Executive Summary
The compensation and benefits program provides employees with adequate and balanced plans to address employee needs in financial and non-financial packages based on employee/employer relationships. Adequate compensation and benefits offered to the employer motivates organizational employees into staying in an organization to retain the best of talents and skills.
The compensation and benefits program varies between employees with the government playing the central role of providing legislation on the minimum requirements for employers to adhere to in providing compensation and benefits to employees.
Typical examples of organizations include Aramco Saudi Company’s compensation and benefits program that spans different employees working from different cultural backgrounds with different pay incentives geared toward getting the best from employees. The company’s program includes schooling, medical; vacation, housing, and take home pay.
Typical programs have different compensation and benefits plans that are designed and aligned with organizational objectives to strike a balance between total compensation wages and organizational expenditure without jeopardizing either in the employee/employer relationships.
Different compensation plans are available for permanent employees, part time employees, and local and international hire employees depending on the compensation and benefits policies in the work environments. Purposely the program addresses diverse individual and organizational needs in context.
Introduction
The compensation and benefits program consisting of the payments made for the work done and non-financial benefits are designed with varying plans to address employee needs in the working environment. Purposely, the program is used to address employee and organizational needs, when organizations recruit talent by offering incentives aligned to organizational objectives.
A typical example is the Aramco Saudi Company with a compensation and benefits program designed to motivate employees to offer their best. Different employee categories are entitled different compensation and benefits depending on their tenure in the work environment, with the program solely designed to provide compensation and benefits appropriate for each employee unique to the working environment.
Compensation and Benefits
Compensation and benefits refer to “wage and salary payments as well as benefits including health and life insurance, retirement payments, and any other non-cash compensation” policy formulation (Hauser & Baggett, 2002).
Compensation and benefits are based on variable pay that draws on monetary rewards or payments for work done in the form of incentives and bonuses, guaranteed pay defined on the relationship between the employer and the employee in the form of basic salary, benefits that draw on extra no-financial gains from organizations and equity based compensation (Atchison, Belcher & Thomsen, 2010).
The basic pay or salary based on time the employee has devoted in working for an organization is defined by the element of guaranteed pay with underlying skills, experience, and educational level defining the pay structure (Atchison, Belcher & Thomsen, 2010). It is crucial to note that the seniority and related employee/employer relationships define the basic pay.
Variable pay which is a monetary reward which correlates with the achievement levels by an employee, defining the bonuses, rewards, and plans for the eligible employee. That is in addition to benefits provided by an organization to their employees to address a specific need, with typical examples including pension contributions and sick pay (Atchison, Belcher & Thomsen, 2010).
It is crucial for human resource managers to ensure appropriate policies for compensating employees are formulated and put in place that reflect organizational goals in line with the gains and contributions made to the organization.
The policies should integrate a well-designed compensation and benefits program to lock in skilled and valued organizational employees with underlying job satisfaction to make employees feel valued in their contribution toward organizational goals (Atchison, Belcher & Thomsen, 2010).
That is in addition to stimulating a motivating effect in the minds of the employees who may want to be associated with the organization to achieve self-fulfillment, and subsequently reducing absenteeism, employee turnover rates, and cultivating self-confidence in the employees toward the organization (Atchison, Belcher & Thomsen, 2010).
Each of the employees is entitled a benefit depending on the type of benefit and the ability of the employee to qualify for the benefit. Depending on the compensation and benefits program, each organization offers benefits according to the policies formulated to address the compensation and benefits for the employees. The compensations and benefits are unique to each organization and environment (Atchison, Belcher & Thomsen, 2010).
Aramco Saudi Company’s Compensation and Benefits Programme
The case study organization in question is the Aramco Saudi Company. Aramco Saudi Company is a global company that deals in the supply of energy needs with a multinational workforce providing employment opportunities to develop talent in a culturally rich environment (Benefits & Compensation, 2012).
The Aramco Saudi Company human resource department has compensation and benefits programs offered employees reflected in the statement which asserts that “Saudi Aramco will put together a very attractive financial and benefits package” (Benefits & Compensation, 2012).
Each of the compensation and benefits element is packaged in “subsidized housing, travel and vacation allowances, medical facilities and excellent education benefits for you and your eligible dependants” (Benefits & Compensation, 2012) in the context of “being a valued member of the Saudi Aramco team, your high performance and achievement will also be recognized and rewarded with a range of financial and lifestyle benefits” (Benefits & Compensation, 2012).
In the context of the above statement, the Company has categorized compensation and benefits packages into various groups. These include schooling, medical; vacation, housing, and take home pay (Benefits & Compensation, 2012).
Differences is the Compensation and Benefits Program
Employees entitled benefits is a design question that human resource managers get challenged with in addition to the challenge of designing the best compensation and benefits program appropriate for each category of employee. The packages should be designed and aligned with the organizational business goals and objectives with the aim of adding value to the organization (Ehrenberg & Smith, 2003).
