Compensation Concepts

Subject: Management
Pages: 4
Words: 902
Reading time:
4 min
Study level: College


With the ever-increasing labor demands caused by the competitive nature of the present marketplace, employee compensation and benefits have become one of the most important tools used by the organization to lure the right workforce.

The total compensation package offered by an organization is a sign of how much an organization values its employee’s efforts; hence, because of its motivating power, it has a great impact not only on an entity’s organization culture but also on the general work output of employees.

Such is the case primarily because, most organization tend to organize their compensation and benefits packages in a way that, such packages will have a positive impact on the bottom line of an entity.

Also, as a result of the different organizational cultures of different entities, organizations usually have different compensation and benefits strategies, which fit their remuneration policies and goals (Stovel & Bontis, 2002, pp. 1-6).

Therefore, to ensure that any remuneration package given to employees complements their efforts, attracts employees with desired skills, and retains employees with the required expertise, it is the duty of the human resource manager to develop the primary components of different compensation packages, as this one of the primary ways of ensuring employees are always motivated in their duties.

Compensation Methods

In most organizations, human resource managers tend to assume that, a good compensation package is the only factor that can make employees be dedicated to their duties; hence, the need to always review and update employees’ compensation packages.

These like managers forget that within an organization, different employees have different personalities and motivational levels.

Therefore, to win the confidence of employees, it is important for management teams to sometimes formulate custom-made compensation packages for their workforce.

The primary goal of any compensation method adopted by an organization should be to develop a direct relationship between the remuneration package, work output, and employee motivation (Advameg, 2011, p.1).

Although most organizations prefer compensation methods that will offer them an opportunity of adopting in new markets, one thing that most managements forget is that a good compensation method should help it adapt to changes in markets, product, and services while helping an organization to attain stable, measurable and desired outcomes.

Such outcomes should not only help an organization to achieve its mandate, but also it should promote the wellbeing of the employee, them being the primary determinant of an organization’s level of success.

An organization can achieve this by keeping itself posted with all the developments and trends in the labor market, as this is the only way that will enable an organization to use compensation methods, which will not only retain a cohort of competitive workers but also attract more qualified personnel.

On the other hand, to ensure that an organization limits the risks associated with losing the best employees or fail to attract the desired group of employees, it is important for an organization to have an effective pay structure.

A pay structure is a strategy of administering a remuneration philosophy that correlates employees’ skills, pay level, and job structure. This is an important tool of ensuring that an organization wins its employees’ confidence, encourages motivation, and controls its costs (Stratman, (n.d), pp. 1-3).

Benefits Strategies

Choosing a correct benefit package for different employees is one of the most daunting activities for most human resource managers, as it is mandatory for an organization to ascertain the motivation behind any remuneration package.

Any benefits package selected must be able to accommodate the primary needs of employees, so long as such packages fall within an organization’s financial budget.

Also, any benefits package should be able to offer employees the required security from risks associated with age, health problems, and other family problems.

To come up with such packages, it is essential for an organization’s management to always update itself with what is happening outside their organization, more so incomparable organizations that operate in the same line of business (Beam & Mcfadden, 2001, pp. 563-571).

While doing any comparisons, it is important for the management to note that there is always a variation in workers’ values and the wants of employees change from time to time, depending on the prevailing conditions.

There are numerous approaches that an organization can use to ensure that it meets its employees benefit demands, and these include cafeteria-style benefits plan, customized benefits pan, preferred benefits plan, and voluntary benefits plan.

The cafeteria benefit is a strategy that gives workers an opportunity to choose their desired benefit plan from numerous alternatives, whereas the customized benefits approach primarily considers all the wants and interests of employees.

Contrary to this two, under the voluntary benefits approach, workers are supposed to contribute some amount to their benefits package on top on what their employers give, whereas under the preferred benefits plan, specific benefits are only given to a certain group of employees (Noe, Hollenbeck, Gerhert, & Wright, 2003, pp. 3-26)


In conclusion, as the world moves into a new era with increasing levels of competition, improved technology, and an ever-expanding labor market, it is important for organizations to ensure that they offer their employees good compensation packages, which should not only complement their skill proficiency but also their needs.

Although sometimes it can be a very challenging task to satisfy each employee’s needs, any compensation package offered should be able to at least motivate them towards helping an organization to achieve its goals.


Advameg. (2011). Employee Compensation. Web.

Beam, B. T., & McFadden, J. J. (2001). Employee benefits. Chicago, Illinois: Dearborn Publishers. . Web.

Noe, R.A., Hollenbeck, J.R., Gerhert, B., & Wright, P.M. (2003). Fundamentals of Human Resource. New York: McGraw Publishers.

Stovel, M., & Bontis, N. (2002). Voluntary turnover: knowledge management friend or foe. Journal of Intellectual Capital, 2(2), 202-222. . Web.

Stratman, S. (n.d). Compensation packages require creative thinking. . Web.