Total Compensation Methods and Benefits Programs Impact Essay

Excerpt from Essay :

Total Compensation Methods and Benefits Programs

Impact on employees and organizations

Salary and benefit administration strategies

Relationship with organizational culture and performance

Total compensation methods used by the organizations are different in terms of their design and approach. The main objective of the compensation programs developed in organizations is to facilitate employee motivation and provide a cost effective reward system that is beneficial for both employees as well as the business. The business objectives, values, and goals are the basic element of compensation methods adopted in an organization. The total compensation strategy adopted by a business also elaborates the approach adopted by the business to offer benefits for its employees in return to their services. The following sections provide a detailed understanding of total compensation methods and benefits programs and their impacts on employees and organizations. The second most important element addressed in the research is concerning the administration of the programs and its relationship with the organizational culture and performance.

Total Compensation methods and benefits programs:

The organizations develop a number of programs for compensating employees. The amount spent on compensation of employees can be managed through a policy for human resources in order to facilitate the organizational growth and achievement of objectives. According to Mathis, and Jackson (2011) the total compensation is method adopted by the organizations to provide monitory and nonmonetary rewards. The total rewards facilitate the business to attract, motivate, and retain employees. There are various issues that should be considered before designing a total reward program including legal obligations, cost-effectiveness, and performance enhancement for employees. The organizations also have to consider internal, external, and individual equity of employees.

The number of philosophies used to design the total compensation and benefits programs. Two distinct paradigms prevail in the organizations to for designing the total compensation rewards and benefits. The entitlement-based programs and performance-based programs. The entitlement-based programs are based on the following criterion. These techniques are seniority-based compensation, across the board raise, pay scale increase, industry related compensation, bonuses given to employees. The performance-based programs does not entitle employees for any raise due to the period in employment. It contains no raise for poor performing employees. The performance-based structures also includes a market adjusted pay structures and the pay raise is linked to the achievement of performance targets.

The performance-based compensation is measured through various techniques. The human resources departments calculate the compensation as following methods.

The pay and benefits are calculated as the percentage of operating expenses. It is accomplished through dividing the total pay and benefits expenses to the total operating expenses. The human value added is calculated through the following equation:

Revenues-Operating cost-pay and benefits = Adjusted profit + Full Time Equivalent employees (FTEs)

The return on human capital invested is also one of the major areas of concern for human resources calculations and it is achieved through the following equation.

Revenues-Operating cost-pay and benefits = Adjusted profit + pay and benefits.

The employee's cost factor is calculated on the basis of total compensation and benefits divided by the FTEs (Mathis et al., 2011).

The key features of a total compensation includes the base pay as well as the geographical differentials, awards, bonuses, benefits including healthcare, and tuition reimbursement. Some of the programs also includes a retirement pays as deferred payments. The organizations develop these programs based on the flexible conditions and market mix specific for the industry (Mathis et al., 2011). All these compensation techniques are used to offer a competitive pay and benefits program in order to maintain the organization and employee interests in the system.

Impact on employees and organizations:

The impact of total compensation programs can be measured through effective mechanisms. The program evaluation over a period of time is measured through employee satisfaction. The employees are given a fair compensation program to increase their level of motivation and as a result they are also inclined to retain their jobs. The effective programs of can also be measured through the benefits that are provided in the programs. A number of organizations offer personal and professional development programs to increase employee productivity. The healthcare benefits offered in the system are essential to provide a support and demonstrate concern for healthcare in employees. The health promotion programs are also centered towards promoting the supportive approach for facilitating and encouraging employees in healthy lifestyle activities.

The benefits for organization can also be assessed in terms of increased productivity and satisfaction level. The organizations offer total compensation programs based on the incentive compensation, training, employee participation, and selectivity. The benefits gained for organizations through these programs are translated into increase in return on assets and decrease in employee turnover. The organizations implementing the high performance work practices develop a sustainable position in the market through increase in market value, return on equity, and other operational performance measures (Mathis et al., 2011). The measure for organizations can also be established in terms of effectiveness and efficacy in its operations and achievement of its objectives.

Salary and benefit administration strategies:

The salary and benefits programs are aimed at the providing the employees a fair compensation and creating room for organizations to attain growth through effective programs of salary and benefits. These programs have specific design and administration features. These features should be in line with the organizational goals and objectives. The salary and benefits programs should also be linked with certain administrative and measurement features. These features include a key attention towards strategic perspective, overall objectives, prominence, competitiveness, and performance measures.

The strategic direction of the salary and benefits programs is defined in the initial stage providing an integrated approach towards the organization values and mission. The mission and values of the business should also be translated in the approach towards designing a total rewards programs for employees. The overall objectives of the program provides a foundation for the designing a program that enables its stakeholders to identify the role of each reward element in terms of its impact on the employees and subsequently towards performance improvement (Heneman, 2002).

The prominence of the program effectiveness should also be considered in order to differentiate it from the competitors and through the differentiation achieve the desired results. The performance measurement is also necessary for the program administration in order to define the performance criterion for achievement of a particular reward. The pay performance linkage allows the organization to administrate the degree to which the compensation program is in conformance with the required performance increase objectives. It can only be achieved through objective assessment and analysis of results attained throughout the period of time. The competiveness of the programs should also be administrated through effective measures. The competitiveness of the program is essential in terms of its relation to the industry and specific rivals in the market. The exceptional talent can only be attracted and retained through a program that is based on competitive value (Heneman, 2002).

Relationship with organizational culture and performance:

The employees are provided with the exceptional compensation program and administration of the program is also maintained does not ensure that it can achieve the desired results. There are various factors that can influence the organizational performance and employee productivity. These factors include organizational culture and performance. The relationship of salary and benefits administration strategy with the organizational culture and performance is also one of the significant factors.

The organizations emphasizing on the intrinsic motivation and compensations strategies refer to a culture that is open and encourages employee participation. On the other hand the performance-based compensation programs are most likely to be in line with the extrinsic motivations (Armstrong, & Stephens, 2005). The organizational culture and employee expectations are also aligned with the system adopted to compensate employees. The business requires a great deal of attention for base salary as well as the associate benefits…

Sources Used in Document:


Armstrong, M., & Stephens, T. (2005). A handbook of employee reward management and practice. USA:Kogan Page.

Heneman, R.L. (2002). Strategic reward management: Design, implementation, and evaluation. USA: IAP.

Mathis, R.L., & Jackson, J.H. (2011). Human resource management: Essential perspectives. USA: Cengage Learning.

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