Compensation Management Report: Petronas Benefits and Performance

This report analyzes compensation management practices at Petronas, a major player in the oil and gas industry. The first section evaluates the effectiveness of Petronas' benefits and incentives schemes, highlighting their impact on job satisfaction, employee retention, productivity, and attracting new talent. The report emphasizes how these schemes contribute to employee motivation and organizational success. The second section delves into the five key success factors for implementing performance-related pay to attract, motivate, and retain talent. These factors include public managerial support, the inclusion of behavioral and result criteria, employee involvement, regular feedback, and coaching and counseling. The report underscores the importance of these factors in creating a fair and effective performance management system that aligns employee interests with organizational goals. The analysis draws on industry surveys and best practices to support its findings.

Compensation
Management

Contents
INTRODUCTION.......................................................................................................................................3
QUESTION 1..............................................................................................................................................3
Evaluation of effectiveness of benefits and incentives schemes..............................................................3
QUESTION 2..............................................................................................................................................5
Five key success factors in performance related pay implementation to motivate, attract and retain
talents......................................................................................................................................................5
CONCLUSION...........................................................................................................................................8
REFERENCES............................................................................................................................................9

INTRODUCTION
The compensation management is one of the key areas that requires attention as it affects
the workforce directly. It relates to or is concerned with compensating the employees for the
work, contribution of effort put by them in order to achieve the organizational goals. For
accomplishing the objectives of company, the employees put their efforts in right direction.
Hence they must be properly nurtured and paid for their work, service or performance and apart
from wages or salary; proper incentives, services and benefits must be provided in order to
motivate them (Tumi, Hasan and Khalid, 2021). This report is based on the company Petronas
(Petroliam Nasional Berhad) which deals in oil and gas industry. It was founded in the year 1974
and is headquartered in Kuala Lumpur, Malaysia. This report shall deal with effectiveness of
incentives and benefits schemes practiced by company and 5 key factors in performance related
pay implementation in order to attract talents.
QUESTION 1
Evaluation of effectiveness of benefits and incentives schemes.
The companies generally hire the talented and most qualified workforce and keep those
employees who are productive and loyal. In order to attract and retain the best and talented
workers, the companies usually offers the packages which includes the compensation in
monetary terms, incentives in the form of reward or perks and benefits which includes valuable
options like paid vacation, etc. It is very important for companies to provide the workforce with
various benefits and incentives as per their performance and work so that they are attracted,
motivated and retained in organization (Hutson and Dunning, 2020). Patronas makes sure that its
employees are given incentives and are subject to various benefits so that their morale is boosted
and they are motivated to work towards the achievement of goals. They offer wide range of
opportunities and benefits to the employees right from recruiting them to retaining the talent in
the company. The incentives and benefits related schemes are very effective and places impact
on the employees so that they are retained and motivated in organization. The employees in the
Malaysia may accept or consider new offer only if it offers them the attractive benefits and
salary. The effectiveness of benefit and incentive schemes in Patronas are illustrated thereunder-

 Job satisfaction: One of the most important factor to keep the company lucrative and
sustainable is to make its employee happy as their objectives can be achieved with the
help of workforce only. The compensation plays an important role in enhancing the
efficiency of the employees. In order to achieve the work performance, job satisfaction is
very essential. Patronas offers wide range of benefits and incentives to its workforce so
that they are stimulated to work harder, thus enhancing performance and productivity.
Patronas offers benefits such as 30 days medical and hospitalization leaves, flexible
working from any location, additional 30 days maternity leave, medical coverage for
children and spouse and many others. These contribute in providing job satisfaction to
employees as their hard work is paid off in the form of benefits and incentives so that
they are motivated to give their best efforts. Moreover these benefits and incentive
schemes boosted their morale which results in retention of the employees.
 Reduce turnover: It is rightly said that the happy employees makes the effective
workplace and it is true for Patronas as it is one of the leading organization which
provides different benefits and incentives to employees so that it can retain them for
longer time period. The most important advantage of offering benefits and incentives to
employees is that it reduces staff turnover rate as no worker wants to leave the company
which offers it attractive salary along with several benefits and incentives. Patronas offers
attractive benefits to the employees which meets their expectations relating to job,
thereby results in retaining the employees at the workplace (Liu and et. al., 2021).
 Enhance productivity and performance: It is very important for organizations to
continuous motivate the employees so that they are encouraged to give their best. it is the
era where the employers are required to be the ear to all workforce needs and wants tso
that they are motivated to retained in the organization. The wide range of benefits and
incentives schemes which Patronas offers includes wellness programs, health benefits
and many others attracts the employees to put their best efforts so that they are entitled to
such benefits. These schemes works as booster to enhance the performance and
productivity of employees at Patronas so that the goals of the company are achieved
before deadline and in an efficient manner. Motivation is the key to attract and retain the
employees at workplace and offering incentive and benefit schemes works as motivator
which increases the productivity of employees as it recognizes the contribution of

