A strategic approach to compensation and promotions

This article discusses the strategic considerations for promotion and compensation of employees. It covers topics such as setting a clear budget, identifying employee objectives, basing compensation on performance levels, and implementing a performance management system.

Human Resource Management
HUMAN RESOURCE
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Human Resource Management
To: [e-mail]
From: [e-mail]
Subject: A strategic approach to compensation and promotions
Ms. Suzanne Stewart,
Promotion and compensation are an important part of employee incentive plans.
Compensation is a monetary incentive offered to the employees in exchange of their services
while promotion is a non-monetary incentive that is purely offered on the basis of the caliber
of an employee. Promotion and compensation can be of a lot of benefits to a company if
implemented strategically. Some strategic considerations for promotion and compensation of
employees are discussed below:
First of all, business organizations should set out a clear budget and all compensation
packages should be designed within this budget. All the costs associated with the employees,
such as bonuses, payroll costs, taxes, insurances, etc. should be factored in beforehand. Once
a foundation is prepared, the human resource managers can then decide the compensation that
can be awarded to each of the employee along with all the benefits that are a priority (Lotich,
2017).
Secondly, business organizations should strive to identify employee objectives right in the
beginning of their careers with a company. During the recruitment process itself, human
resource managers can identify the needs of the employees and formulate compensations for
them accordingly (Leonard, 2019). For example, older employees have a greater need of
healthcare benefits as compared to fresh candidates. On the other hand, some of the fresh
candidates have a greater need for paid-time off or education funds. Further, business
organisation can also consult the average compensation rates in the market and can design a
competitive compensation strategy themselves.
Thirdly, compensation should also be based upon the performance levels of the employees.
Almost all contemporary business organisation have implemented performance management
systems and are continuously carrying out performance appraisals. It is important for
business organizations to reward their employees, who are able to demonstrate excellent
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Human Resource Management
performance levels, in the form of annual salary hikes. This factor should also be
incorporated in the compensation system by human resource managers.
Fourthly, one of the best strategies for promotion of employees is to place an effective
performance management system in the organisation. Performance management system
allows business organizations to develop performance objectives for individuals, monitor
their progress and share performance feedbacks with the employees. One of the key
components of a performance management system is potential appraisals, which aims at
identifying employees who have the potential to take up higher job roles and responsibilities
in the organizational hierarchy. Thus, the data obtained from performance management
systems can be used by business organisation plan for employee promotions and development
(Donor Dreams, 2015). The process of promoting the employees in an organisation can be
based on the following factors:
 Performance level
 Length of service
 Merit and ability
 Person qualification
 Assessment of potential
 Training and development (Anastasia, 2015)
Identifying the right employee for a promotion is not just important for business
organizations but for the employees as well. Having right promotion strategies can motivate
the employees to work harder in their jobs so that they can open up new career development
opportunities for themselves.
Yours Sincerely,
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Human Resource Management
Bibliography
Anastasia. (2015, July 6). When and How to Promote Your Employees. Retrieved April 2019,
from www.cleverism.com: https://www.cleverism.com/when-and-how-to-promote-
your-employees/
Donor Dreams. (2015, April 21). Strategic Compensation: An Effective Tool in Recruiting,
Promoting and Retaining Highly Qualified Employees. Retrieved April 2019, from
donordreams.wordpress.com:
https://donordreams.wordpress.com/2015/04/21/strategic-compensation-an-effective-
tool-in-recruiting-promoting-and-retaining-highly-qualified-employees/
Leonard, K. (2019, March 07). Strategic Plan for Employee Compensation and Benefits.
Retrieved April 2019, from smallbusiness.chron.com:
https://smallbusiness.chron.com/strategic-plan-employee-compensation-benefits-
15613.html
Lotich, P. (2017, March 29). 7 Keys To An Effective Compensation Strategy. Retrieved April
2019, from thethrivingsmallbusiness.co:
https://thethrivingsmallbusiness.com/compensation-strategy/
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