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The impact of various compensation methods and benefit programs on employees and organizations

Analyzes the impact of various compensation methods and benefit programs on employees and organizations. Relate salary and benefit administration strategies to organizational culture and performance.

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The compensation plan deals with the amount to be paid to the employees for their service to the organization. We should understand that management involves the development of organization systems and practices for the planning, acquisition, development and utilization of manpower. It involves developing a symbiotic relationship between the external, societal culture and internal culture of the organization. Compensation plans have a statutory effect on the entire organization. Employees are happier in their work, co-operation and loyalty are higher, productive output is up and quality is better.1 Thus good compensation is a basic need of the human. It is very important to maintain the healthy employee morale.

Compensation may be monetary or in non-monetary forms, though it is the monetary compensation that helps to retain and attract new employees. Total Cash Compensation (TCC) has two parts:

1. Primary compensation- is the basic wage or salary given to the workers and other employees.

2. Incentive compensation- also called 'payment by result', is essentially a managerial device for increasing workers' productivity.1

There are four main categories of incentive compensation plans:
1. Individual incentive plans
2. Group incentive plans
3. Factory-wide or plant-wide incentive plans
4. Payment by results to indirect workers1

INDIVIDUAL INCENTIVE PLANS- There is four main plans under it, followed by their sub-plans.

- Plans in which workers' earnings vary in the same proportion as the extra output

--> The straight piece rate system-The workers are paid as per the amount of work done by them. For instance, In garment industry at times the rate per piece is fixed say Rs.10, so the worker who will make 20pieces in a day would get Rs.200 and so on. This kind of system can be for the weavers who can be paid according to the per sq yard of fabric they produce. The drawback in this case is that the quality suffers in the process of producing maximum number of pieces.

--> Balance or debt method- under this system the worker is guaranteed a minimum weekly wage for a full week's work and also has an alternative piece rate. This system is suited to those industries where the flow of work is uneven. For instance, dock-workers.

--> Standard hour system-in this method, along with the hourly rate a 'standard time' is also fixed for completing a job.

--> Plans in which workers' earnings vary at a lower rate than the increase in the output

--> Halsey or Weir Premium Plan-under this plan, a standard time is fixed on the basis of past performance records and not on the basis of elaborate time study for the completion of a job. A ...

Solution Summary

1687 words are given in analysis of the benefits of various compensations offered to employees, including important relations to salary and organizational culture.