Question

1) What are the behaviors that compensation needs to enforce? 2) In the context of the pay model, explain how effectiveness is dependent on equity in designing a pay system. 3) Briefly explain the concept of flexible compensation. 4) Explain the expectancy theory of motivation. 5) Compare risk-sharing and success-sharing plans.

Answer 1

1. Behaviours that compensation needs to enforce:

• Attraction- The compensation plans attracts the potential employees and feel comfortable during the hiring process.

• Recruiting- If the compensation given is fair enough then the recruitment process will be easier for the employers to find the best resources.

• Efficiency- It helps to increase the efficiency of the employee in such a way they will get motivated and feel satisfied to perform a job.

• Retention- the compensation plans helps to increase the trust and loyalty of the employee and helps to optimize the talent in the company. Since it is very difficult to identify the best resources, the employer in turn modify the compensation plans accordingly to make the employees loyal to the company.

• Meets expectations- the types of compensation given to the employees ensure that the employees meets the objectives of the job perfectly to achieve the given target.

• Word of mouth- this becomes the free advertisement for the company outside the work place which leads the company to get talent people.

• No negative effect- if the compensation is paid fairly, there will not be a negative effect among employee’s circle.

2. Dependency of effectiveness to equity in designing the pay system:

The major aim of pay model is the following in order to achieve overall organizational objectives.

• Performance Improvement – the good pay will make the employees work effectively and it shows in their productivity. Likewise, the pay model will improve the performance of the employee to work harder to achieve more bonus, incentives, hike in salary and other plans of compensation.

• Quality of work – the work style of the employees will get enhanced if he/she is satisfied with the pay system and thereby the same will increase their effectiveness. This in turn provides the utmost quality of work.

• Satisfied Customers- the effectiveness of the pay model will makes the employee to complete the job on time that leads to customer satisfaction.

• Comparison of job to job- the comparison of job to job from female workers to male workers will lead to Improve the effectiveness and makes them paid equally.

3. Flexible Compensation system:

The employees are offered with the power to modify their salary structure and other benefits based on their personal preferences. Here, the employees get flexible benefits through payroll deductions from pre- tax income. It depends on the company to provide such plan where the employees can either

• Keep their current salary as a standard amount and select a combination of benefits that don’t cost them additionally

• Reduce or increase their basic pay or gross pay by taking more or lesser benefits

These modifications enable the employees to cover their perks using their gross income (i.e. the money an employee gets before taxes are deducted).

Some of them includes;

• Life Insurance

• Health Insurance

• Retirement benefits

Advantages of Flexible compensation system:

• Helps the employees to satisfy their needs

• Enables them to be more comfortable with the plan

• Helps the employer to retain the employees

• Helps the employer to organize the finances

4. Expectancy theory of motivation:

Vroom's expectancy theory of motivation assumes that an employee's performance is based on individual factors such as personality, skills, knowledge, experience and abilities. He mentioned that effort, performance and motivation are linked with a person's motivation. To justify his assumptions, he used the following three terms

• Expectancy,

• Instrumentality and

• Valence

• Expectancy is the belief that increase in effort results in increase in performance i.e. if I work harder then this will be better.

• Instrumentality is the belief that if you perform well that a desired outcome will be received. i.e. if I do a good job, there is something in it for me.

• Valence is the importance of the individual places upon the expected outcome. For example, if someone is mainly motivated by money, he or she might not value offers of additional time off.

5.Comparison of Risk sharing plans and Success sharing plans

Risk sharing plans is an incentive plan where the employees wages are set below the specified level and the incentives earning are used to raise wages above the basic pay. This compels the employees to work harder and achieve the target.

Success sharing plan is an incentive plan in which the employer distributes some percentage of company’s profits. The idea is to share the profits equally among the employees. This plan makes the employee to work effectively in order to improve the overall profitability of the company.

If you liked the answer, give me an Up vote. Thank you.