Total Compensation Methods Essay

Published: 2020-04-22 15:25:56
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All job evaluation approaches have the same objective: an accurate assessment of a jobs worth. Some methods go about it in very simple ways, while other methods employ complex procedures. Studies, however, have shown that there is a fairly high degree of correlation between the results produced by different job evaluation schemes. In other words, different methods generally tend to produce similar results.

Since there is a commonality in the end results generated by the various methods of job evaluation, an organization should carefully examine its own situation and compensation program goals to select a specific approach to job evaluation that is appropriate for what it wants to accomplish. Among the factors that an organization should consider and weigh carefully are cost, installation time, longevity, ease of application, and acceptance by managers and employees.

This discussion will analyze the impact of various compensation methods and benefit programs on employees and organizations. This paper will relate salary and benefit administration strategies to organizational culture and performance.

Total Compensation Methods

Compensation and benefits are very important to employees in the current workforce. In this market, employees are faced with choosing an organization to work for and what makes or breaks that decision are the compensation and benefit packages offered.

Most of these organizations use different strategies regarding benefits and compensation in their organizational cultures. Most compensation methods are designed by the organization to positively affect the bottom line of the business. Some methods permit quick change as markets, products, and services change. (Donald, 2004) The compensation methods need to provide strong, measurable benefits to the organization and assist in achieving its goals.

An organization is constantly evaluating the impact of the compensation methods on employee performance. This ensures that the programs are having the desired results and if not, what changes need to take place. The methods need to be flexible enough to change with the industry and as business evolves (Workforce Management, 1995-2006). In addition, the compensation methods need to be competitive to make sure the organization can attract and retain the kind of talent needed to achieve the stated goals for the organization.

Executives are coming to expect a bottom line impact from compensation programs (Compensation and Performance Management, 2006). For example, if an employee is not performing his or her job, the reason could be more than just lack of compensation. Therefore, just by providing the appropriate and updated compensation package, one cannot be sure that the job is being done.

There are times that one needs to tailor and develop a custom-made compensation package for a group of employees in a company. The organization needs to be fast on its feet to change with the fast pace of the market. If one does not take care of valuable executives or employees, chances are that some other company will. This is not a threat from employees. It is simply accepted behavior given the economy and the competitive environment.

The ideal compensation method would be to create a direct relationship between pay and performance and positively affect employee motivation. Our organization had to interview all employees and office workers to have an understanding of what sort of compensation methods are competitive and desired. One needs to check the market constantly and update the package accordingly. In the end, having a competitive compensation method benefits not only the employees but the organization as well. We had employees who applied in our company merely because of the compensation method.

Benefit Programs

Although benefits and compensation are different departments in human resources, it is safe to say they go hand and hand. When companies match the employees needs and desires, the companys turnover is lowered significantly. At a minimum, companies must provide the benefits that are required by law. The benefits offered are tailored to the employees the company is in search of. The human resource department must provide employees with materials on their employee benefits. Examples are the use of the associate handbook, hosting benefit fairs, and updating company intranet websites. It is vital to all parties to maintain communications with all employees concerning their benefits just as you do with their wages.


Given the tight labor market of today, many organizations struggle with the issue of how much to pay employees. If an organization pays employees too little, it may risk alienating and losing valuable employees. If they pay too much, they may be unwisely spending the organizations resources. If an organization earns the reputation as a poorly paying employer, it may fail to attract desirable candidates. The quest to compensate employees fairly is an ongoing challenge.

As described by Noe, Hollenbeck, Gerhard, and Wright (2003, chap. 11), a pay structure not only simplifies the process of making decisions about individual employees pay by grouping together employees with similar jobs, but also helps the organization achieve goals related to employee motivation, cost control, and the ability to attract and retain talented human resources. Its purpose is to organize and demonstrate a companys compensation philosophy and to reflect and support the advancement of the organizations culture. An effective pay structure also allows the company to attract, retain, and motivate employees that add value to the organization.

An organizations pay structure is a method of administering a pay philosophy that reflects decisions about pay level and job structure. The pay level is the average amount an organization pays for a particular job. Benchmarking is a common procedure organizations use to compare their practices against those of successful competitors as well as a way to compare internal jobs to external jobs of similar content. (Frederick, 2004)

The job structure consists of the relative pay for different jobs, including different functions and varying levels of responsibility within an organization. All these decisions are based on the organizations goals, market forces, and overall fairness. A pay structure is a visible demonstration of an organizations compensation philosophy and strategy. (George, 2002) Developed logically and communicated effectively, an organizations pay structure is a tool that employees can view and understand. It answers questions about what each employees role is, why others are compensated differently, and recognizes career development in addition to promotion.

Benefit Strategies

Choosing a benefits package can be a demanding task for organizations. An organization must first establish it objectives for offering benefit packages. Organizations choose their benefits based on the following criteria:

A common pattern from the objectives listed above is that many organizations tend to consider the needs of their employees. In order to meet the expectations of an organization, it is common to make comparisons amongst other organizations in a comparable market. (Wal-Mart (2006). Another way to find out what is valued by employees is to issue company benefit surveys or even research the BLS (Bureau of Labor Statistics) website (Noe, Hollenbeck, Gerhard, and Wright, 2003). These organizations should however understand that employees values do change and at times may differ from one another. As we see today, benefits are the most important factor when an applicant decides to join an organization.

Voluntary Benefits are the benefits paid at an additional cost to supplement those of which the employer offers (Chordas, 2005) Whereas, preferred benefits apply to a particular generation in the workforce (Chordas, 2005)Our growing job market has been very highly competitive.

As we move into a new era of the growing job market, employees and applicants have a say in determining their salary and benefits. Organizations today are still competing amongst one another for a talented workforce. By staying true to their core values, along with offering a safe and secure work environment with comparable salaries and benefits, an organization can land the high quality work staff they desire.


Chordas, L. (2005, June 2005). Designing the Package. Best Review, 59-65.

Compensation and Performance Management (2006). . Retrieved September 18, 2007, from

Donald L.Caruth, Compensation Management for Banks (Boston: Bankers Publishing, 2004), 50.

Frederick S.Hills, Thomas J.Bergmann, and Vida G.Scarpello, Compensation Decision Making, 2d ed. (Fort Worth: Dryden Press, 2004).

George T.Milkovich and Jerry M.Newman, Compensation, 6th ed. (Boston: Irwin-McGraw-Hill, 2002), 112.

Noe, R. A., Hollenbeck, J. R., Gerhert, B., & Wright, P. M. (2003). Fundamentals of Human Resource Management (1 ed.). : The McGraw-Hill Companies.

Wal-Mart (2006). Retrieved September 18, 2007, from

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