Human Resource Management: Compensation - Coursework Example

Running Head: Human Resource Management: Compensation Compensation is monies paid to employees because they rendered their services to the company. It can also be monies paid to employees when they get injured, sick or treated unfairly as they perform their jobs. Compensation is important to an organization because it influences staff turnover, work morale and staff performances. Fallon and McConnell (203) suggest that employees are concerned about compensation and benefits they receive after rendering their services. Therefore, compensation and benefits are important because it influence employee performances. The staff seeks to be compensated well in the organization, which they work for. However, some organization fails to compensate their employees accordingly. Such companies practice discriminatory compensation practices while others may take a long time to compensate their staff incase they fall sick or are injured in the work place. Furthermore, some companies offer in adequate compensation to their employees. Discriminatory compensation practices, delayed and inadequate compensation are some of the key challenges that are facing the human resources department. Poor compensation policies and procedures can be very costly to the organization. Consequently, employees may perform below the expectations, high employee turnover and industrial actions usually follow suits. The organizations suffer costs incurred because of legal suits, lost time, low productivity levels and recruitment costs. According to McConnell (334-335), the role of the human resource department is to maintain appropriate compensation structure of the organization. The key challenges related to staff compensation faced by human resource practitioners The human resources departments are struggling to establish human resource policies that are good and perceives as fair by all the employees and other stakeholders. However, the challenges in compensation practices and policies continue to exist in most organization. As a result, most employees feel demotivated, misused and disregarded. The challenges that exist are explained as follows. First, compensation discrimination is real in most organizations. There are instances when employees feel that salaries and other benefits they receive are lower as compared to other employees with the same set of skills, experience and performance. The rate of pay is lower and incase they are injured, their compensation are also less as compared with other identical employees. The discriminations is also evident when other employees are paid lower commissions and bonuses, lower base pays and over time pays, lower house and travel allowances as well as lower insurance and medical cover as compared to their colleagues. Compensation discrimination is not acceptable in a civilized country. This is because it is unfair and retards employees’ development. In addition, it lowers employee morale and start unnecessary battles. Most laws have been enacted to help weed out compensation-based discrimination in the workplace. For example, there is Equal Pay Act of 1963 and the Age Discrimination in Employment Act of 1967 among many others (HR-Guide.com). The acts that have been enacted prohibit any discrimination during employment regarding race, colour, religious affiliations, gender, age, nationality or disability. It requires all employees to pay equal wages for equal work for all men and women who perform same jobs requiring equal skill, effort as well as responsibility performed under same conditions. Discrimination in the work place can brew legal battles, discontentment and feeling of misuse in the work place. The organization eventually suffers from loses caused by legal battle, low productivity and unfriendly working environment. To avoid the above consequences, organizations should abolish discriminatory policies and develop compensation policies that promote equal pay for equal job. The second problem that is experienced by the human resources department in an organization is low compensation rates. There are cases when employees questions why some organizations pay them lower than their counterparts in other similar companies. Most companies have reduced the salaries or benefits in attempt to save the money. However, such companies fail to take into account satisfaction and staff morale. Low salaries and benefits cause the employees of the organization to move and seek jobs in organization that pay higher salaries and benefits. As a result, such companies fail to attract and retain high talents. They also spend a lot of money as they seek to fill the vacancies left vacant by unsatisfied employees. Companies that pay their employees low salaries, compensation and benefits are perceived as exploitative. Either they lack appropriate job pricing policies or they just wanted to amass more wealth by exploiting the employees. Caruth and Handlogten (123-142), job pricing is an essential task that consolidates all activities associated with employee compensation. However, most organizations lack payment policies. Therefore, they pay lower than what the market pays because they fails to develop salary ratings and lack pay increase policies. In most cases, the employees of such companies would always be on the look out for better jobs rather than concentrate on the job. The third problem that employees face is delayed compensation. Some companies are