Executive Summary: Compensation and Benefits

decision maker Summary The purpose of this paper is to highlight the best practices followed by HRM and to ac hunch overledge the importance of allowance and benefit strategies utilize in organic laws all around the world. Compensation and Benefits are utilise by different organisations globally to attract, actuate and retain their employees. This paper contains a case studies, summary and analysis of academic journals and books to under(a)stand the latest trends in remuneration and benefits field.The three primary components which are used in designing a strategical compensation invent are listed. During the course of the paper, it discusses how the compensation and benefit strategies can be tailor-made for the different contemporariess association the workforce, and how these strategies are used in the organisations. Further, this paper highlights four different case studies giving the reader insight on the different ways compensation and benefits schemes were used by o rganisations in different scenarios.In this present day circumstances, with employees having access to all kinds of information regarding salaries, wages and benefits of other companies it is extremely important for any organization to oblige a fair and an attractive compensation system in place. Introduction Employees are the most valuable assets of any organization. The main purpose of human preference direction (HRM) is to manage the goment and performance of people employed in an organization.Some of the significant tasks of HRM comprise of attracting and retaining employees with the right skills and abilities, match people to the right positions within an organization and to align employees goals and objectives with that of the organizations. All these key tasks are directly or indirectly affected by compensation and benefits plan which the human resource management decides. Compensation and benefits redefines value and success in any workplace.An efficient compensation and benefits strategy is seen as an opportunity by organisations to differentiate themself from their competitors, who may otherwise express away talented workforce. Hence, organisations need to know the evolving unavoidably of the working population to make sure they offer the most competitive piece of ground. This paper adopts a public plan of attack which may be relevant to number of different organizations or industries and discusses how the cutting generation workforce is making an impact and forcing organizations to change their traditional compensation strategies.This paper also examines how companies located in different sectors and countries look at compensation and benefits aspect of human resource management, to attract and retain their highly hooked staff. Finally the paper summarizes and analyses a couple of(prenominal) articles related to HR practices in compensation and benefits, and see if they fit into organizations seeking best practice. Compensation and benef it strategies for current generation workforce Compensation is a major driver in the success of any organization and it is also true that it is one of the highest expenses for an organization.Therefore, compensation is always under heavy scrutiny by the top executives of a bon ton. Compensation is not only carefully analysed by the management, but also analysed by employees and prospective employees. If correctly actiond, effective compensation design can improve organizational effectiveness, support human capital requirements of the organization, and motivate the employees to achieve key corporate strategic and fiscal goals (Ellig, B. R. 2007). Effective compensation and benefits strategy is no easy task, especially with the large organizations and ever-changing demands of the workforce.To construct the most attractive compensation and benefits package, organizations essential now undertake the fundamental landscape change in workforce requirements and demands. Employees bor n in the 60s and 70s (generation X) thrust ceded place to a new generation of workers (generation Y). A flexible approach to compensation and benefits is now required to satisfy the different priorities of these generations. Planning for the future has eagle-eyed been the motto governing Generation Xs approach to their careers and so, traditionally, a generous pension provision compensation plan has been the key to attracting workers.But for Generation Y, priorities have changed. For instance, in a research conducted last family, just 4% of 16-24 year olds were attracted to their employer because of their pension contribution, compared to 17% of 45-54 year olds (HR magazine, March 2011). Certainly, younger workers are increasingly questioning the customs and traditions of the workplace and now those same pension plans which were previously considered as synonymous with security, are now regarded as unstable.In present day environment, employees have become much more educated on t he possibilities available to them with sources wish well online fee calculators, industry chat rooms and so on (Schneider, B. , & Paul, K. B. 2011). Employees now know more about current market pay levels, new opportunities and how to successfully talk terms compensation packages. Keeping these changes in mind organizations include many other noncash components to the potential cash components to come up with a fair, competitive and an attractive compensation program (Schneider, B. & Paul, K. B. 2011). Employee benefits are indirect forms of compensation provided by the organizations to their workforce as part of an employment relationship. The competition for quality employees in todays market is tough and employers must do more than just offer a fair salary to compete for the best employees. Employees also look forward for a good benefits package in fact employees have grown accustomed to generous benefits programs, and join an organization expecting them.Employee benefits exis t in organizations all around the world and the levels and range of these benefits digress between countries. Some of the benefits companies offer can be like troupe accommodation, company provided vehicles, health insurance, retirement benefits, easy loans, travel benefits, workplace flexibility, work-time flexibility and so on. (SHRM, 2011) Compensation and Benefit strate gies used in organisations As per Kevin OConnell, there are three primary components in a strategic compensation plan. First, construction a solid engraftation for the plan to understand the business strategy is required.Where the company is now and where is it heading to in the future, what are its short term and long term goals. This will provide the necessary information needed to construct a solid framework for the design of a compensation plan. Second, understanding organizational capabilities and how the role of compensation plays a key role to achieve organizational goals is critical. This will provide a n excellent understanding of what positions are the most critical to a companys future success and the various compensation options available to motivate employees to achieve this success.Third, aligning compensation with human capital management initiatives will help start a plan that allows the company to successfully recruit and retain employees (OConnell, K. 2007). We will see how different organizations have overcome significant business challenges by re-evaluating and strategically designing new compensation plans. By striking the right balance between organizational goals and employee needs, compensation plans can play a major strategic role in the success of a business. Jamba Juice case Jamba juice was founded in 1990. It is a leader