Employee compensation viz, salary and benefits viz, benefits over and above the salary are important pillars of hiring right employees and keeping the existing employees satisfied. The organizations design the compensation structure in a very systematic way keeping in mind the impact on employee’s retention and engagement with the organization.
In today’s open and competitive market, with easy accessibility to new job openings, it is very common that employees shift the jobs for higher pay scales. This switching for pay scales becomes a threat to the organizations which fall short in matching with the industry standards or does not have attractive compensation and benefits package. This not only results in attrition but also impacts overall profitability of the company, as the companies have to hire new staff over and over again and wait for the employees to get accustomed to company’s work culture, understand the assigned job role and start contributing like the old employee.
In order to avoid all these consequences, it is advisable to design the compensation package in a way as to keep the employee’s happy, motivated and keep rewarding them for better performance.
The compensation and benefits structure, mandatory and non-mandatory terms are different for Government Organizations and Private Organizations. However, the employee compensation and benefits package will generally include;
While structuring the compensation and benefits package, the organizations must adhere to laws and regulations related to Employees and Workers. The laws are defined by the Industrial policies and are different for different countries.
The laws which are mandatory in India includes
While the adherence to Employee Laws and following the basic structure of compensation is same for the Govt. and non-Govt. organizations, there are differences in the overall pay scales and benefits.
The Govt. employees enjoy the benefit of protection of tenure and not under threat of removal from services in between the tenure period. However, that is subjected to the overall conduct of the employee and adherence of rules and regulations of the organization.
The Govt. employees also enjoy the benefit of automatic increase in Basic pay and other allowances on annual basis. However, the increase is within fixed percentage which is applicable to all the employees irrespective of the performance, grade and existing PayScale.
The Govt. employees also enjoy the benefits of Pension post retirement and under Voluntary Retirement Scheme. However, these benefits of the Govt. employees are at the stake of comparatively less salary compensation.
The private employees on the other hand are at risk of removal due to change in organization’s policies or mistakes by the employees at the work front. The private employees do not enjoy the benefit of pension or any scheme of Voluntary retirement.
However, the biggest benefit to private employees is the flexibility of changing jobs from one company to other company with increment in the pay package. The private employees have the benefit of bargaining with the existing employers for higher remuneration if he is termed as a good performer for the company.
Let us now look at the key pointers which are important for designing the compensation and benefits package.
Pay based on competencies: In every industry, there are few skills which are in high demand and which are eligible for high remuneration as they contribute directly to the organization’s revenue and profitability. The organizations are thus willing to pay high to key skills personnel and the pay scales goes higher with increase in years of experience. The organizations need to identify the key skills areas, key positions and then design the compensation package which will be rewarding to those employees.
Rewards and bonus : In every organization the Sales & Marketing team is the one who ends up in selling the end product/service of the company and contribute in the top line. The Sales team is thus holding a very important role. The entire sales team is directly responsible for growth of the company. In order to keep the sales team motivated, the organization need to come up with rewards and bonus plans on six months or annual performance basis. A lot of organizations arrange for internal competitions wherein the winners of the sales team are rewarded either with material gifs or holidays outside India with family or so.
Rewards to other employees: The Sales team though is the backbone of growth of the company, the Backoffice operations, Finance and other departments can not be ignored. In order to keep every employee motivated, the companies come up with rewards and benefits plans based on the activities of the department.
The Promotion policy: More importantly, every employee deserves a promotion over a stipulated period based on performance. The organizations, therefore need to structure a healthy promotion policy, giving justice to each department and roles.
The above four points are the most important pillars of designing the most effective Employee Compensation and Benefits Strategy. These factors are not just important for employee’s personal growth but have direct impact on the growth of the organization.