notorious in paying compensation to employees after a long period. As a result, the employees suffer as they struggle to get money form other sources to treat and contain the injuries or sickness they experienced in the work place. The employees suffer from distress and feel betrayed by the companies that they devoted their time and skills. The delay is occasioned by lack of adequate financing or poor compensation procedures and processes that are inherent in such organizations. The companies in civilized or modern societies should develop quick ways of paying genuine employees who deserve compensation. The fifth problem is cause by the employees. Employees are claiming excess money in their compensation unfairly. Most employees collaborate with health providers to defraud the company thousands of dollars. They claim more than they should be paid and drain the company financial resources. The workers may fake illness or sickness to earn undeserved compensations. Therefore, the employees misuse the objects of compensation because they inflate the monies paid to them in terms of compensation. Researches have revealed that compensation paid to employees are exceptionally higher as compared to the medical consumer price index. This is true especially in situations that the company fail to put in place appropriate compensation procedures to discourage such moral hazards. The initiatives to solve the problems of underpayment, compensation discrimination, compensation delays and frauds by employees as they claim underserved compensation. The human resources practitioners have the skill s and the competencies to develop appropriate human resources policies especially those covering the compensation aspects. If the skills are lacking, the company should build human resource capacities in the human resource department or hire a competent human resource consultant to draft and help the company to implement appropriate policies. According to Business & Legal Reports (42), compensation is one of the important factors that motivate the employees to work hard in an organization. It is a strong motivation factor as compared to job security, enjoyment of work, challenging jobs and conducive working environment. Compensation should be treated cautiously because it can be a negative motivational factor especially when the employees feel that they are not compensated fairly. Every human resource practitioner should make sure that the management system of an organization and associated pay structure work inline to compensate every employee fairly. There are important initiatives that lead to better compensation policies in the companies. Organization should embrace formal structures that integrated appropriately the well defined job descriptions and job analysis into a system of graded wage and salary ranges. Such a system imposes discipline on supervisors and managers. In addition, it ensures that the payroll growth is appropriately tracked and well managed. Any inconsistencies are weeded out and better practice instituted when needed. The formal system should apply to all employees and departments. The advantage of a formal system is that it promotes company’s pay policy communication to inform the employees of various initiatives instituted to compensate them better. Secondly, managers and supervisors must be accountable for all their pay actions. However, the human resource department must authorize each pay action to ensure consistency exists and adherence to the rules is observed. Sharing of authority promotes fair and transparent dealings during the paying processes. Thirdly, organizations must customize their human resource information Systems (HRIS) to perform job and grade analysis as well as employee performance ratings. This ensures that employee receives fair performance rating and fair compensation raise within their grades. It also ensures that the length of service and current salary levels influences compensation increases. Fourthly, annual salary increases must be budgeted for by the management and approved but the directors. The pay salary increases should be based on company’s profitability, cost of living, turnover rates, market rates, individual performance in the job, and individual position within the range established for the job’s grade. Fifth, incentives should be tied to the employee performance goals, ratings as well as company goals and performances. They should be enough to motivate the executive to continue performing highly. Sixth, incentives should be broad and inclusive to prevent discriminations. Finally, statutes that have been enacted should be implemented to protect the employees from bad employers who fail to compensate employees appropriately. Sources Business & Legal Reports, Inc. Managing an HR Department of One USA: Business & Legal Reports, Inc., 2006. Caruth, Donald and Gail Handlogten. Managing compensation (and understanding it too): a handbook for the perplexed. London: Greenwood Publishing Group, 2001. Fallon, Fleming and Charles McConnell. Human resource management in health care: principles and practice. Canada: Jones & Bartlett Learning, 2007. Haneline, Michael and William Meeker. Introduction to Public Health for Chiropractors Sudbury: Jones & Bartlett Learning, 2009. HR-Guide.com, HR Guide to the Internet: Compensation: Outline and Definitions. 2 May 2010. . McConnell, Charles. The health care managers human resources handbook, Vienna, Jones & Bartlett Learning, 2003. Read More