Effectively Compensating Employees Essay

3181 words - 13 pages

Effectively Compensation
Through Collective Bargaining

Devita R. Ewell

Compensation can be accurately defined as something, or a sort of payment, that is generally given or received, in return for a service rendered, or for any other reason. There are several different types of compensation, and one example is ‘worker’s compensation’, wherein the government forms a sort of state sponsored insurance for the workers of the state, which would provide benefits to the workers in case the worker suffers from disease, injury, or death.
As far as human resources are concerned, compensation refers to the pay structures within any particular organization. Some of the primary issues ...view middle of the document...

When the company desires to enjoy the maximum benefit of the compensation plan, then the management has to maximize the difference between the profits from sales, and the cost of the compensation to the employees. This is because of the important fact that compensation affects effort, and effort therefore would impact the sales, bringing one back to the ultimate idea that the company does indeed exist to increase profits and sales.
It must be noted that several years ago, the so-called ‘incentive plan’ was something that would be offered to top sales executives, or to piece workers, or to sales personnel. However, today, incentive plans are offered to all the employees of the firm, and this is because today, more and more companies have arrived at the conclusion that an incentive plan must make up a part of the compensation to the worker. Incentive shows the appreciation that the company has for the employee, and it also inculcates a sense of participation in the affairs of the company. Today, perhaps an incentive plan would be able to offer an employee the much needed ‘push’ in the right direction, because the extremely stiff competition from other companies is a very important factor to be considered in making up the compensation plan.
One type of incentive plan that brings success is the ‘profit-sharing’ idea, wherein the company will undertake to donate a small percentage of its pre-tax profits to a savings pool, which would later on be divided among deserving employees. Most profit sharing plans are done annually, and several companies do follow the trend of putting the pre-tax profits into a retirement savings plan for the employee. However, it must be remembered that profit sharing plans do have a negative side to them, wherein the performance of the employee throughout the year is not taken into consideration at all, and this means that the employee does not really have to prove his abilities in order to avail of the benefits of the plan.
Another disadvantage is that if the company has erratic earnings, then the unnecessarily high expectations that have been created because of the profit sharing plan would not be met, and this would create anger and frustration among the employees. The ‘individual incentive’ plan would perhaps work better, because it takes into consideration the talents of each employee and thereafter offers them just rewards. It can therefore be stated that the types of bonuses and incentives that the company offers to its workers, and also the salary that the company is prepared to offer its employees make the difference in the success and failure that the company faces.
One of the more favored methods is the ‘equity based’ compensation plan, wherein ownership to the company is offered to the top workers of the company. However, this type of plan is largely criticized because it creates more short-term financial results and that at the direct detriment of the company, but at the same time,...

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