Compensation and Benefits: Employee and Employer Report

This report provides a comprehensive analysis of compensation and benefits, examining their importance for both employers and employees. It delves into the concept of efficiency wages, the role of managers in designing and implementing compensation systems, and the various types of compensation plans offered, including medical care, retirement plans, and non-retirement plans. The report also addresses the ethical and equity issues faced by managers regarding compensation, as well as other challenges related to employee behavior and emotional stability. Furthermore, it explores compensation trends in Singapore. The report emphasizes the significance of fair and competitive compensation in attracting, motivating, and retaining employees, ultimately contributing to organizational success. This assignment, contributed by a student, is available on Desklib, a platform offering AI-powered study tools.

Running head: COMPENSATION AND BENEFITS
IMPORTANCE OF COMPENSATION AND BENEFITS
Name of the Student
Name of the University
Author note

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Table of Contents
Introduction:...............................................................................................................................3
Discussion:.................................................................................................................................4
Efficiency wages of the employees:.......................................................................................4
Importance of compensation and benefits for both employers and employees.....................4
Role of the managers:.........................................................................................................5
The common type of compensation plans the companies offer for the employees:..............7
Medical care:......................................................................................................................7
Retirement plans:...............................................................................................................8
Non-Retirement plans:.......................................................................................................8
The ethical issues faced by the managers regarding compensation:......................................9
The equity issues regarding compensation, which are faced by the managers:...................10
Other issues faced by the managers:....................................................................................11
Evaluation of the dysfunctional behavior of the employees:...........................................11
Supporting the emotional stability of the employees:......................................................12
Conclusion:..............................................................................................................................13

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References:...............................................................................................................................14

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Introduction:
An organization can only remain strong if the members of that organization
participate in their role behavior effectively and necessarily. To motivate the members to
contribute effectively, an organization have to provide them with inducements. This
transaction process is the heart of the employee-employer relationship. From the perspective
of cost management, managing the compensation effectively is often a critical process for the
managers (Edmans 2012).
Compensation can be referred to all the benefits, financial return and the services an
employee receives from the management of the organization as a part of the employee-
management relationship (Flood 2017). They might receive pay directly as cash wages and
incentives, or they by indirect benefit from the services such as pensions, health insurance
and paid time off. There are many programs, which distribute the compensation to the
employees and one employer can use more than one program. Compensation can be regarded
as one of the most complex disciplines in the talent management field or human resources.
The manager who handles the compensation issues requires the knowledge of employment
trends, job valuation and the adaptability of the job in various financial conditions (Bryant
and Allen 2013).
In this critical analysis of the need of benefits and compensation for the development
and growth of company and the employee both is going to be discussed. The aim of the report
is to focus about the issues the mangers of any organization faces regarding the compensation
of the employees. The discussion will include the role of managers to control and motivate
the employees for their development and the efficiency of different wages will be discussed.

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further, the type of compensations and benefits provided to the employees in the context of
the Singapore will be discussed in details.
Discussion:
Efficiency wages of the employees:
Pay level can be described as the average compensation paid by any firm, which is
similar with their competitors. When an organization sets its pay level, the organization sets
its cost to produce a certain level of output. There are many companies who pays their
employees efficiency wages. There are four levels of mechanism by which the companies
pays their employees the efficiency wages, namely, sorting, turnover, shrinking and gift
exchange (Weiss 2014). Sorting is whenever a company pays higher rates to some higher
ability employees. Turnover and shrinking are two identical processes, which say that the
productivity of a worker is difficult to measure as it permits workers to shrink. The expected
effect of shrinking is that, a worker would not risk losing the premium wage. Gift exchange is
a process, which contrasts with shrinking. Some organization pays their workers excess
wages and in return they expects their workers will give them more effort (Keynes 2016).
Importance of compensation and benefits for both employers and employees
Compensating employees is an important part of work ethics as valuable and
hardworking employees are assets of any company. However, the decision of compensation
and benefits are important to attract and retain the right person for right place. The company
should offer proper compensation to the employees as per the industry standards and similar
to their co-workers. Otherwise, the employees feel neglected and starts looking for other
options available in other companies. This situation is not preferable for any good employer
wanted to grow their turnover (Sengupta et al. 2012). Nowadays, In Singapore, there are

