Discussion of Importance of Compensating Employees

Subject: Employee Management
Pages: 2
Words: 553
Reading time:
2 min
Study level: Bachelor

Compensation has three key aspects, and they include direct, which covers bonuses, incentives, salaries, wages as well as commissions. The second component is indirect which comprises benefits offered by employers, while non-financial consist of flexible work hours, staff recognition programs and corporation support. Compensation policy of companies influences the perks that firms offer to their employees, depending on the market or industry. Factors that influence an organization’s compensation policy include market value of the company’s jobs, size of the firm, nature of industry, expected returns, revenues, and objectives of the business. This paper discusses Maersk’s compensation policy, the value of salary survey to the organization as well as the coons of discretionary benefits for the business.

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A.P. Moller – Maersk is an integrated company and an international leader in container shipping as well as ports with multiple brands that deal in transport and logistics. Maersk, as it is commonly called, is a global organization that operates in 130 nations and employs approximately 76,000 people (Maersk, 2020). Maersk is a Danish corporation, and its compensation philosophy is grounded on the country’s legal framework, particularly the Companies Act of 2010. The organization follows the general guiding principles on incentive pay for both its management board and panel of directors in line with section 139 of the Act. The size of the payment is dictated by Maersk’s performance, it is higher when the business attains greater market success and higher profit margins.

Maersk’s compensation policy is informed by the company’s performance and often varies depending on the firm’s profitability. The way compensation is assigned passes a strong message to staff about what a business’ management believes is vital and the kind of activities that it promotes (Snell et al., 2017). The business aims to encourage the idea of pay for performance which involves an opportunity to receive yearly cash incentives depending on three factors. The determinants include the company’s total results, specific financial targets of single or multiple business sectors, and any other non-financial goal, such as the performance on engagement and leadership. The Board of Director’s Remuneration Committee determines the amount of annual cash incentive based on the level of attainment of the three aspects, all of which are influenced by the market within which Maersk operates.

Salary surveys are used to gather information on employee salaries and benefits in diverse industries, geographical locations as well as jobs. The study performs the role of benchmarking tools that help organizations to make informed resolutions on compensation. When undertaken objectively and credibly, then the outcomes are valuable to organizations across economic environments. One of the reasons why staff leave organizations are to get better pay and benefits elsewhere. To prevent such employee turnover, companies need salary surveys to ensure they are offering fair wages and perks to workers.

Even though there are several advantages of offering competitive salaries accompanied with benefits, there exist a number of downsides too. Offering discretionary benefits needs extra administrative work, thus increasing expenses for Maersk to ensure they are accurately managed. Additionally, even though discretionary benefits are not mandated by law, a business can face legal battles over their provision. If Maersk makes mistakes in its benefits plans, this may result in costly lawsuits and or hefty regulatory fines. However, with adequate strategic planning, these overheads and risks can effectively be mitigated.

References

Maersk. (2020). Remuneration. Web.

Snell, S., Morris, S., & Bohlander, W. G. (2017). Managing human resources, Cengage Learning.

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