Analysing Compensation and Benefit Management in Business Organisation

Abstract

Employers regularly monitor their compensation policies to ensure they are paying employees in an equitable manner and as competitively as possible when compared to other businesses in the industry. Having a written reward and compensation policy helps employees understand consequences and how to align their work with their goals. Many organizations have a policy of not disclosing pay related information; in order to avoid any discontent that might result from employees' knowing what every employee else is being paid (Byars & Rue, 2003). In that respect Ferris and Buckley (1996) claimed that pay secrecy leads to low trust, and on the other hand open pay can induce management to effectively administer the pay system. Employees' satisfaction Torrington et al. (2005) argued that the compensation policy should be satisfactory for both the employer and the employee, and meets the objectives of these two parties. According to Suliman (2007) job satisfaction influences work performance, in that respect Mullins (1998) stated that motivation, job satisfaction and work performance are affected by the employees' needs and expectations, and the extent to which they are fulfilled. Nickson (2007) argued that employees seek a range of monetary and non-monetary rewards and benefits from employment, of which money is only one aspect, even if it is often the primary consideration for employee. Thus employees seek: (1) extrinsic rewards; which relates to tangible rewards such as pay, fringe benefits and conditions of work, (2) intrinsic rewards; which relates to psychological rewards and internal feelings such as the sense of personal satisfaction from the job, challenge, achievement and being treated in a considerate manner (Mullins, 1998). Everton et al. (2007) stated that when an organization is perceived to be fair and supportive, employee deviant behavior (i.e., unexplained absenteeism and stealing) will decrease. As emphasized by Negi (2002), Kotler et al. (2003) and Kandampully (2007) employee satisfaction produces ultimately customer satisfaction. Concerning the relation between the retention of employees and compensation system, Jones and Haven-Tang (2005) mentioned that there is a correspondence between these factors, they added also that there is a link between the firm size, pay levels and the retention of employees, because of the fact that employees in small enterprises often have to apply for jobs in other firms if they want better positions with higher payment.