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Benefits and Compensation in Workplace

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Benefits and compensation in Workplace


Benefits and compensation in workplace offers a labor friendly condition to the workers to ensure that they give fully their potential. People during the pre-industrial era treated workplace and home place as one place, which change significantly with emergence of the machines and factory. Industrialization thus brought socioeconomic hierarchal that was accompanied with gender role stereotypes (Butler, & Park, 2005). This means that men were the one who were able to access the paid jobs while the women worked at home. The quality of the family was affected very much by the socio-economic hierarchy that each family occupied. This is because the wealthy people were the one who drove the industrial demand of goods.

During the time of war, the demand for the industrial workers improved as men mostly worked as military. Therefore, women were the other option to be recruited to work in men dominated careers in the industries. However like men, they were neither given enough economic rights nor able to access good work protection for their jobs.

According to the industrial employment conditions that were reported in those early times, they showed that men and women received very low wages, succumbed long working hours and poor working conditions as they serve hazardous job places (Repa, 2010). They were also discriminated in terms of sex, race color and gender. Some of them reported sexual harassment. There was rampant child labor reported in the work place.

Due to all these problems, laborers formed uprisings that were too used to address the issue of good payment, better working conditions as well as equal and fair treatment in the workplace. This fight got support from all the divides where religious and academicians supported them (Griffin, 2010). This led to formation of unions as well as cooperatives to help the workers acquire better benefits and compensation in the workplace (Rosenbloom, 2005). People behind cooperatives and independent communes were socialist Robert Owen and Charles Fourier in the eighteenth century. Owen advocated for short working hours, formation of unions and self-governing workshop while Fourier fought for equal women rights and good basic income. He also advocated decent minimum payment for the unemployed thus creating benefit for the unemployed. Child labor was abolished as they were forced to go to school and attending other recreation activities (Repa, 2010).

These struggles lead to the formation of the International Labor organization (ILO) in 1919. The countries who signed this convention were on their way to promote their employees at workplace, bring about decent employment opportunities, strength dialogue between the employees and the employers as well as handling professionally work related issues. It also offered a platform that there would be possibility of forming labor groups, organizations and they have representative from sate government (Henderson, 1985). These ensured that consultation to come up with ideal working standards and policies were formed. Therefore, this was the birth of good benefits and compensation at the work place.

Benefits and compensation in work place

According to definition, compensation is an approach that is systematic to ensure that employees are provided with monetary value in exchange of the work performed. The purposes that the compensation is able to achieve include recruitment, job performance and job satisfaction (Muller, 2009). While benefits are a kind of compensation, that are given to employees in additional to what they get as wages and salaries.

How compensation and benefits are used in workplace

Compensation as a tool is used by the management to further their company existence through achievement of various purposes through its dispensation. It is usually adjusted to cater for various company needs, goals and available resources. Compensation in the company is used in the company to ensure that they recruit employees and retain those who are highly qualified. This ensures that the company’s human resource is always competent to undertake the duties in accordance to the postulated goals and objectives of the company (Wilson, 2003).

Compensation in the company works as a morale booster in the company as it maintains employee’s satisfactions in their jobs ensuring that their productivity is increased. Therefore, through good compensation scheme, the business is able to increase its output with minimum resources possible thus making good returns (Thomason, et al. 2001). Compensation ensures that the top performers are also rewarded and the same high performance act is increased throughout the working period. When the company encourages high performance in the business, it increases high returns and due to reward offered to the high performing employees, labor turnover in the business is decreased (Repa, 2010).

Through proper compensation, it is capable of achieving internal and external equity of the company. It increases company loyalty by its employees reducing labor turnover (Guerin, 2010). Therefore, when the company offers a good compensation scheme, it reduces its expenses that come from continuous recruitment due to high labor turnover as well as lower employee’s loyalty. Good compensation ensures good work communication through proper modification of union’s practice that offers proper compensation negotiations (Wilson, 2003). This is very important in the company as it offers job satisfaction and increases high morale in the working place.

Components of compensation systems

For a compensation scheme to be perceived as affair one by the employees, it has to base itself in certain components that should be systematic. Therefore, various systems have been put in place to help develop the value of the compensation positions. In these systems, various components are utilized that include, job description, written procedures and salary ranges as well as structures (Peterson, et al. 1998).

Job description

This is one of the most important components in compensation and selection systems. It ensures that it gives in writing the requirements, responsibilities, duties, functions, location, environment, conditions among other jobs aspects (Repa, 2010). It usually developed for individual job descriptions or for the whole families of the jobs. The following two ways are used in the process of job description.

Job analysis

This is the process into which jobs are analyzed to ensure that description of job is brought about. The techniques usually used are questionnaires, interviews and observations (Griffin, 2010).

