Total Compensation Methods

Total Compensation Methods

Total Compensation Methods

Analyzes the effect of benefit programs on employees and organizations

The distinction between compensation methods and benefits is that benefits extend beyond the basic compensation of time and services rendered. Benefits are either the result of regulations or an optional strategy for an employer. Similar to certain forms of compensation like commission, benefits have business and volume driving properties. Where benefits diverge is in their ability to instill stability, added productivity, loyalty and consistency in the workplace.
"Compensation which includes direct cash payment, indirect payments in the form of employee benefits and incentives motivate employees to strive for higher levels of productivity is a critical component of the employment relationship (Cascio, 2009). Benefits often vary but the three that are required by law are workers compensation, unemployment and social security. These mandatory benefits guarantee a minimum level of income and thus an added sense of security. Employers are incentivized to keep terminations low in order to receive lower payments on unemployment insurance rates. Optional benefits that are increasingly not offered by employers include: health insurance coverage, pension plans, 401K’s, stock options, etc. These benefits are often used as recruitment incentives; however, many U.S. companies are increasingly attributing their inability to offer these them because government legislations have put them at a competitive disadvantage. U.S. companies pay an average of 10k/annually for each employee with health insurance, whereas many European and Asian markets rely on their governments to pay their employee’s benefits. Although benefits are no longer common and growth of the average salary has plateaued, companies are controversially spending more money in one area, its executives. CEO’s increasingly receive most of their benefits, nearly 1/3 of annual compensation through stock options. This practice is one of the factors that contributed to the recent U.S/World economic meltdown during which an alarming number of CEO’s back-dated their stock options in order to make them more valuable. This practice allowed CEO’s to make money without genuinely improving their company’s financial standing or wellbeing. With the exception of those that are legally mandated, companies should view benefits as strategic options for recruiting and maintaining productive work environments. Benefits may extend beyond basic compensations to encourage overall company loyalty and focus. Employees who feel their input is rewarded strive to achieve greater goals. Although many companies claim their decreased ability to offer several of these benefits, critics continue to cite the scandalous culture of stock benefit abuse by executives. Employees continue to rely and expect many of these benefits but reform will largely rely on economic feasibility, government legislation and internal company business ethic.

References
Cascio, W. F. (2009). The Effects of Compensation on Employees Work Performance. Retrieved from http://ezinearticles.com/?The-Effects-of- Compensation-on-Employees-Work-Performance&id=2421430

References: Cascio, W. F. (2009). The Effects of Compensation on Employees Work Performance. Retrieved from http://ezinearticles.com/?The-Effects-of- Compensation-on-Employees-Work-Performance&id=2421430