Employee Incentive Pay, Benefits, and Compensation Strategies
This paper examines key components of employee compensation and benefits management from an HR perspective. It covers two primary methods for determining incentive pay—linking pay to employee performance benchmarks and rewarding managerial decision-making—alongside an overview of mandatory employee benefits such as Social Security taxes, unemployment insurance, and workers' compensation. The paper also discusses optional benefits that enhance recruitment and retention, strategies for communicating benefits packages effectively, and the ethical concerns that arise when incentive pay becomes the dominant form of employee compensation. Practical examples and citations from compensation literature ground each discussion.
- Determining Incentive Pay: Performance and Managerial Decision-Making: Two methods for structuring employee incentive pay
- Mandatory Employee Benefits Required by Law: Legal requirements including Social Security, FMLA, and insurance
- Optional Benefits That Attract and Retain Employees: Wellness, meals, and flexible workspace as recruitment tools
- Communicating Benefits Plans to Employees: Techniques for clearly presenting total compensation packages
- Ethical Concerns with Incentive-Based Compensation: Risks and ethical problems of commission-only pay structures
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What makes this paper effective
- Uses concrete, relatable examples — such as the sales team bonus scenario — to illustrate abstract compensation concepts.
- Balances legal requirements with practical employer choices, giving the paper a real-world HR application focus.
- Addresses ethical dimensions of compensation, adding analytical depth beyond a simple descriptive survey.
Key academic technique demonstrated
The paper consistently pairs a general principle with a specific illustrative example before moving on. This "principle then example" structure makes each concept accessible and shows how theory applies in workplace settings, a useful technique for applied business writing.
Structure breakdown
The paper is organized into five numbered sections, each addressing a discrete topic: incentive pay determination methods, mandatory benefits, optional benefits, benefits communication strategies, and ethics of incentive pay. Each section builds on the prior one, moving from how pay is structured, to what benefits are required, to how to present the full package, and finally to when the system can become harmful. References follow APA format throughout.
Determining Incentive Pay: Performance and Managerial Decision-Making
One method an HR professional can use to determine incentive pay within the workplace is connecting incentive pay with employee performance. Setting up benchmarks helps the organization assess employee performance. If an employee's performance exceeds the established benchmark, that employee receives additional or incentive pay. Providing incentives potentially drives higher sales and productivity, as employees understand what they must achieve to earn a particular reward (Boyer, 2011, p. 285).
A simple example is setting a monthly sales goal and awarding sales associates a $100 bonus for reaching it, or doubling their commission on anything sold beyond the goal amount. In this way, hard work is rewarded and the company generates more sales each month. Goals can also be adjusted according to the skill level of the salesperson, along with the incentive amount.
The second method for determining incentive pay is assessing the impact of managerial decision-making. Managers are a vital part of any company or organization. If a manager makes a decision that proves useful to the organization, he or she should be compensated depending on the overall output and profit generated during any given period. This approach helps the company retain good managers and encourages them to pursue choices that benefit the organization rather than themselves.
To illustrate this, consider the example of a sales team and its manager. The sales manager receives a list of individual sales goals to distribute to associates according to their experience and skill level. If the manager assigns the right goals to the right associates and those goals are met, the manager can receive additional compensation or a perk such as a trip or an award of recognition.
References
Acharya, V., Pagano, M., & Volpin, P. (2013). Seeking alpha: Excess risk taking and competition for managerial talent. http://dx.doi.org/10.3386/w18891
Benefitfocus. (2015). 6 simple steps to communicate total compensation to your employees. Retrieved December 4, 2015, from
Boyer, M. (2011). The twelve principles of incentive pay. Revue d'économie politique, 121(3), 285. http://dx.doi.org/10.3917/redp.213.0285
Ek Spector, S. (2015). Should unemployment insurance cover partial unemployment? IZA World of Labor. http://dx.doi.org/10.15185/izawol.199
Giancola, F. (2012). Are employee benefit programs being given enough credit for their effect on employee attitudes? Compensation & Benefits Review, 44(5), 291–297. http://dx.doi.org/10.1177/0886368712464471
Stanger, M. (2015). 18 of the best perks at top employers. Business Insider. Retrieved December 4, 2015, from http://www.businessinsider.com/companies-with-awesome-perks-payscale-2013-1?op=1
Taylor, T. (2015). Communicating total compensation to employees in a meaningful way. Payscale.com. Retrieved December 4, 2015, from
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