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different array of trends for the compensation and benefits proposed for the employees. They
are offered with free food, transport, healthcare, gym are among the common trends.
However, the important one is offering senior employees company share, so that they can feel
connected to the organization. Offering talented and hardworking employees with flexible
working hour are one of the biggest trend in the workplace nowadays.
On the other hand, if the company fails to provide the hardworking, loyal and key
workers with the compensation they demand for their contribution in the company, they start
looking for jobs in the market. However, if their needs are met and they are values for being a
part of the company, their job satisfaction increases and loyalty to the company grows as
well. It increases their drive to work. Not only the monetary package, but the overall benefit
package also enhances the caliber of the employee and through him/her that of the company
as well (Odunlade 2012).
Role of the managers:
The managers are there to see that the systems are in such a way that no money of the
organization is being wasted and the money is being used to secure the highest level of
productivity. The ideal compensation management system pays the employees enough to
keep them motivated, which will make them stay with the organization (Cherian and Jacob
2013). There are many psychological theories that say that good pay influences the behavior
of the employees. The pay satisfaction is related to behaviors such as absenteeism, union
activity and turnover. From the organization’s perspective, the organizational procedure
cannot have the effect they desire unless the compensation system of that organization is
good. The design of the compensation system affects the employee motivation and can be
used to improve safety, creativity and quality of other outcomes, which are critical for the
success of the organization. Either the compensation system would increase the payroll costs

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to raise the salaries of every one of the employees or the same level of money can be
distributed amongst the employees in a variety of ways. All the employees can be paid with
compensations based on skill, competency, seniority and so on (Shields et al. 2015).
The new talents can be drawn to the organizations based on the compensation. The
managers of the company have to know how to attract good employees. The companies will
also have to maintain a good benefits package to retain the employees (Mishra, Boynton and
Mishra, 2014). To hire a new employee and to retain the good employee, the costs must be
used to create a quality work environment. To be a good manager to the organization, the
manager would have to listen to the employees in order to know about their motivation. This
would further help the manager to modify and create the offer and benefits. To attract the
quality applicants, the HR managers of the company have to be able to evaluate the
company’s ability to offer the new applicants attractive wages and benefits, such as health
benefits. The base amount of the wage mostly attracts the job seekers. The reputation of the
company is also a determinant about whether the company would be the first choice of the
jobseekers. The HR managers have to quote a fair wage while posting an advertisement for
the job. The HR managers have to analysis the wages offered by the competitors, market
trend and the employment level before posting for a job (Juhdi, Pa'wan and Hansaram 2013).
It is evident that compensation matters to every employee. There are many stories
about the issues and benefits the companies give. This makes the compensation system more
interesting. The managers have to learn to evaluate the pronouncements about the incentives,
which generally come down from the high. The managers often faces problem while
evaluating the pronouncements, as they have to report the higher authority about that. The
managers often work as a link between the common workers and the authority. It is often
their job to interview the workers and to know what actually keeps them motivated. It is also

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a manager’s job to evaluate if the compensation given by the organization is enough for the
workers (Alfes et al. 2013).
Many companies offer incentive pay and annual bonuses based on the performance of
the employees and the performance of that particular organization. The bonus and incentive
offered by the company is very hard to budget far ahead if the company is new.
The common type of compensation plans the companies offer for the employees:
There are several types of compensation plans, which are used for the employees like
pay for the working time, integrated benefit plans like medical care for the employees, which
includes temporary disability benefit, survivor benefit, partial and permanent disability
benefit, rehabilitation survivor benefit. Other benefits should include retirement plans and,
nonretirement plans (Chung, Steenburgh and Sudhir 2013).
Medical care:
Providing the employees with a good medical care option always helps them to
remain attracted for the employees. The offered medical care should includes those plans
which would really help the employees such as care for work related injuries, permanent and
partial benefit, survivor benefit and rehabilitation. Offering a good, healthcare option always
lures new employees to stick to the job (Baxter et al. 2014).
The state law covers these types of compensation plans. These laws are compulsory in
47 states and elective in three states. One of the laws, which cover the benefits of the
common employees, is self-insurance coverage. This law is applicable in all 48 states and is
compulsory for all the industrial employees, farm labors, housekeepers and casual employees.
It is also compulsory for every public sector employees as well. Another law covers the

