Case Study on Compensation and Benefit: Simple Literature Production

This case study analyzes the compensation and benefit system at Simple Literature Production, focusing on its effectiveness and impact on employee turnover. The study reveals that the current system, managed solely by the CEO, lacks formal structures for compensation, benefits, and performance appraisals. This leads to perceived unfairness, demotivation, and high employee turnover. The analysis highlights the need for a formal, transparent compensation system that links performance appraisals to pay, ensuring fairness and motivating employees. The case study emphasizes the importance of providing health benefits, bonuses, and retirement benefits to attract and retain employees. It also discusses the detrimental effects of favoritism and the benefits of a structured approach to compensation and benefits management.

CASE STUDY ON COMPENSATION AND BENEFIT
CASE STUDY ON COMPENSATION AND BENEFIT
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1CASE STUDY ON COMPENSATION AND BENEFIT
Table of Contents
Response to question 1: The compensation system of Simple Literature Production and if it
meets the needs of an effective compensation system.....................................................................2
Response to question 2: Reasons for high employee turnover........................................................2
Response to question 3: Need for a formal appraisal system at work.............................................4
References........................................................................................................................................4

2CASE STUDY ON COMPENSATION AND BENEFIT
Response to question 1: The compensation system of Simple Literature
Production and if it meets the needs of an effective compensation system
A compensation and benefit system refers to a system at the workplace that is used for
fair compensation and benefits to the employees of the organization (Michiels, 2017). Therefore
a compensation and benefit system helps in making payment of both monetary and non-
monetary benefits to the employees of the organization. The compensation and pay of the
employees at the Simple literature production is determined by the top management of the
company that is by Ravi Prosper the CEO of the company. There is no system for compensation
or appraisal at Simple Literature Production Company. Moreover there are no employee benefits
that are given formally to the employees of Simple Literature Production Company. The benefits
that are given to the employees are also dependent upon the CEO of the company (McCaffery,
1992). Moreover the CEO of the company gives benefits to the employees depending upon his
mood at the time of giving the benefit and further the employees have to ask for the benefits.
However the compensation system at the simple literature production company is not effective
because it fails to make payment to the employees on the basis of their actions and performance
which an effective compensation system does. An effective compensation and benefit system is
aimed at motivating the existing employees and attracting the new employees and includes
making provision for health benefits, bonuses, retirements benefits, different types of non-
monetary benefits. Therefore a compensation and benefit system helps in providing a complete
package of compensation to the employees for in return of their contribution.

3CASE STUDY ON COMPENSATION AND BENEFIT
Response to question 2: Reasons for high employee turnover
Employees turnover refers to number of employees removed from the organization and
replaced by new employees in the organization. It is necessary to measure the employees
turnover in order to understand the main reasons behind the same. The employees turnover of
simple literature production is high because there is no formal compensation and benefit system
in the company for making fair payment to the employees of the organization. Further the
organization fails to provide a formal system for providing employee benefits (Malik, 2018).
Moreover the company and its CEO fails to make use of any formal method of managing the pay
of the employees of Simple literature production.
All the decisions related to compensation and benefits are made by the CEO at the spur of
the moment and therefore there are different pay rates for different employees of the
organization. This strategy of compensation and benefit used in the company demotivates the
employees as they may feel discriminated against each other especially the new employees. This
is so because the CEO does not believe in annual raises and people have to ask for the same and
moreover the CEO makes provides annual raise depending upon his mood and the time period
for which he has been knowing the employees. Further the merit bonuses are given to the
employees depending upon their contributions and that is done through analysis of their work in
the previous year and therefore the chances for employees who are newer in getting the merit
bonuses is less. Further the CEO determines the amount of bonus depending upon his ability to
remember a face against the names of the employees and gives more bonus to people whom he
tends to remember.
Therefore this method of paying the merit bonuses to the employees favours the
employees with a long tenure much more than the newly joined employees. According to me

4CASE STUDY ON COMPENSATION AND BENEFIT
this system of compensation and benefits to the employees is unfair because this system
supports favouritism against some employees and therefore discriminates the employees
depending up different grounds. This system is also not effective because it does not motivate
the employees and as a result the turnover is very high. A formal system of compensation and
benefits should be used in place such that the employees do not feel discriminated and it also
needs to be transparent.
Response to question 3: Need for a formal appraisal system at work
A formal performance appraisal system is one that is dependent upon the concept of
reporting observation and managerial impression about an employee on the basis of hos
performance. For the same a formal meeting is arranged between the employees and the
managers. Therefore there is need of a formal appraisal system in place as it will help in
improving the motivation of the employees for improving their performance. Moreover there is a
direct relationship between the appraisal and pay because in the process of performance appraisal
leads to increase in pay of the employees by comparing the performance of the employees
against some standards and some other predetermined objectives. Therefore the CEO of Simple
literature production should link the performance appraisal of the employees with their pay.

5CASE STUDY ON COMPENSATION AND BENEFIT
References
Malik, A. (2018). Strategic Compensation and Benefits Management. In Strategic Human
Resource Management and Employment Relations (pp. 133-139). Springer, Singapore.
McCaffery, R. M. (1992). Employee benefit programs: A total compensation perspective. PWS-
Kent Publishing Company.
Michiels, A. (2017). Formal compensation practices in family SMEs. Journal of Small Business
and Enterprise Development, 24(1), 88-104.