employee in workplace. It also makes the workforce loyal towards the company, thereby
contributing in taking the company to the top.
 Attracts new talent: Nowadays, it has become challenge for the companies to strategize
their benefit and competitive plan so that they can attract and retain the appropriate talent
and maximise their return on human capital. Compensation is the regarded as one of the
powerful communicator of the goals of company as it helps in striking the right balance
between the work and pay which results in increasing the organizational effectiveness.
The company which offers attractive benefits and incentives are more likely to attract
talented workforce and this has now become more of the competition for organizations as
each wants to attract talented and skilful workforce towards their organization (Cadarso
and Marín, 2017). Patronas offers the best incentives and benefits schemes to the
employees which attracts the young and new talent who has passion to give their best
efforts to the company.
Hence, it can be said that as in today’s world of globalization, the companies are facing
problems due to increased competition, shifting market and changing of the employee
demographics. In between all this, it is essential that companies strategize their benefits and
incentive plans so that it can attract and retain the talent at workplace. Patronas work with this
strategy offers attractive incentives and benefits schemes so that it can attract talent and retain
them in organization in order to take edge over competitors.
QUESTION 2
Five key success factors in performance related pay implementation to motivate, attract and
retain talents.
The pay for performance is every time pre- supposed that good performers shall receive
the merit and the incentive awards. After all, very worker must be given reward on the basis of
their performance which they deliver to the company. The organizations which began to realize
that if they share the economic gains of accomplishing the goals and target, they can keep the
workforce motivated so that they can contribute in achieving the difficult goals. When there is
clear line of sight between the work and reward, the employees shall work harder in order to
achieve the objectives and receive rewards (Gartenberg and Wulf, 2017). It is often suggested to

organizations that the performance based pay is best when the company is ready to share success.
Whenever the company pays the fair bonus or rewards to employees for their performance, their
attitude and behavior towards the work changes and improved which in turn contributes in
improving the performance at individual as well as organizational level.
As per the survey conducted in Malaysia, 72% of the employees in Malaysia have their
pay tied to some or the other kind of performance or the productivity target. The result of survey
also showed that the 67% of the respondents preferred the pay for performance in comparison to
the overtime work. Among the sectors of job, the highest number of performance based pay in
Malaysia is in security which is 73% then in education which is 64%, 58% in math and 49% in
healthcare (The Edge Market, 2021).
There are different success factors which are to be considered when implementing the
performance related pay for attracting, retaining and motivating the talent at workplace. These
are discussed below-
 Public managerial support- The success of the performance related pay needs the
support of the top level management as their commitment is essential. It is very important
that their commitment is publically made so that the employees has the degree of trust in
company that such commitment is not department wise, rather it is organization wide
commitment. This acts as serious message for managers and the employees in order to
take the performance related pay serious and makes the goodwill of company as it shows
the commitment of organization towards success. The HR of every organization plays a
key role in this as it makes the effect of the program consistent and involves on-going
mentoring and training to make it success (Conroy, 2019). For instance, in Nestle, The
HR manager works as strategic partner in conveying the message of top management to
employees and continuously mentors and trains the employees so that they can entitle the
talented workforce for performance related pay so that they are motivated to give their
best efforts and are retained in organization. Inclusion of behavioural and result criteria- Whenever the performance of employee is
evaluated, the organization must focus on specific items or the small part of overall job.
The effective performance management involves both the result as well as behavioural
criteria. For instance in Shell, the performance f employees are evaluated on the basis of

three things which includes firstly the job function, secondly behavioural task and lastly
the contribution of employee towards goal and objectives. This works as providing sense
of direction to the employees and indicates where they are required to pay attention.
Including both result and behavioural aspects makes the evaluation fair as behaviour is th
key factor in maintaining healthy environment and each employee is connected with this
aspect. Involvement of employees- It is very important that there is participation of employees in
the evaluation of performance so that there is greater satisfaction and fairness in process.
The involvement of workforce widens the room of improvement for employees. It is seen
that there is high correlation between the employee involvement and the reaction (Tao,
Xu and Liu, 2020). The managing director of Kelly Service Malaysia once said that it is
important that there is involvement and engagement of the workforce in evaluation of
performance as it helps in aligning their interest which in turn contributes in motivating
them. Hence, Kelly services make sure that it engages the workforce in this process so
that there is reduced staff turnover and motivation for employees to put their best efforts. Regular feedback- It is one of the important factor in performance related pay wherein
the employees must be given the chance to improve their work and performance so that
they can be rewarded for their hard work. The companies which offers regular feedback
to the employees and makes efforts to bring improvement in their working tends to
motivate, attracts and retain the workforce as the employees feel valued that the company
is prioritizing and valuing them beside saving their profits by only rewarding those put
efforts themselves. The managers must find different ways in which it can communicate
with workforce by using technology so that improvement is made in their working and
they are also given chance for performance related pay. Coaching and counselling- The performance management is one of the key role of HR
in the company and it is not once in a while process rather is the on-going process. The
manager must continuously coach the employees and provide them feedback so that they
can improve their behaviour at workplace. This coaching will help in improving the work
of employees and thereby making them motivated to give their best. This contributes in
motivating, attracting and retaining the employees for longer time (Jain and et. al., 2021).

CONCLUSION
It is concluded from this report that it is important for organization to have practice of
compensation management at workplace so that the employees are motivated to work harder for
the achievement of goals and objectives. The effectiveness of benefit and incentive scheme
involves job satisfaction, reduced staff turnover, attracting new talent, enhancing productivity
and many others. Further it is added that the performance related pay is focused on factors such
regular feedbacks, employee engagement, public managerial support, coaching and including
result and behavioral criteria so that the employees are motivated, attracted and retained in
organization.

REFERENCES
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Online
The Edge Market, 2021 [Online] Available Through
<https://www.theedgemarkets.com/article/performance-based-pay-gaining-support-
malaysia>