Compensation strategy

Original question

What factors should influence an organization’s compensation strategy?

Respond to classmates with at least 250 words or more and please cite the source(2)

Student 1 from Richardson, Gwendolyn, posted 08/21/2018 09:55 PM CDT

Employees are very concerned about the amount they are paid. The tangible benefits and all forms of financial returns that employees receive as part of their relationship with their employer is known as compensation (Bernardin & Russell, 2013), An organization compensation strategy is very important to the organization as well as the employee. One of the factors in the organization’s compensation strategy is the company’s performance. It has been proven that a direct link exists between the company’s financial performance with the compensation strategy according to Romero and Cabrera (2001). Companies may not be able to pay top dollar to their employees if the company is not performing well. Over the past few years, companies have been to move towards a more standard base salary and adding pay at risk to the employee’s compensation. When a portion of the overall compensation involves pay at risk, employees are more focused on achieving that particular goal which has a payout for the employee and the company benefits as well. Job skills is another factor. Companies no longer pay for the actual job role like traditional pay systems where the worth is comprised of the contributions of the job. Skills-based pay tends to build a relationship with the company, foster trust and increase employee participation (Gomez-Mejia & Welbourne, 1988). Bringing the appropriate skills to the organization impacts how the company performs, so the company will pay for the skills to attract and retain the best employees. Finally, performance is a huge part of the strategy. In the past, companies did not focus on performance. They grew an employee compensation based on seniority. Now HR professionals and leaders are developing performance systems that help in measuring and differentiating performance (Gomez-Mehjia & Welbourne, 1988). Therefore, more discussions are taking place and employees are being fairly compensated if the system is implemented and used correctly. Financial performance of the company, job skills and performance are a few factors that influence an organization’s compensation strategy.

Student2 from Scott, Tiffany, posted 08/22/2018 08:38 PM CDT

It is important for every organization to have an organized compensation strategy. Compensation in regard to the employer is all forms of financial returns and tangible benefits that employees receive as part of an employment relationship (Bernardin and Russell, p.252, 2013). Each organization have different values and different types of compensation whether it be a bonus or a raise. The organizations compensation strategy is important because it outline the business ability to sustain and retain their employees. One of the factors when seeking to fill open positions is offering a competitive pay, it tells the potential employee how much they are valued. The business needs to offer external equity and review like businesses that offer similar or same positions and evaluate a competitive salary. “ Studies suggest a compensation strategy pay system is essential, integrating mechanism through which efforts of individuals are directed toward the accomplishment of an organizations strategic objectives” (Gomez and Welbourne, 1991). The organization also needs to develop pay structure. The pay structure should be based on the skillset of the employee and as the employee advance in their career they would have the ability to advance based on the pay scale structure. There are many organizations that require certain certifications or degree in order to be considered for certain positions. Employee performance should also influence the compensation strategy. Showing appreciation through monetary compensation such as bonuses or raises should be influenced by employee’s performance. A good compensation strategy enables a business to retain employees; it also motivates the employee to reach their goals and ultimate business strategies” (Pomering, 2001). Compensation is a great tool to motivate employees; these employees invest longevity in the company making a career. All companies value different things in their industry

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