HR compensation and benefits - 100127

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Employee Compensation and Benefits


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Employee Benefits

Compensation that encompasses both benefits and pay is closely linked to performance appraisals. Employees with high performance are likely to get good pay rises (Qader, 2015). Various aspects impact employee’s compensation. An organization must consider both external and internal elements when planning and developing their employee benefits scheme.

Pay configuration and internal influences. Salaries, benefits, and wages depend on expertise, skills, and the level of the task. High-level ranks like chief information officer, chief financial officer, and the president are remunerated at high rates. Also, diverse tasks of equal significance to the organization are remunerated at identical rates. Reasonability increases as the level of management increases, and consecutively the pay. On the contrary, compensation is also affected by external influences. In determining employee remuneration, an organization must consider compensation by their rivals. If the opponents are paying high salaries, an organization might lose its best-performing employees. Human resource managers habitually appraise salaries by job position, geography, and market and rival wages. 

External factors that determine compensation:

  1. Conditions in the labor market. The forces of supply and demand hold a critical function in the decision regarding employee compensation (Sushmita, 2019). Employees with an exceptional skillset and experience command higher salaries and wages compared to those with basic skills in the market. However, the wage reduction cannot go below floor level because of workers union’s bargaining power and government’s terms on minimum wage.
  2. Economic conditions. Organizations with the latest technology, higher operational efficiency, adequate manpower, excellent productivity records, among others, have the potential to pay well. Compensation is the result of the exte