Designing Compensation Systems and Employee Benefits - Assignment Example

Defining Compensation System and Employee Benefit Plan 1. Describe the differences between job analysis and job evaluation and how these practices help establish internally consistent job structures. In today’s organization these two terms often confuse and the HR managers are trying their level best to figure out the difference between these two issues. In order to understand that how these two phenomenon help organizations to build internally strong consistent job structure a detailed study is mandatory at this point. Difference between job analysis and job evaluation Job analysis and job evaluation are two different phenomenon. According to Torrington et al. (2007), job evaluation aims at calculating the net worth of all the jobs with special reference to the salaries and wages differentials, whereas job analysis helps in identifying the job description, job specifications, working conditions, skills and abilities required to perform a particular job. In addition to this, job evaluation provides a measure of evaluating the employees’ performance and enables employers to rank them on a scale of either 1 to 5 or from excellent to unsatisfactory, whereas on the other hand job analysis is undertaken to explain in detail the nuts and bolts of a job that an organization is going to advertise (Martocchio, 2011). Job evaluation and job analysis help organizations to build internally consistent job structures. Detailed job analysis gives a meticulous insight of the type of the job an organization aspires to create and this is done by keeping in view roles, responsibilities, skills, knowledge, abilities and working conditions (Martocchio, 2011). This analysis provides detailed information to the employers on what type of person with what sort of skill set they aim to find out. However, as job evaluation calculates the net worth of the jobs in an organization, so it provides a detailed insight of the compensation packages and the salaries being given to the prospective individuals. Job analysis linked with job evaluation helps organizations not only in defining a job, but also in identifying the salaries and wages attached to that particular job (Durai, 2011). Thus, a considerate conductance of these activities helps organizations in building strong and consistent job structures. 2. Describe the challenges in developing compensations that are both internally consistent and market competitive. Every organization has oral or written, formal or informal compensation plan. In todays’ era of innovation and competition there are few challenges that are faced by compensation managers while developing compensation plan. These challenges are as follows: Innovative job designs In today’s era different organizations make their compensation plan according to their affordability. With the emergence of conventional and non-conventional jobs, flexible hours and part time jobs it has become difficult for the HR managers to design their compensation packages. Due to the flexible hours and e-commuting the supervision hours and correspondingly the supervision cost has increased to a dramatic level and now it has posed a challenge to HR managers regarding developing competitive compensation packages (Torrington et al, 2007). Money as a motivator Today most of the organizations view monetary reward as the only solution to motivate employees. However, many of the academicians have proposed that when organizations continue to use money as a prime motivator, the individuals tend to lose their interest in whatever they are doing as they get used to the monetary rewards. Therefore, the organizations should consider intrinsic rewards such as appreciation as the major component of their compensation plan. Still many of the compensation managers consider monetary rewards as a tool for achieving increased employee performance, satisfaction and commitment (Kleiman, 2011). Lack of Objectivity According to Durai (2011), most of the organizations use subjective measures for evaluating the worth of the job. Techniques like job ranking, grading and paired comparison are widely practiced and are not considered as objective measures. Need for the objectivity in fixing pay structures is required at all levels because it is connected with job evaluation and ultimately the compensation strategy is also linked with it. Therefore, subjective measures can result in a job being either over paid or under paid. In order to achieve the internal consistency and market competitiveness, all employees working in an organization should think that they are being paid according to their job worth (Kleiman, 2011). Few of the jobs contribute to a larger extent in achieving organizational goals and objectives and those holding such jobs deserve to be paid more. In addition to this, in terms of achieving market competitiveness the organizations must conduct a detailed survey regarding how much their competitors are paying to their employees for a particular job. Internal competitiveness can be achieved only when employees feel that they are being paid fair in relation to their other counterparts working in other organizations (Martocchio, 2011). 