Competency 1: Applying human resource strategies to business needs
Effective human resource management is an important factor for most organisations. It is important that every organisation needs to provide proper motivation to the employees. This is done by providing benefits related to compensation (Ouyang et al., 2016). The assignment focuses on the ways by which benefits and compensations are provided to employees. The types of employee compensation that are available are also discussed. The role of benchmarking along with factors affecting compensation is also analysed. In order to understand the implementation of the benefits of employees in organisations, Google has been considered. Google is a famous multinational technology company that provides internet related services and products. It is one of the most sought-after companies in the world and has the largest number of products on the internet.
Employee benefits represent a significant cost for a company. This provides the company with an added advantage as the costs can be dealt with retaining employees. However, it is seen that some companies cannot afford to deal with a high compensation level for the employees. This is because the benefit costs of the employees are usually higher than the salary of the employees. It is seen that in a company like Google an employee earning $50,000 earn a huge benefit in terms of compensation. As observed by Shen (2015) insurance cost, health coverage cost and disability cost amounts to 1.25% or 1.4% more than the salary of the employees. Hence, an employee earning $50,000 can earn $70,000 as a cost of employee benefit to a company.
It is important for a company to ensure that the terms and conditions of the benefits are communicated to the employees. Every benefit that the employee may get is written down in the appointment letter. However, Bryant & Allen (2013) at times it is seen that most employees do not remain eligible to claim the benefits that are provided by the company. This is mainly due to the tenure of the employees that discards them claiming the benefits. However, upon being eligible the benefits can be claimed. This needs to be communicated by the employers in terms of emails or by a formal letter. In Google, employees are informed about the benefits via e-mails. This helps the employees and the employers maintain a record of the eligibility of the employees and the amount of money that they can claim as a cost to employee benefits.
Ning Xiao & Lee (2017) stated that providing compensation and benefits are not an easy task for an organisation. Despite making promises related to the compensation of employees, organisations fail to live up to the promise. One such reason includes tight budgeting. At times, it is seen that organisations fail to compensate employees due to miscalculations in the budget. The investment made for a particular year may have been more than anticipated. Thus, the budget becomes tight and compensations of the employees are hampered. In the case of Google, this is a huge issue, as Google tends to produce new applications every year in order to keep the customers satisfied. This requires a fair amount of investment, as the applications have to be made updated and user-friendly. Thus, the company find itself in tight budgeting scenario most of the times.
Analysing the costs of employee benefits to a company
Different types of employee compensation exist that help in the motivation of an employee. The most common type of compensation includes the basic pay or the overtime pay. Basic pay is the salary of the employees that they deserve to get for the work done. On the other hand, overtime pay is received if an employee continues his duty even after the working hours are over. According to Shields et al., (2015) another common type of compensation that exists in the industry is the bonus and merit pay. Employees working in an organisation for more than one year are eligible to get a bonus amount for the loyalty towards the organisation. The merit pay is provided based on the performance of the employees over the year. Moreover, commissions is another form of compensation that employee receives. This type of compensation is usually received by employees of the sales department of an organisation after performing a high number of sales for the company (Guptil & Shaw, 2014).
The State or Federal Government provides mandatory benefits to the employees working for any organisation. According to Hussey & Thau (2017), currently, there are four mandatory benefits that employees need to be provided with. These include social security tax, Medicare tax, and unemployment fund along with workers compensation. These are essential in order to protect the employees from any unforeseen events that may affect their working life. On the other hand, voluntary benefits include the benefits without limitations. These benefits include the insurances that are provided to the employees (Biggs & Richwine, 2014). This includes life or disability insurance, retirement scheme, paid leaves and health promotions.
Benchmarking helps in identifying the better policies that are adopted by other organisations. The manners in which other organisations provide compensation to the employees are employed by a different company to satisfy employees. Thus, it can be said that benchmarking plays a pivotal role in developing competitive compensation. This is because organisations aim to retain employees and ensure that the competitive advantage is attained (Terera & Ngirande, 2014). Employees need to be given proper compensation so that they feel motivated in working for that organisation. Google, however, sets a benchmark for the compensation package that the company provides to the employees.
Some of the environmental factors that affect the compensation and benefits of an employee include the economic factors. This is a most important factor in the economy of a country continuously fluctuates. In the cases when the economic stability of a country is low, providing compensation to the employees can be a risk factor (Samnani & Singh, 2014). This is mainly because of the fact that the financial ability of the organisation lessens due to less income. Hence, it becomes difficult for the organisations to provide proper compensation to the employees. Apart from this the legal factors of certain countries also cause hindrance in paying the employees. In the case of Google, such factors do not affect the payment of compensation. This is because the products of Google do not need purchasing.
Conclusion:
Thus, it can be concluded that providing compensation to the employees is a way of motivating them and making them loyal to the companies. However, some organisations cannot afford to pay a huge compensation to the employees due to its financial condition. In the case of Google, the reputation of the company helps it to retain employees by providing them with proper compensation and benefits. Some of the benefits that an employee receives are mandatory, as it is the duty of the State Government to protect the interests of the employees. However, the factors that hinder progress also need to be analysed by the managers.
Reference:
Biggs, A. G., & Richwine, J. (2014). Overpaid or underpaid? A state-by-state ranking of public-employee compensation (No. 415891). American Enterprise Institute.
Bryant, P. C., & Allen, D. G. (2013). Compensation, benefits and employee turnover: HR strategies for retaining top talent. Compensation & Benefits Review, 45(3), 171-175.
Guptil, N., & Shaw, J. D. (2014). Employee compensation: The neglected area of HRM research. Human Resource Management Review, 24(1), 1-4.
Hussey, I., & Thau, S. (2017). Money vs Meaning: How Organizational Emphasis On Work Meaning Inhibits Employee Compensation Demands. In Academy of Management Proceedings (Vol. 2017, No. 1, p. 17038). Academy of Management.
Ning, Y., Xiao, Z., & Lee, J. (2017). Shareholders and managers: Who care more about corporate diversity and employee benefits?. Journal of Management & Governance, 21(1), 93-118.
Ouyang, K., Lam, W., Chen, Z., Cheng, B. H., & Zhong, J. (2016). The Benefits and Costs of Employee Taking Charge: From a Resource Perspective. In Academy of Management Proceedings (Vol. 2016, No. 1, p. 15687). Academy of Management.
Samnani, A. K., & Singh, P. (2014). Performance-enhancing compensation practices and employee productivity: The role of workplace bullying. Human Resource Management Review, 24(1), 5-16.
Shen, H. (2015). Employee benefits: plight of the postdoc. Nature, 525(7568), 279-281.
Shields, J., Brown, M., Kaine, S., Dolle-Samuel, C., North-Samardzic, A., McLean, P., … & Plimmer, G. (2015). Managing Employee Performance & Reward: Concepts, Practices, Strategies. Cambridge University Press.
Terera, S. R., & Ngirande, H. (2014). The impact of rewards on job satisfaction and employee retention. Mediterranean Journal of Social Sciences, 5(1), 481.
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