Prepare the portion of the business plan that addresses the benefits that the organization will be offering to its employees.
Compensation, Benefits, Retention & Motivation
“People act in ways to maximize their self-interest within a company, so create incentives that align employee’s objectives with the organization’s mission statement. Reward compliance with core values as much as profitability, especially in the face of competitive pressures.” – Kent Alan Robinson
Compensation includes not only salary, but also the direct and indirect rewards and benefits the employee is provided in return for their contribution to the organization.
To determine compensation, organizations should develop a compensation and rewards program. This type of program outlines an equitable process for compensating employees. A well-structured program with a good balance of salaries, benefits and rewards will help an organization remain competitive in today’s labor market and support sustainability.
Compensation can be defined as all of the rewards earned by employees in return for their labor. This includes:
1. Direct financial compensation consisting of pay received in the form of wages, salaries, bonuses and commissions provided at regular and consistent intervals.
2. Indirect financial compensation including all financial rewards that are not included in direct compensation and understood to form part of the contract between the employer and employee such as benefits, leave, retirement plan, education, and employee services. Non-financial compensation refers to topics such as career development and advancement opportunities, opportunities for recognition, as well as work environment and conditions.
While employees tend to focus on direct financial compensation when contemplating their rewards, according to the McKinsey Journal, for individuals who are relatively satisfied with their salary, it is the non-financial rewards that tend to be more effective in contributing to long-term employee engagement.
Readings:
1. Read chapters 6 & 7 in the text.
Also of Interest:
1. Totz,R. & Bolger, B. (n.d.) Content and Process Theories of Motivation, Incentive Marketing Association.
2. Klonoski, R. (2011) Work Motivation, Culture, And Economic Development: Is Work Motivation Shaped By Its Socio-Economic Context? International Journal of Management & Information Systems (IJMIS), [S.l.], v. 15, n. 4, p. 91-100.
Assignment:
Discussion Video: Create a 3 to 5 minute video that identifies which pay theory you think is the most important when developing your pay system. Make sure you state why you selected the pay theory and why you believe it to be the most important.
