Introduction
A system of rewards is necessary for any working venture dependent on the exploitation of one’s energies or mental faculties. Compensation in human resources refers to the monetary or nonmonetary perks afforded to an employee due to the work they input (GreggU, 2018). Strategic compensation goes beyond the transactional aspect of the employer-employee relationship and focuses on establishing a partnership based on the latter’s performance (Larkin, 2019). It is a system that combines varied methods of remuneration to attract, motivate, and retain employees. Furthermore, the strategy is flexible, innovative, and based solely on aligning compensation types with strategic business outcomes.
Discussion
Differing perspectives present unique challenges to compensation since each group attaches a varied meaning to the reward system. There are four compensation perspectives; employees, society, managers, and stockholders (Zafar & Sudiardhita, 2022). Employees perceive their value to the organization based on their compensation level (Tyler, 2022). Alternatively, the pay level determines equity or justice in society, wherein the individual status is determined. Stockholders tend to feel a sense of ownership that directly affects the company’s performance, whereas the manager utilizes compensation to attract and retain workers (Zafar & Sudiardhita, 2022). Each group is vested in the company’s performance, and the compensation scheme addresses that facet.
Effective compensation strategies align the organization’s expenditure with the internal pay policy, which requires cohesive cooperation between all stakeholders. Collaboration ensures that each party’s value is recognized and appropriately rewarded to improve motivation and employee retention. Moreover, senior leaders and employees are bound to work better when pay grades are present and equitably distributed (Larkin, 2019). Inclusivity breeds creativity and a sense of ownership which can attract new workers. An aligned compensation strategy is flexible to alterations only when all stakeholders communicate and think alike.
Conclusion
In conclusion, strategic compensation focuses on rewarding employee performance based on their ability to reach strategic goals. Departing from a traditional transactional relationship is integral to boosting motivation and performance. Employees, managers, stockholders, and society view compensation differently, affecting their perspective. Enhancing collaboration between all stakeholders within an organization is essential since it breeds transparency in compensation pay grades.
References
GreggU. (2018). HR Basics: Compensation [Video]. YouTube. Web.
Larkin, I. (2019). Strategic compensation: A critique and research agenda. In Anthony J. Nyberg, and Thomas Moliterno (Eds.), Handbook of Research on Strategic Human Capital Resources (pp. 403–424). USA: Edward Elgar Publishing.
Tyler, K. (2022). What employees want. SHRM. Web.
Zafar, S. V., & Sudiardhita, D. B. M. (2022). Reward and compensation management on performance of Health Care Workers in India. Journal of Human Resource &Leadership, 6(4), 1–10. Web.