3. Two employees perform the same job and each received exemplary performance ratings. Discuss whether it is fair to give one employee a smaller percentage merit increase because his pay falls within the 3rd quartile but give a larger percentage merit increase to the other because his pay falls within the 1st quartile and explain why. Consider that two employees performing the same job, say of marketing manager, and showing exemplary performance are given different percentage merit increase because one employees’ pay falls in third quartile and the other in 1st quartile is fair to an extent. The explanation to this policy is that there is no doubt, both are working at same positions but they might be performing different duties with different complexities (Kleiman, 2011). A company operating in different products, say in beverages and chocolates, hires two marketing managers, one for each product and the company’s goal is to achieve high market share in beverages industry. The marketing manager dealing with the marketing of beverages might be performing duties of more complex nature as compared to the one dealing with marketing of chocolates. The reason behind this is that few jobs contribute to a larger extent towards achieving organizational goals and those holding such jobs deserve to achieve high percentage merit pay. Keeping in view this, it is fair to an extent that a persons’ pay falling in 1st quartile must be given high percentage merit increase because his job duties might be of more complex nature as compared to the other employee working at the same position (Torrington et al, 2007). 4. Discuss the basic concept of insurance and how this concept applies to health care. Insurance Insurance is meant to provide financial protection against any loss arising due to uncertain event. It enables individuals to protect themselves against any loss by paying premium to the insurance companies (Kleiman, 2011). Insurance is defined as an agreement drawn between two parties in which one party agrees to undertake the risk of another party by taking a premium and promising a fixed amount to the other party in case of any loss or uncertain event (death). However, in case of general insurance, the other party takes the premium promises to pay lump sum amount to the other party in case of any uncertain event. The best examples of general insurance are motor insurance, theft insurance, health insurance and personal accident insurance (Durai, 2011). Health care insurance Health care insurance falls under the category of general insurance. Health care insurance refers to insurance policy that pays specified amount for medical expenses and treatments. Different health insurance policies offer different services. Most of the organizations today select different types of health care insurance plans according to their employees’ needs and requirements. Most of the married employees having children may prefer to have maternal facility; similarly, those that work on computers may prefer insurance plan covering optical facilities (Martocchio, 2011). 5. Except for the Family and Medical Leave Act, the remaining legally required benefits were conceived decades ago. Describe the changes in the business environment and society that might affect the relevance or perhaps the viability of any of these benefits. Today organizations and specifically the compensation managers are paying huge attention towards introducing such plans that aim at providing huge benefits to the employees and help organizations to attract and retain the talented employees in their organization. Except for the benefits related to Family Act and benefits related to Medical Leave Act, many of other benefits are being given to the employees since decades. To highlight some of these benefits are health and general insurance, housing benefits, pension benefits, termination benefits and many more (Martocchio, 2011). In addition to this employee benefit plans, defined contribution plans that cover pension plans are notable. These benefit plans, though enacted decades ago, were not practiced in their true sense. Today the organizations have called for such systems that aspire to provide employees with all essential benefits because many renowned organizations view these benefits as a part of provision of social security other than rewards (Martocchio, 2011). The execution of benefit plans require proper communication because most of the employees often do not know about the benefits offered to them. An interesting point here is to understand the reason of why employees today are being offered such benefit plans and what the changes are, that caused this transition in employee benefit plans. Careful analysis revealed that in today’s era of innovation and competition organizations realized the worth of retaining talented employees. That is why they are more into introducing benefit plans to attract and retain talented employees and to ensure greater employee satisfaction, increased performance and high levels of employee commitment (Durai, 2011). In addition to this, with increasing number of SMEs and MNCs the organizations are now expanding their business outside the borders and due to globalization they aim to provide benefits with a purpose of retaining employees. Similarly, multitasking and job rotation in different departments have also called for the need of employee benefit plans (White and Drucker, 2009). References Durai, Praveen (2011). Human Resource Management. India: Pearson Education. Kleiman, L (2011). Employee Compensation. Retrieve February 18th 2012. Available at: http://www.referenceforbusiness.com/management/Em-Exp/Employee-Compensation.html#b Martocchio, J.J. (2011). Strategic Compensation. (6th ed). Upper Saddle River, NJ: Prentice Hall. Torrington, H., Hall, L. and Taylor, S. (2007). Human Resource Management, Harlow: FT Prentice Hall. White, G. and Druker, J. (2009). Reward Management. 2nd Ed. Routledge. Read More