The effect of compensation and benefit towards employee motivation

 The effect of compensation and  benefit towards the employee  motivation


What are compensation and benefits? 

Employees receive compensation from their employers as payment for tasks completed. It is a fundamental tenet of the job, relationship and can be in the form of a yearly income, an hourly rate, commissions, as well as the chance to get overtime pay and bonuses.

Benefits include additional, less obvious types of financial support, including profit-sharing, stock options, health insurance coverage, and pension contributions. These items have a monetary worth, but aren't often paid for directly Smith, (J. R., 2021).

 

Effect of compensation on employees

According to Dirks, E. (2020) The degree of engagement among employees is significantly influenced by remuneration packages. The employees that receive high pay feel more satisfied with their work and are motivated to work more (especially when compensation is directly related to job performance). On the other hand, research has also shown that inadequate pay deters employees from doing well and being motivated. Employees are favorably impacted by salary in one or more of the following ways:

  • ·       Job satisfaction
  • ·       Retention
  • ·       Prospective recruitment
  • ·       Work productivity

The importance of compensation and benefits

Businesses hire individuals to help them reach their objectives, and people work for businesses to advance their careers and make money. The salary and benefits, wages, perks, incentives, and other considerations provided to employees are among the main reasons why individuals join businesses. The amount of money paid as a pay, in addition to the firm's reputation and job description, is crucial in luring people to work for the company.

Employee loyalty and incentive to perform well at work increase when remuneration and perks are increased. Companies with lower pay, however, report a high turnover rate and worse staff productivity. All of these elements contribute to the importance of salary and benefits in managing the workforce.

 

Building employee motivation

As excessive employee turnover can have a negative effect, keeping good workers as they further their education and establish business culture can boost employee engagement and productivity. Motivating talent is essential to keeping them on board and maximizing their potential.

Paying workers a fair salary boosts their probability of having a stable financial situation in addition to making them feel appreciated. Financial stability helps employees feel engaged and at ease in their jobs; if they are struggling to make ends meet or don't feel their work is valued, they are more inclined to hunt for higher income elsewhere.

Benefits can offer comparable inducements to remain and support organizational objectives. Good perks may ease workers' lives and foster a sense of appreciation. Even if an employee's pay is less than elsewhere, they are more likely to stick around and contribute if they feel protected by strong benefits.

Another crucial factor is how fairness is perceived. Employees are more likely to stay and desire to contribute to the company's objectives if they believe that their remuneration and benefits are fair and that their organization chooses compensation levels in a fair manner (Smith, J. R., 2021).

 


Compensation and benefits best practice

The salary and benefits plan of a corporation is one of, if not the most, significant motivators for employees. To be successful as a top employer, a firm must include best practices into its approach (Smith, J. R., 2021). 


Higher performance, higher pay: Companies that reward well performing employees with increases will encourage those individuals to keep working at a high level and offer others something to aspire to. A well-paid employee is often a highly motivated employee. High performers from outside the firm may join the team if the compensation structure is competitive. It may also reassure employees that their efforts and value to the business are acknowledged.

 

Review employee compensation often: Regular evaluation gives you the freedom to make any required improvements, just like it would with any other aspect of your business. Even while the pay structure typically only undergoes annual revisions, there is always a potential that unanticipated market or organizational demands, such as the cost of living or a rising turnover rate, may necessitate adjusting compensation.

 

Understand the company’s budget: The budget outlines how the money will be spent on various organizational departments. In order for the business to pursue its plan and achieve its objectives, it is critical that compensation and benefits remain within the budget as they are frequently the greatest expenditure. In order to attract elite people, a firm may occasionally be ready to exceed its pay budget, but if that plan is in place, the barrier for this should be precisely defined.


How Compensation and Benefits Are Related to Employee Motivation

Never undervalue the advantages of excellent pay and a competitive benefits package. HR managers may assist businesses of all sizes and sectors provide competitive benefits with fewer resources than their rivals by developing an employee health plan strategy. Benefits and pay have been shown to incentivize workers, increase output, and increase job satisfaction (New City Insurance 2021).


Reference

Smith, J. R. (2021) How compensation and benefits can motivate employees, Hrreporter.com. Canadian HR Reporter. Available at: https://www.hrreporter.com/focus-areas/compensation-and-benefits/how-compensation-and-benefits-can-motivate-employees/358978 (Accessed: December 4, 2022).

Dirks, E. (2020) Does Compensation Motivate Employees?, HRSoft. Available at: https://hrsoft.com/does-compensation-motivate/ (Accessed: December 4, 2022).

Compensation & benefits - meaning, importance, types, components & example (2012) MBA Skool. Available at: https://www.mbaskool.com/business-concepts/human-resources-hr-terms/4032-compensation-a-benefits.html (Accessed: December 4, 2022).

New City Insurance (2021) How compensation & benefits related to motivation, New City Insurance. Available at: https://newcityinsurance.com/how-are-compensation-and-benefits-related-to-employee-motivation/ (Accessed: December 4, 2022).

 



Comments

  1. Rusan SahthiDecember 4, 2022 at 3:27 AM

    The compensation and benefits provided by an organization can have a significant impact on employee motivation. By offering competitive salaries, bonuses, and other benefits, employers can create a positive work environment which can help drive productivity and enthusiasm. Furthermore, when employees feel that their contributions are valued, they are more likely to be motivated to work hard and strive for excellence.

    ReplyDelete
  2. Chamara RanasingheDecember 9, 2022 at 8:40 PM

    informative article to read.in addition Compensation and Benefits can actually play a role in increasing shareholder value. Shareholder value is created when the company’s stock price goes up, which in turn increases the shareholders' equity in the company.

    ReplyDelete
  3. VinorajDecember 10, 2022 at 2:09 AM

    Deshika - it can improve the life of the employee and secure their life in the future. The employee will raise their performance so that they will get the bonus or promotion as the compensation and benefit. Anyways the organization is benefited either ways. The written flow was encouraging.

    ReplyDelete

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