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occupational diseases the employees suffer from. This law covers only those diseases, which
can arise out of the course of employment. This law does not cover the ordinary diseases such
as influenza (Noe et al. 2014).
Retirement plans:
The employee stock ownership plans (ESOP) mainly transfer a part of company stock
to a trust account for the benefit of the employees who are retiring. When an employee is
retiring from his or her position from that organization, the company is bound to pay the
employees the current value of the entire company stock purchased by the retiring employee
during his or her tenure in that company. The organization also gives the employees the
benefits of using the other retirement plans and profit sharing plans (Sonnega et al. 2014).
The HR managers of the company are there to help the retiring employees to choose
the type of the retirement plan, which might be better for them. To do this, the managers
should have a detailed knowledge about all the retirement plans and the laws regarding
financial laws and regulation. One tough problem the managers follow regarding this is they
have to assess the allover performance of that employee in the organization and report it to
the authority. Over this assessment, the company implies the retirement plan of the employee.
Generally, this issue puts the managers into dilemma (Wiatrowski 2012).
Non-Retirement plans:
The employee stock option plans (ESO) helps the current employees of one
organization to buy the stocks of the company for a limited number of years, per say 5 years
or 10 years. This also a type of the compensation plan offered by the company for a limited
number of years as the employee would be gaining from the whole program after the end of
the mentioned number of years. The company generally allows the employees to buy their

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stock at discount and give the employees an immediate ownership rights (Bova, Dou and
Hope 2015).
The managers should have a detailed knowledge about ESO, and ESPP (employee
stock purchase plan) options as they can help the employees to choose the right form of the
plan. The managers should let the employees to know about the benefits of these plans, as it
would provide the employees to have a large amount of money after a limited number of
years (Spalt 2013).
The ethical issues faced by the managers regarding compensation:
The managers are responsible for the behaviors of the employee in that organization,
be it ethical or unethical. The managers also have to make sure that, the staffs they hire are
also ethical people who would contribute in the ethical workforce of that company. The
managers will also have to ensure that, the people working there also receive training to be
ethical. The ethics of an employee also depends on the manager as the manager trains the
people to have ethical work culture. The good performance of an employee makes the
company to motivate him or her to perform better. This leads the company to give the
employee a good compensation as a reward (Berman et al. 2012).
Sometimes a manager does not conduct the appraisal process fairly. Some research
shows that, sometimes the managers does not appraise those employees with whom they does
not get along or wants them to leave the firm. These managers ignore the accuracy of the
compensation system and are dishonest. This is important for a manager to set up a fair
standard in order to compensate the employees.
A manager is also responsible for evaluating the performance of an employee and it is
their task to reward the employee according to their performance. It is also the job of a

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manager to penalize the employees, who are conducting some unethical practices within the
organization (Deresky 2017).
It is also a job for a manager to determine the pay rates of the employee working in
the organization. Generally, the company pays an employee either directly (through wages,
incentives and benefits) or indirectly (through vacations and insurance). The direct wages are
for every employees and the company exclusively rewards an employee through the indirect
pay. It is the job of the managers to evaluate which employee is eligible for the pay or not.
An honest and unbiased view of the managers is necessary for an unbiased evaluation.
Generally, the employees like to have a combination of timely pay and incentives (Johnson
2017).
The equity issues regarding compensation, which are faced by the managers:
There are many theories of equity, which are applicable in the compensation system
of any organization. One of those theories is motivational theory of equity, which states that
the people are like to stay motivated in order to do good work. The equity theory explains
that, when somebody does not have equity, he tries to perceive it. In order to perceive the
equity he deserves, he becomes motivated, eliminates the drive, and perceives equity. Four
types of equity issues generally face the managers (McEvoy and Buller 2013).
External: This is regarding the equivalency of the pay rate in relation to the competitor
organizations.
Internal: The equivalency of pay rates in relation to the earnings of the co-workers of the
same company.
Individual: The equivalency of the pay rate to the other jobs of many competitor companies.

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Procedural: It relates to the fairness of processes needed to make decisions related to the
compensations.
The managers have to face all these issues regarding compensation and pay role. They
can solve the issues by many different ways. Such as, the managers should monitor the salary
structures of the other competitor companies in the market. The evaluation and analysis of the
job techniques are the best way to maintain equity. The managers should follow the
performance appraisal system to maintain the internal equity of the organization. The
managers can ensure that the people working in the organization is ethical by taking to them
and by conducting frequent surveys in the market which reflects the mindset of the
employees about the pay plan. The managers need to find out about how satisfied the
employees are with the pay plan by those surveys (Bell and Martin 2012).
Fig: A fishtail flow chart showing the relation of the employee compensation with the four
issues faced by a manager ( Liu 2016)