How Salary & Benefit Administration Strategies Affect Organizational Performance

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Salary and benefits usually reflect employee skill level.
Salary and benefits usually reflect employee skill level. (Image: Jupiterimages/Photos.com/Getty Images)

Every company subscribes to a slightly different compensation and benefits strategy, but most of those strategies are designed to recruit and retain top industry talent. Compensation strategies support business objectives by motiving employees to meet company goals. Rewarding accountability and skill competency helps businesses shape employes into future company leaders. Administration strategies showing respect for each employee's individual talents and needs lead to a high level of employee loyalty and low turnover. Many modern organizations strive for flexible salary and benefits, which can raise employee motivation by supporting each employee’s desired level of work/life balance.

Understanding Compensation Strategy

Several elements make up an overall compensation strategy. These elements include: alignment with organizational strategy, individual employee’s room for career growth, the contributions of employees and the involvement of management using guidance and performance appraisals. Management uses salary and benefits to show employees that the company values their contributions. In turn, employees help the organization perform better in the industry marketplace.

Linking Compensation to Organizational Strategy

Though benefit and salary administration are often part of a business’s comprehensive compensation strategy, every department within a corporation may have different pay and benefit challenges. Salary and benefit administrators can keep the strategy focused by requiring that every compensation choice help the company sustain or gain competitive advantage. This assists the company in outperforming competitors by hiring, motivating and retaining the best possible workforce. Keeping organizational objectives at the forefront of compensation strategies supports the cooperation of employees at various positions and levels of pay because workers understand how their colleagues’ various skills benefit the organization.

Implications of Compensation

Salary and benefit strategies assist companies with industry competitiveness, but many plans also foster employee competitiveness within the organization. Employees competing for a position with an attractive salary and benefits package will be highly motivated to demonstrate outstanding work skills and motivation. Employees that are competent enough to meet company goals means objectives can be completed quickly and with high quality. Compensation administrators can tweak the salary and benefit system to reward currently relevant skills. For example, a business requiring fresh ideas may choose to reward innovative employees.

Satisfying Employee Needs

Each employee has specific needs that may or may not be met by the organization’s compensation administration. Many business salary and benefit systems overlook the individual needs of employees and choose to subscribe to uniform administration. However, some modern organizations have had success with flexible systems, which allow employees to personalize benefits packages and trade some wages for benefits.

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