Job evaluation

To ensure that a proper compensation scheme is brought into place, the management uses this system where jobs element are put into consideration through comparison to ensure that compensation of each job is critically put in place (Griffin, 2010). The various techniques that are used in the job evaluation methods are ranking, classification, factor comparison and point methods. Through them each jobs is offered the right compensation that fits it.

Pay structures

To ensure that in an employment place there is a standard compensation practice; job structure should be put in place.  In most of the structures that are put in place, they contain different grades that offer a minimum salary or wage. These structure =s provides also the interface that help in the increment of the salary from one grade to the other according to the given range (Griffin, 2010). This is more pronounced in the working place that has a unionized employees system where each job has predetermined pay, which is put in place through collective bargaining.

Salary survey

Salary survey is a method of collecting salary data from the market. The data collected includes, averages salaries in the market offered to a specific job, inflation indicators that may make the salary market unstable in the near future and an average salary budget.  Either the survey can be conducted by the company themselves or they can be from other parties for example survey vendors who do survey of the market for sale. Therefore, the company can decide on the method to obtain these data (Turner, 2001). The best method of obtaining data is through the company carrying their own survey, as they will be more specific in the type of the data they are up to. Otherwise, if they opt to purchase survey from the vendors, the company must be very observant as these surveys are done depending with specific industries or across different industries. They may also be done from one geographical region or from diverse regions geographically. Therefore, to ensure that the company is capable of obtaining the right salary results, it has to ensure that it knows the right geographical region that pertains its salary survey and compare with its company objectives (Rosenbloom, 2005).

Policies and regulations

For a company to come up with a certain scheme of pay, it should ensure that it is conversant with rules and regulations that underlie the salaries and wages in the country. They should ensure that they comply with them to ensure that they offer good background for their company existence or otherwise it will be subdue d by the non-compliance consequences (Butler, & Park, 2005).

Types of compensation and benefits

Various compensations offer incentives to the employees of the company. The first one is base pay. Base pay is a form of compensation that is fixed that an employee is offered after performing a specific job or after undertaking a certain responsibility. It is usually paid in as a monthly salary, hourly or as piece rate. This type of compensation does not include any additional pay.

The other type of compensation is commission. This compensation is the one offered for service that have been rendered based on the amount of a percentage that has been agreed upon by both parties depending with the amount sold. This is usually an incentive given to sales people to ensure that their sales morale is increased as the more the sales, the higher the commission offered.

Overtime pay is another compensation that is offered to the employees. After working four the normal working hours, overtime sometimes may be introduced to various reasons. First, one employee may have fallen sick and he/she has not been replaced; therefore creating a vacant shift that requires someone to work extra hours. The company might be in the transitional period of expanding their functioning time and the recruitment of extra employees is underway. Therefore, the created time is counted as overtime to the regular employees as they will be forced to work for extra hours (Griffin, 2010). The other way that overtime is created is when some of the employees are on leave. These hours are paid extra money on top of the normal salary to compensate the person undertaking the responsibility. Most of the overtimes are calculated with a given percentage over the base salary per hour worked after normal time.

Employee stock option is a form of incentive that employees are offered by the corporation. This is through being given an offer to buy stock in the corporation at a bargained price. This bargained price is made to run at a specified period.  Most of the companies will offer such incentives to their executives to ensure that they feel the ownership of the company.

Other compensations that the employees are able to enjoy include bonuses, profit sharing, merit pay, travel, meal as well as housing allowance. Benefits including insurances, medical, vacation, leaves, retirement and taxes.

Regulations affecting compensations

Compensation is regulated through the laws that are given in the Fair Labor Standards Act (FLSA) chapter 676 of 1938. This is also known as Wages and Hour Bill. This is a U.S based federal law that establishes minimum requirements for an employees number of hours for working, wages, payroll  and premium overtime records (Turner, 2001).

Compensation plan

To ensure that the compensation is well disbursed to the employees and all the factors that affect the compensation are put in place, compensation plan will be of paramount use. Therefore, the company should ensure that the following is done.

Developing program outline

A program should be put in place to set an objective for the program. The company should ensure that they establish the target dates for implementation and completion of the program. Then determine a budget for the program to ensure that the amount to be used is known.

Designating individuals for overseeing compensation programs

To come up with this position the company should ensure that they determine if the position will be based there permanently or temporarily.  Afterwards, they select the person to oversee the program once it is completely established (Thomason, et al. 1998). The cost of going outside and getting one from the inside the company should be established. This will make sure that the most cost effective method is used. The other part that should be determined is the cost of consultants review.

