical in attracting top-notch workers to a business. 

Key components of compensation and benefits

  • Fixed Pay - A fixed salary is the least a business is required to pay an employee, and it does not include any incentives or overtime.
  • Variable Pay - Employee performance and business performance are considered when an employer awards an employee with a variable compensation package.
  • Equity Pay - Some firms incorporate stock and options in employee remuneration packages. Instead of money, these tokens signify ownership in the firm.

Figure 01: Key Aspects of Compensation and Benefits

Therefore, employees are motivated and more likely to attend for work if they are rewarded fairly for their effort. Their morale remains high, and their levels of work satisfaction are rising since employees are more likely to show up for work on a daily basis and do their best job if they receive proper compensation package. In addition to being less inclined to hunt for new employment, highly motivated and contented people tend to stay in their existing positions for longer periods of time. Any intelligent and industrious person would want to maximize their worth in order to receive the greatest possible compensation and benefits. There is a high probability that an employee may leave their current employer because they believe that they are underpaid or because their current employer is not giving a superior benefits package than a rival company. In order to recruit and keep the best employees it is important that human resource managers should compare their overall pay packages with other rivals.

References

Wooll, M. (2021). Compensation and benefits: Why the right pay and perks still matter. [online] www.betterup.com. Available at: https://www.betterup.com/blog/compensation-and-benefits.

HR-guide.com. (n.d.). Compensation. [online] Available at: https://hr-guide.com/Compensation/Compensation_Overview.htm.

Dirks, E. (2020). How Compensation Affects Employee Performance. [online] HRSoft. Available at: https://hrsoft.com/how-compensation-affects-employee/.

Suri, S. (2016). IMPACT OF EMPLOYEE COMPENSATION ON ORGANISATIONAL EFFECTIVENESS. International Journal of Research in Management Issue, [online] 6. Available at: https://rspublication.com/ijrm/2016/nov16/9.pdf.


Comments

  1. AparnaMBA2022May 4, 2022 at 9:07 AM

    with motivated employees,an organization can improve there performance.for that HRM have to offer more benifits for there employees.you explained these thigs well.good luck!

    ReplyDelete
  2. Niluke SirimannaMay 4, 2022 at 8:57 PM

    Identified that employees are a company's most valuable asset. As a result, a competitive compensation package is necessary to attract and retain staff. Employees will perform better if they feel the organization values them. Compensation and benefits are significant factors in an employee's satisfaction. good article

    ReplyDelete

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