A strategic approach to compensation and promotions

Human Resource Management
HUMAN RESOURCE
MANAGEMENT – 960362
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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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