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6. The effect of compensation and benefits towards employee performance.

  The effect of compensation and benefits towards employee performance.

By Dilshard Hameed

Introduction

Compensation is the remuneration an employee receives in exchange for their contributions to the organization. Employee perks, both monetary and non-monetary, aim to balance the work-employee relationship. Compensation options include bonuses, profit sharing, overtime compensation, recognition prizes, and sales commissions. Compensation is an essential aspect of human resources.
Management contributes to employee motivation and organizational effectiveness. Direct compensation often includes salary payments and health benefits. Compensation management professionals are responsible for establishing wage ranges and pay scales for various jobs within the firm. Direct remuneration that aligns with industry norms ensures employees are paid appropriately. Indirect compensation. And it is the most important part of human resource management and for the organizational performance.

 (Kadir, A., AlHosani, A.H., Ismail, F. and Sehan, N., 2019, September.)


                                              (Figure 1;Important of compensation and benefits)


Compensation system in HRM

Human Resource is the most vital resource for any organization. It is responsible for each and every decision taken, each and every work done and each and every result. Employees should be managed properly and motivated by providing best remuneration and compensation as per the industry standards. Compensation is the remuneration received by an employee in return for his/her contribution to the organization. It is an organized practice that involves balancing the work-employee relation by providing monetary and nonmonetary benefits to employees. Compensation is an integral part of human resource management which helps in motivating the employees and improving organizational effectiveness. Strategic goals and company objectives are considered while designing compensation schemes. The compensation structure is based on job-related characteristics and obligations. Compensation systems consist of the following components. Employee compensation can be direct in the form of monetary benefits and/or indirect in Non-monetary rewards include perks, time off, and so on. Compensation encompasses all awards and allowances offered to employees in exchange for their services, beyond only money. Effective pay management can lead to increased organizational productivity. 

(Martocchio, J.J., 2011)

                                                                       (Figure2; Compensation Planning)


Impact of Compensation and benefits

The impact of compensation and benefits on employee performance and organizational effectiveness depends on the existing compensation and performance management programs in the organization. Typically, most employees respond to increases in pay and benefits with a positive and more productive attitude. Sometimes, employees only notice rewards of a salary increase the day the increase is communicated to them, and the day they receive the first paycheck that includes the salary increase. In this Paper I would like to discuss the components and importance of compensation and I would like to emphasis more on the impact of compensation on employee performance in the organization.

(Naidu, A.T. and Satyanarayana, G., 2018)


                                                            (Figure3; Types of employee benefits)

       


                                                         (Figure 4; Compensation and benefits)

Conclusion

Compensation and Benefits are effective instruments for drawing in, keeping, and inspiring talent. The importance of strategic compensation strategies increases as firms navigate a more competitive landscape. HR departments attract top talent and promote employee satisfaction and engagement by providing competitive compensation, performance-based incentives, and extensive benefits packages. Furthermore, paying employees in accordance with company objectives and industry standards guarantees the retention of important staff and rewards excellence. Organizations may foster a culture of justice, parity, and recognition by managing pay and benefits well. This will eventually increase employee loyalty, productivity, and organizational success.


References,

Kadir, A., AlHosani, A.H., Ismail, F. and Sehan, N., 2019, September. The effect of compensation and benefits towards employee performance. In Proceedings of the 1st Asian Conference on Humanities, Industry, and Technology for Society, ACHITS 2019, 30-31 July 2019, Surabaya, Indonesia.

Martocchio, J.J., 2011. Strategic compensation: A human resource management approach. Pearson Education India.

Naidu, A.T. and Satyanarayana, G., 2018. Impact of compensation on employee performance. Intercontinental journal of human resource research review, 6(4), pp.1-7.

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