Outsourcing and global competition has become the order of the day and everything is so much performance based, a lot of companies are still have employee compensation systems. Going by history, employee compensation systems were developed many decades ago in factories.
Anybody with a job worked for a fixed numbers of hours with annual pay hikes based purely on years of service with the company, sometimes with a bonus. In the modern day, most of the companies are still stuck to the archaic systems where workers are subjected to reviews and more or less definite pay increases annually. As a matter of fact, employee compensation is often seen that whenever compensation remains the same, employee compensation leads to resentment among workers.
The employee compensation and benefits package is often the deciding factor for many potential employees. In order to make your company competitive and attractive to job candidates, employee compensation has become imperative to to offer an exceptional total benefits package. Employee compensation is the most important step to keep top employees glued to your organisation for the overall profit of the company.
There are various forms of compensation. The first thing that we will discuss is about bonuses. Bonuses are based on achievement and includes all of the employees. Then there is commission structures. Bonus is an incentive-based pay structure given to sales employees for producing better results. Bonus incentives have been so much successful that most companies have earned millions by introducing incentive-based compensation.
But there are certain disadvantages in employee compensation system. employee compensation systemhas been seen that sales representative often work only for monetary benefits and do not really look inside the requirements of customers. There is one more kind of compensation. Non Cash Compensation. Non Cash Compensation benefits packages given to employees that does not have the money matter directly. Non Cash Compensation includes health insurance, vacation and retirement plans.
Employee compensation is a very serious subject. Employee compensation deals with a host of human resource-related concerns and finds ways to address it properly. But, one of the most important thing is to understand the financial aspects of employee compensation. Employee compensation is not just about compensation but much more than just the direct amount that you pay an employee. There are a few areas to be looked into when figuring out how to compensate employees.
Incentives and bonus must have clear guidelines in order to avoid confusion. They shouldn't be seen as a guaranteed payment, but should be given based on performance of the individual, team or company. If bonuses are made as fixed, bonus will take away the performance factor as employees will remain assured that a fixed sum of money will come. Bonus should be given to those who go above and beyond their everyday performance to help the company exceed its profitability goals.
It is very important to understand the costs of a benefit plan before it is offered as it can be a very costly burden to the company. When giving benefits, it is imperative to consider not only today's direct costs, but also long-term expenses. Again, adding and removing benefits can be very demoralising to your staff.
It is also very important to properly calculate employer payroll taxes into the overall budget. Employers incur a number of expenses such as social security and medicare tax.
Payroll budgeting is the next most important thing. Company budgeting is not a simple issue and moreso because it includes the payroll budget component in it. Payroll budgets include direct wage and salary payments, commissions, bonuses, incentives, payroll taxes and insurance, along with any other directly related costs the business incurs in the payroll function.
Employee motivation is one of the toughest factors for managers. This is because employees do not respond to the same motivations. Every person is different and so are his or hers likes and dislikes. To motivate them to perform in the best way they can it is very important for the managers to identify and understand the pulse of each one of them. Some of the easiest steps to motivate employees are to remain excited and passionate about your mission, making sure that everyone in the organization understands and can communicate, to ensure that employees understand how they fit into the process of fulfilling the organization's mission and to make a connection between the mission and the individual values and goals of your employees.
In order to attract the top talents, it is extremely necessary to keep the workforce motivated. At the end, it is a motivated workforce that earns profits. Among the various factors that helps in attracting and retaining top talent, salary tops the list. To maintain the employees get a rewarding package, it is absolutely necessary to have innovative tools for salary planning. This is where software can play a vital role. Such software should provide easy access to salary information for direct reports besides helping in salary planning with 100 percent accuracy. Many companies now use specially made compensation management software to keep its employees happy.