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    Effect of Various Compensation Methods and Benefit Programs

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    Questions-

    1) Analyze the effect of various compensation methods and benefit programs on employees and organizations

    2) Relate salary and benefit administration strategies to organizational culture and performance.

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    COMPENSATION METHODS AND BENEFIT PROGRAMS

    Effect of compensation methods and benefit programs on employees and organizations

    The following are some of the common compensation methods and the possible effects on the employee and the organization:

    1. "Pay for performance" (piece rate) has been considered as the optimal compensation scheme (http://www.nber.org/papers/w16540). In this method, the employee is compensated on the basis of his level of performance. In effect, the higher the level of performance, the higher the pay that will be received by the employee. Correspondingly, a lower level of performance would mean lower compensation level.
    This method is defined by Cherrington (1995) as a pay system that ties pay to performance levels.

    This method may encourage the employee to focus on improving his level of performance because this would mean a higher level of pay. As a result, the employee would focus on improving his own performance but may sacrifice other aspects of his work or job such as fostering good relationship with peers or his superior.

    Another possible effect on the employees is that they may tend to become individualistic - they may forget the concern for others. It would also be to the disadvantage of the employee if there is a limit on what the company is capable of producing because of constraints in resources. Given the circumstances, there would be a limit on the pay that the employee would be capable of ...

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