It is crucial for organizational human resource managers to ensure the disadvantages associated with different compensation packages are avoided to avoid creating a status ladder, discrimination among employees, administrative problems, and external problems resulting from insurance carriers (Atchison, Belcher & Thomsen, 2010).
Organizational are well aware of the problems associated with different compensation packages, but have embraced the notion of having packages for executives, and for other organizational employees. That is in addition to the type of employment an employee gets engaged with an organization.
Part time employees provide some benefits to the organization which have no legal binding and requirements to adhere to, leading to a cost saving. In the context of the study, employee choice and the options available for different benefit programs lead to a “flexible benefit plans or cafeteria benefit plans”.
Each of the differences is highlighted below in a summarized table.
Table 1
Purposes of Employee Benefits Programme
Recruitment and talent
Employee benefits program is crucial for organization as a management tool in recruiting employees with the underlying objective to retain skilled talents, improve revenue generation, and enhance productivity (Ehrenberg & Smith, 2003). The program underlies employee decisions to stay and work for a particular firm because it addresses employee needs.
Here, the HRM uses the compensation and benefits program to enable employees achieve economic security, protection against hazards, disability, old age, and illnesses, provide time-off pay benefits, and provides services in the off-work and on-work situations to address an employee’s most basic needs (Shaver, 1997).
It is crucial that organizations keep to a minimum the total wage cost in terms of compensation and benefits, which makes the entire wage cost of an organization (Atchison, Belcher & Thomsen, 2010; Lineberry & Trumble, 2000).
Engagement and Morale
The employee benefits program spans the policies of a country with the United States as an example, where partnership with organizations and individual businesses exist with the government as an obligation (Lineberry & Trumble, 2000). Importantly, private businesses offer benefits such as health care insurance and pensions on a voluntary basis.
In the spirit of a partnership between the government and other businesses, the government is always obliged to support the provision of such benefits by offering fair tax treatments and other mandatory benefits that a country is obliged to offer (Ehrenberg & Smith, 2003).
At the organizational level, employee benefits are necessary because an organization wants to achieve a number of objectives in tandem with their employees.
These include fostering employee engagement and morale, enhancing an employee’s value proposition and employment, creating preference as an employee, creating and ensuring a sustained employment brand, recruitment and retainment of well skilled and qualified employees, and creating employee loyalty.
That is in addition to facilitating the growth of an employee’s disposable income (Atchison, Belcher & Thomsen, 2010).
As a corporate social responsibility, these programs enable organizations, besides focusing on organizational business goals; enable the provision of services to employees such as the provision of child care programs while addressing the needs and preferences that are unique to each employee (Lineberry & Trumble, 2000).
It is crucial for organizational human resource managers to design an appropriate benefits program based on the elements conceptualized below.
Plans to address employee needs
The human resource manager ensures the employee benefits program is designed in tandem with a country’s legislations, based on organizational plans that address organizational objectives in tandem with existing legislations (Ehrenberg & Smith, 2003).
These plans might include core-plus option plans based on retirement and health, and other optional plans, pretax salary reduction plans with underlying premium only plans and flexible spending accounts, modular plans with associated options for employees to choose from, and mix and match plans that allows a specific amount of contributions to be made on behalf of the employee (Atchison, Belcher & Thomsen, 2010).
While a number of explanations have been explored on the reasons for compensation programs, studies show these programs to be because of government influence, competition, union demands, employee interests, changes in economies, and managerial attitudes (Atchison, Belcher & Thomsen, 2010). It is crucial for organizational human resource managers to design an appropriate benefits program based on the elements conceptualized below.
(Atchison, Belcher & Thomsen, 2010).
Conclusion
The compensation and benefits program is a tool organizations use to address employee needs while providing them with the right packages for the work done, motivating best talents to stay, and enabling employees to identify with the organization.
Organizations have different compensation and benefits programs with varying plans aimed at addressing varying work environment and tenure of work.
It is crucial for organizations to design a cost effective compensations and benefits program in line with organizational objectives that appropriately accommodates employee needs.
References
Atchison, T. J., Belcher, D.W., & Thomsen, D. J., (2010). Internet Based Benefits & Compensation Administration. Employee Benefit Programs. Web.
Benefits & Compensation (2012). Web.
Ehrenberg, R.G. & Smith, R.S (2003). Modern Labor Economics, Reading, Mass., Addison- Wesley.
Hauser, A. H., & Baggett, S. M. (2002). “Workers’ Compensation: The Statutory Framework for Defending a Claim.” Trial Advocate Quarterly 21 (fall).
Lineberry, J. & Trumble, S (2000). “The Role of Employee Benefits in Enhancing Employee Commitment,” Compensation and Benefits Management, Winter 2000, pp. 9-15.
Shaver, B.(1997). The Claims Process,” in “Employee Benefits Management”, Ed. Wayne.
Snider, Warren, Gorham and Lambert, New York, 1997, pp. 141-152.