COMPENSATION PLAN
The compensation plan denotes the entire package that illustrates employees’ salaries, benefits wages, and payment terms. It specifies the details regarding the incentives, commissions, and bonuses that might be salaried to an employee. Moreover, an organization compensation plan constitutes the full benefits package, such as retirement plans, paid-time-off, and health insurance. The organization’s compensation plan tends to have a significant positive impact on the organization and the employees. An effective organization plan tends to uphold customer satisfaction since it contains motivation elements. The motivation element present in an effective organization plan tends to move the employees to work hard towards fulfilling the organization’s objectives. Hence, facilitating the overall performance of an organization. There exist seven significant types of organization compensation which are employed by most of the organizations. The seven primary forms of the organization’s compensation are explored further in this essay.
Base Pay
Base pay refers to the initial salary provided to an employee with the exclusion of the bonuses, raises, and benefits. In other terms, it denotes the compensation rate offered to an employee for service exchange (Conroy, 2019). Base pay is expressed in weekly rate, an hourly rate, annual salary, or monthly rate; it does not incorporate all types of compensation. Some of the compensation excluded in the base pay include; on-call pay, incentive-based pay, special assignment pays, and the shift differential pay (Conroy, 2019). Generally, base pay for each employee refers to the minimum sum that he/she should expect to be given during a particular pay period, excluding the tangible or additional compensation that might raise the total pay above base pay. Rates for base pay tend to vary significantly based on the type of profession. For instance, professions demanding specialized skill sets, and advanced education tends to offer high base rates compared to jobs that require basic skills. Various organizations tend to provide high rates of the base pay to attract highly qualified employees.
Commissions
Commission refers to the amount of money offered by an employer to an employee after completion of a particular task, mostly after selling a specific amount of services or goods. Moreover, some of the employers use commissions as a form of incentive necessary to enhance the productivity of employees. Compensation plays a vital role in improving the overall performance of an organization or business (Eaton & Voos, 2016). Commission-based pay tends to encourage the workers to harder; this, in turn, facilitates the achievement of organization goals and adds the overall profit margin for an organization. Additionally, commission-based pay assists employers in managing payroll expenses.
Overtime Pay
An overtime pay refers to money earned by an employee at an increased rate after working over the usual hours he/she is supposed to work in a week. For instance, the employee tends to get overtime whenever he/she work at weekends (Allen, 2018). Overtime pay enables the employees to earn extra money from the basic salary agreed between them and the employers. Working for extra hours allows the company/organization to produce more services and goods. This, in turn, facilitates the overall performance of the organization.
Bonuses
Bonuses refer to the monetary payment offered by the employer to employees over their standard compensation package and standard salary. Bonuses are among the significant ways through which employers reward their employees after performing a good job. Moreover, bonuses can be used to pay the employee after the achievement of a particular task. Also, it can be issued as a method of showing appreciation to the employees who exhibits significant achievements. Moreover, bonuses can be used as a method of attracting new employees to join the organization (Allen, 2018). The various types of bonuses present in an organization include; sign-On Bonuses, Spot Bonus Award, Referral Bonus, Retention Bonus, and Non-Cash Bonus. Rewards play a significant role in a business; it helps the companies to maintain their employees. Moreover, bonuses tend to motivate employees; motivation to employees enables them to perform their specified duties better. This, in turn, benefits the organization more fabulously, it allows the organization to meet its overall goals and objectives.
Stock Options
An employee stock option denotes the compensation agreement between the employee and employer. The stock option offers the employee a chance to purchase a particular number of shares for a certain period. Stock options tend to have a significant positive impact on an organization’s overall performance (Eaton & Voos, 2016). They give the employee a chance to gain ownership in an organization. This, in turn, enables them to feel more connected to the organization; the employees’ connectedness due to the stock options facilitates their performance (Allen, 2018). They tend to work harder. This, in turn, enables the organization to achieve its specified goals and objectives at a faster rate.
Travel/Meal/Housing Allowance
Company allowances refer to the allocation paid by an organization to the employee whenever he/she wants to travel from the usual place of work. It refers to the fixed sum offered by an employer to employee meant at covering a portion of expenses or the entire collection of expenses (Eaton & Voos, 2016). Travel, meal, and housing allowances motivate the employee to continue working for a particular organization.
Other Benefits (Insurance, dental, vacation, leaves, vacation, and retirement)
The company’s various benefits tend to have a significant benefit towards employee performance (Eaton & Voos, 2016). They make employees feel appreciated, which in turn makes them more productive and tends to produce a large volume of quality work. An interesting, unique benefits program makes workers feel valued, and they become more willing to participate in the company’s productivity activities.
Good benefits are better than higher base pay.
I would go for the organization that offers better benefits rather than the one offering higher base-pay. An organization with better benefits is the most effective since it tends to put into consideration the employee expenses. Better benefits will reduce the employee benefits at a significant rate without affecting the basic salary that he/she is supposed to receive. This is in contrast to higher base-pay where employees will tend to cater to all his/her expenses with the basic salary he/she receives. This, in turn, will tend to have a significant negative impact on the possible amount of savings that an employee can have.
References
Allen, N. (2018). Nonprofit Talent Management: Using Compensation, Benefits, and Incentives to Effectively Attract and Retain Top Talent Employees at Nonprofit Organizations (Doctoral dissertation, University of Maryland University College).
Conroy, S. A. (2019). Setting base pay rates: integrating compensation practice with human capital value creation and value capture. In Handbook of Research on Strategic Human Capital Resources. Edward Elgar Publishing.
Eaton, A. E., & Voos, P. B. (2016). ORGANIZATION, COMPENSATION, AND. Advances in industrial and labor relations, 6, 63-109.