Developing compensation philosophy

The company is required to form a compensation committee that is required to oversee the development of the scheme. This committee may include officers from the company depending with the number that will deliver a quick and quality compensation scheme. They are required to ensure that they offer differences that will exist in the pay structure depending with the level of the job. That is the executives, professional employees a swell as other employees in the company.  This committee will ensure that they bring about company set salaries at, above or below market level. The final thing that the committee should determine is whether the extent to which the benefits to be offered to the employees will supplement or replace cash compensation.

Conducting job analysis of all position

Major departmental analysis should be conducted to ensure that general analysis is given showing who to accomplish what. To ensure that the committee comes up with the primary function of each department, inputs from each senior departmental head should be offered to ensure that organizational structure is formed (Thomason, et al. 1998). Interviews are to be conducted to the senior departmental heads to ensure that roles and function of each job is given to ensure that when rating the compensation such functions are considered. Decision should be generated on the job classification that will be exempt and the ones that will nonexempt (Griffin, 2010).  After coming up with such classifications, job description methods are developed for both exempt and nonexempt positions. Afterwards, the models that have been put in place are distributed to the departmental head for reviewing where adjustment is done where necessary. After reviewing the models, final draft is therefore generated having jobs deceptions. At this stage, the committee is required to meet with departmental mangers to ensure that they finalize necessary reviews of the job description. From here, the job description document will be finalized.

Jobs evaluation

In evaluating the jobs, the ranking will be done from the top most senior job and in the interdepartmental stages depending with the function of each employee and other postulated factors. The ranking is then compared afterwards with the market data that was previously obtained to ensure that error deviations are suppressed. The deviations are suppressed through necessary adjustment. After verification is complete, an organizational review matrix is generated to show how compensation will be done. Still in the developing of the matrix, jobs cross lines, departments are developed based on the task required, and forecasted business plan. To ensure that the matrix is standard, the matrix data is then compared with the company structure and the industry market. Flow charts of the ranks for each department are prepared afterwards to ensure that interpretation and assessment is done. Data and charts prepared are then presented to the compensation committee where they are reviewed and adjusted accordingly (Turner, 2001).

Grade determination

The number levels of each job are established and a grade assigned for all the job families. It is from here the pay grade is generated through use of the position at each particular level within the department. This is done to ensure that fair compensation and benefits are offered to employees in all the employment levels.

Grade pricing and salary establishment

The first thing that is supposed to be done is to establish the benchmark of the references job. This job will ensure that the compensation is disbursed well throughout the established grades (Irving, 2011). This benchmark job price should be reviewed to conform to the market price within industry. Finally, a trend is established depending with the company philosophy. That is the position that the company requires to be in the industry range.

Appropriate salary structure determination

Through this, the difference is made between each salary step. Minimum and maximum range is determined and the remaining jobs slotted in.  Jobs description is reviewed at this stage while verifying the purpose of maintaining certain positions in the company (Thomason, et al. 1998). To ensure that policies are well generated, compensation review committee is met to ensure that adjustments and approval are made.

Developing salary administration policy

General company policy document is generated at this stage. This is followed with a document showing specific policies for each selected groups and a strategy for merit document. The merit document will show all the benefits that will be enjoyed by the employees as well as pay increases. This includes annual reviews, bonuses, and promotions among others. A document is also generated showing the procedures required and justification of the policies given like performance appraisal forms, merit schedules among others. Then the relevant committee does reviews finally for adjustment.

Communicate the final program to the employee and managers

After the approval of the program by the top executives, the compensation program is then presented to the employees for feedback, review and consequently adjustments. Then it is presented to the executive staff managers for approval, change and incorporation of all necessary measures to ensure that it is effective before being adopted (Turner, 2001). A plan on how this will be communicated to the employees is devised to ensure that they are well versed with the whole idea. Slideshows, movies, literatures among others can be used depending with the most appropriate method. The best form of the compensation and benefit plan is printed as specification for all re-ports are developed. Tests runs are executed to human resources information systems as the program is adopted for execution.

Program monitoring

To ensure3 that the program is up to the required standard, feedback should be monitored where they will lead to necessary changes. Monitoring will also offer ways in which problems in the program are noted and adjusted wherever necessary (Butler, & Park, 2005).


Good benefits and compensation program will always make the employees of the company to feel company ownership. Their production will always be at per and will ensure the company objective and goals are always met. This is because, a company may have good objectives but the driving force to meet them is through human resource. Therefore, whenever the human resource is satisfied, the company will always address their issue and meet their basic objectives. This is through offering incentives to the employees through good benefit and compensation practice.  The higher the job satisfaction in the company, the higher the morale in the job and the higher the production rate in the company thus increasing sales turnover.

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