HRES2203 Compensation and Benefits Analysis Report: Winter 2020

This report analyzes the compensation and benefits system of Simply Literature Production, a family-run SME. The assessment reveals a dysfunctional organizational structure with centralized decision-making and a lack of HR expertise, leading to an unfair and ineffective compensation system. The analysis highlights issues such as arbitrary pay decisions, lack of transparency, and inadequate recognition systems, resulting in employee demotivation and high turnover. Recommendations include implementing a formal HR department, establishing a performance appraisal system, and linking pay and rewards to performance. The report emphasizes the need for a transparent and systematic reward system based on employee performance, fostering fairness and improved employee engagement. The analysis highlights the importance of organizational structure, performance appraisals, and the implementation of a transparent compensation system to ensure that employees are treated fairly and each person gets what they deserve due to their effort for the organization.

Running head: COMPENSATION AND BENEFITS
Compensation and Benefits
Name of the Student:
Name of the University:
Author Note:

1COMPENSATION AND BENEFITS
1. Assessment of compensation system
Simply Literature Production is a family run SME. The company structure as a whole
is in disarray. The basic problem for the company is its top down organizational structure and
the decentralization of decision making power in the company (Mohrman & Lawler, 2017).
All the decisions are virtually taken by the owner himself and there are nor accounting or
human resource expert who can guide him through the process.
The salary and reward system of Simply Literature Production does not meet the
effective compensation system neither it is fair. Fair compensation policy must include a
proper system and strategy (Sharma & Sharma, 2017). It conforms to the system of regular
raise and providing bonuses for achievements. Ravi also does not have any budget system for
payroll and thus has no track of the money being spent. This leads to the subsequent drainage
of the bank vault. The compensation system violates systematic pay, appraisal system and
proper strategy for payroll.
2. Analysis of the compensation system
The problem of the company goes to its roots. In most cases people are appointed for
personal reasons and the owner, Ravi is a moody and instinctive man. While deciding pay
and rewards he fails to keep a proper record which he can use (Steers & Lee, 2017). Rather,
he decides sporadically and attributes certain amount of increase or reward to his liking. This
has led to widespread disparity in salary within the employees. The new employees face these
problems harder. They are unaware of the system or lack thereof. They get lesser amount of
pay raise and bonuses and thus become de-motivated to work. They also have to work longer
hours and rarely have time for their family and pleasure. They become tired due to the longer
office hours and in exchange they are not even paid for their extra hours. The new employees
also face problem finding solutions to problems. The managers and the supervisors are unable

2COMPENSATION AND BENEFITS
to provide solutions to problems as all the decisions are taken by Ravi. Concepts like lack of
motivation, disengagement and lack of employee morale explains the employee reactions to
the compensation system (Idowu, 2017).
The compensation system of the company is not fair neither is it effective. The system
violates almost all of the principles of fair reward system. The company has no recognition
system. They only pay through money that too is decided without any guidelines. The
individuals working in the company needs to feel important for the organization. The
managers have no power for decision making which places them in a difficult situation in
workplace (Mulvaney, 2019). They have to wait for Ravi’s input. Moreover, the employees
get paid according to the wish of the boss. Any complaints, whatever the cause may be,
reduces their growth significantly. They also do not get overtime. Moreover, the basic salary
of the employees vary which influences their motivation to work. It violates the principles, of
fairness and justice, transparency, systematic reward system (Zhao, Xu & Jia, 2018).
The organization needs to implement many changes. First, they need to change the
organizational structure and distribution of power. Sharing the decision making power with
the top managers and line managers will increase the performance of the departments. The
company should also have a proper human resource management system that will enable
them to create proper payment and performance assessment and base their pay, raise and
rewards on the assessment reports. Moreover, the organization should also include non-
monetary payments and recognition procedure in order to increase the employee engagement
and employee morale (Steers & Lee, 2017). Most importantly, the organization should ensure
that the reward system and pay is based on a systematic review of employee performance,
their devotion to the company not some personal emotion or judgment which can be easily
clouded by personal biases.

3COMPENSATION AND BENEFITS
3. Recommendations
Through the assessment of the company’s structure, present operation management
and reward system, it is recommended that a formal human resource management department
is needed in the company direly. The company lacks any form of structure in the performance
appraisal (Sharma & Sharma, 2017). In reality, the performance of the employees are rarely
reviewed and the pay raise is based on what the boss remembers at the end of the year. Thus,
establishing a performance appraisal system and linking payments and rewards to that is the
most effective way of managing the situation.
Performance appraisal system will ensure that employees are treated fairly and each
person gets what they deserve due to their effort for the organization. Linking pay with
appraisals will ensure that there is a transparent increment structure that employees can rely
on. It would reduce the employee turnover and increase the motivation of the employees
(Idowu, 2017). The only con for this is that employees might be resistant to change and the
shortage of budget might make it difficult to apply.

4COMPENSATION AND BENEFITS
References
Idowu, A. (2017). Effectiveness of performance appraisal system and its effect on employee
motivation. Nile Journal of Business and Economics, 3(5), 15-39.
Mohrman, A. M., & Lawler, E. E. (2017). Motivation and performance-appraisal behavior.
In Performance measurement and theory (pp. 173-194). Routledge.
Mulvaney, M. A. (2019). Examining the Role of Employee Participation, Supervisor Trust,
and Appraisal Reactions for a Pay-for-Performance Appraisal System. Public
Organization Review, 19(2), 201-225.
Sharma, A., & Sharma, T. (2017). HR analytics and performance appraisal
system. Management Research Review.
Steers, R. M., & Lee, T. W. (2017). Facilitating effective performance appraisals: The role of
employee commitment and organizational climate. In Performance measurement and
theory (pp. 75-93). Routledge.
Zhao, H., Xu, X., & Jia, L. (2018). Talking about the Employee Performance Appraisal
System. Human Resources Management and Services (TRANSFERRED), 1(1).