in blended-to-order fruit smoothies and fruit juices. Source http//www. jambajuice. com/) Since its inception, it found employee retention as a major problem. It was located in San Francisco bay area and therefore the employees had more options with other employers situated there. A lot of these employers were engine room based and offered more generous financial benefits than the food retailer. To tackle this problem, Jamba Juice introduced a compensation plan, called J. U. I. C. E plan which allows the worldwide manager to receive a percentage of stores cash flow depending on their businesss final performance. It allows manages a share in the profits over a period of three years.When the general managers increase the year-to-year sales, money accrues in a retention write up, which is payable only in three year cycles. This retention account not only provides short term retention benefits, but also incentives to stay with Jamba. Also, executives at managerial positions are offered stock options. And, when assistant managers are promoted, their general managers also receive a cash award of $ 1000 for their development efforts. In a highly competitive industry Jamba was able to successfully reduce turnover. (Mello Jeff rey, 2011) The MAERSK wayMAERSK not only rewards absolute performance but also focuses significantly on performance relative to peers, says Alex Penvern, Global Head of Group Compensation, Rewards and Executive HR. This had not always been the case. Less than five years ago, rewards in the company were characterised by confidential bonuses, awarded with very little transparency. One of Penverns first challenges when he joined MAERSK in 2008 was to create a scalable, measurable and quantifiable compensation and benefits structure that was understandable and could, over time, be rolled out uniformly crosswise the organisation (Source http//www. aersk. com/Pages/default. aspx). He spoke to CEOs of each business within the meeting and focused on the executive compensation structure that focussed on relative distribution. During these conversations, he discussed range of different performance criteria, happening in annual sessions which were a part of the performance management cycle. T he outcome was a relative performance distribution of the companys most successful and less effective performers. The company believes that our people are motivated by this unending striving to do even better, says Penvern. You can never rest on your laurels or spend too long patting yourself on the back, because you know how hard everyone else is running. We want people who thrive in this atmosphere. This is brought in practice and reinforced by a carefully considered distribution of rewards to the highest performers. Since the introduction of the pay-for-performance scheme, fewer very high performers are securing a significantly larger share of the bonus on offer. The highest performers receive nearly double the bonus opportunity that they did few years back but to earn that bonus they need to keep up or stay ahead of their peers or market.While Penvern does underline the value the company creates by this performance culture, he believes that the transparency of its bonus system is just as important. The lesson is clear. Company has to build employee engagement and drive performance both by having a clear and transparent compensation scheme that links pay and performance and by communicating this consistently in order to reinforce and fix the belief that pay and performance are linked (Bonic, Davies, Brood, etall, 2011) Design and Engineering group in DelawareA small to medium design and engineering group in Delaware, employs engineers and designers, most of them who are in their 30s. closely of the employees were the primary wage earners in their families and have several dependents. This company pays wages that are or so lower than those of its competitors, but it offers a fully paid insurance program that includes health, pharmacy, dental and eye care coverage for employees and their dependents. By meeting the employees benefit needs the company enjoys very low employee turnover (McConnell, J. 2003 Pg. 235). Mississippi garment shaperA garment manufa cturer in Mississippi pays on a piecework basis. Most piecework plans in garments factory in general must guarantee pay equal to at least the legal minimum wage. In this specific company, new employees receive an hourly wage until they have acquired the skills required to meet performance standards. Then the manufacturer pays them on the basis of the number of pieces they produce in an hour. The company has designed its compensation approach to retain good and productive employees i. e. those who are continuous good performers (McConnell, J. 2003 Pg. 232). ConclusionCompensation whether i the form of salary or benefits is a key element in both attracting and retaining employees. With careful and logical thinking companies should design a program that will significantly contribute to obtaining and retaining the typewrite of employers who perform best for that company. Compensation professionals play a critical role in enabling organizations to execute their business strategy. The ex amples in this paper demonstrate how organizations have overcome significant business challenges by redesigning their compensation plans as seen in Jamba and MAERSK.We also have seen how a small company like the garment manufacturer in Mississippi use compensation package to retain highly performing people and do away with low performing people. Some companies like the one in Delaware uses non monetary benefits to keep their workforce happy and content. Compensation and benefits have a negative effect on the company if not properly managed. Collapses of big companies like Enron and Global crossing are examples. These are direct results of managerial behaviour aimed at short term profit maximization.That behaviour is in turn a result of the executive pay structure that measure and reward performance based short-term financial results. Managers are under regular pressure to show the expected / desired results the management wants to see in order to continue to be rewarded generously (Stabile, 2002). Compensation experts need to be at the focal point where strategy, organizational effectiveness and human capital management congregate. They need to have a clear understanding of the business and organizational issues as well as the future direction of the company.Strategic compensation and benefits design is not a sound bite to impress management. Its the process behind compensation plan design that links and binds strategy, organization effectiveness and human capital together. By balancing organizational, employee and business needs with a companys financial and strategic goals it is possible to develop the right compensation strategy to motivate, reward and sustain high levels of performance. By finding this balance, a company can effectively use compensation to execute and achieve desired business results. References Bonic, Davies, Brood, etall, (2011). Mercers 2011 EMEA Compensation and Benefits Conference * Compensation, Retirement and Benefits Trends Report , 2012/2013. (cover story). (2013). Pension Benefits, 22(1), 1-2. * Ellig, B. R. (2007). Fashioning an Employee Benefits Philosophy Statement. Benefits Compensation Digest, 44(10), 44-48. * Employee Benefits in the United StatesMarch 2012. (2012). medical checkup Benefits, 29(23), 4-5. * Heshizer, B. (1994). The Impact of Flexible Benefits Plans on Job Satisfaction, Organizational Commitment and Turnover Intentions.Benefits Quarterly, 10(4), 84-90. * Lazear, E. P. (1990). 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