The managerial part of the Compensation
During the work a employee can be compensated in several ways fot their performance, but mostly we can split them in 3 fields.
Base compensations: Very often a worker will be reworded with fixed salaries or based on hourly wages
Pay incentives : When a worker is doing a great job and putting so much effort. the company can reward that performance with yearly bonus or similar.
Indirect Compensation-Benefits : these type of privileges are mostly useful to gain and guarantee the loyalty of the employee, they can be Vacations, Health insurance or even Apartment rent.
During the compensation process managers and employers need to design a system of rules that will form and optimise the compensation. It will affect and improve the quality of the work environment. The company will record and focus on the objectives to achieve so on they can reword the employee s and respect the contracts.
There are several strategies that companies can apply in their policy to fullfill the compensation management.
Distributive justice model
It focuses on the Fairness of the company to pay the salaries and other type of compensations, which can be monetary or benefits. Very often salaries and other type of non monetary benefits are compared with other similar companies of similar type of job.
Labour market model
Usually the government or syndicate try to fix certain minimum thresholds of wages for hourly salaries to workers. So they first focuses on different types of jobs. Depending on the demand of that specific labour in the marketplace.
Firms can make contracts with fixed amount of salaries.
They depend on percentage fixed and explained from the contracts.
It happens when the employer pays sales commissions and team contribuitions
It happens when the employer pays the same wages indifferently to every worker for the same work position. Sometimes it can lead to competitions between workers and it is not always beneficial for the company.
It focuses on the same pay system for every type of job.
The salaries differ depending on the organisation and execution level of the teams.
Below market compensation
Few workers need to be under average of compensation so the company can cut costs and raise the revenue.
Above market compensation
Usually higher compensation will be given to high quality workers.
Non monetary rewards
All the type of benefits that a company gives to the employee in order to give better quality life and gain more loyalty. Usually company prefer to give this type of rewords because of course are less expensive.
Every kind of countable and profitable reward.
Article 1 (pink 2009) “the candle Problem”
The article focuses on the fact from 40 years of statistics, that give a monetary rewards to the workers does not always lead to improvement within the company. Instead non- monetary solution works better for manual type of jobs and motivate them to give better quality of performance within the company.
Salaries are showed from the administration in order to improve transparency
Usually are made when there are different type of salaries. It will increase the privacy of the workers.
Centralisation of the compensation
It is managed from the Human Resource branches of the company, it is more common in bigger size company.
Decentralisation of the compensation
When the company decide to hire other companies to manage every unit of salary. It is more common in small-medium size companies.
Compensation of performance system
Companies use this type of incentive system to reward workers performance. After the performance of the team or individual the company administration need to pay these rewords according to the contracts. They are very helpful to motivate the workers. There are 9 big fields to consider when companies will give these incentives.
Usually workers want to do only what they get payed for.
Not ethic behaviours.
It happens that employee will not behave properly even after the incentives, in this case the company need to face the behaviour trying to set and demand more goals&tasks for the employee.
Negative effects of the cooperation
Very often within a company employee have conflict and competitions. Employees that receive less salary might lead the company in big disadvantages. This will decrease cooperation in the team.
Lack of control
When the supervisors do not check on their employee, the working condition might get worst .
It is very hard to record performance, many mistakes can be done during the recording process . In my opinion K P I do not necessarily contribute in better performance.
When psychological contracts are not respected the employee will not be very motivated, he might want to find other job position elsewhere.
During the incentives programs the employee might discuss about the fairness of the rewards, if they do not appreciate them, it will effect negatively the company. In my opinion it is very important to implement the incentive programs with feedback so the company can focus on the right measurement of rewards.
Incentives can produce more effort and tasks accomplished but instead can also lower the work satisfaction.
Reduction of intrinsic drivers.
In order to achieve and gain the incentives the worker is able to do anything, it might lead in less quality of work and creativity. As result workers can be annoyed to participate in some activities unless they are rewarded.
Very Well organised pay-for-performance systems will help managers to coordinate the interest of the employees and the company.
(Gomez L.R., Balkin, D.B. and Cardy, R.L. 2016) Managing Human Resource The puzzle of motivation https://www.ted.com/talks/dan_pink_on_motivation?language=en#t-468. Accessed: 26/02/2019.
(Ted Summaries 6 June 2014) Dan P: The Puzzle Of Motivation. URL: https://tedsummaries.com/2014/06/06/dan-pink-the-puzzle-of-motivation/comment-page-1/. Accessed: 26/02/2019.
(Teine, K. 2014). Internal and External Equity Comparison. URL: https://toughnickel.com/business/Internal-and-External-Equity-Comparison Accessed: 26/02/2019.