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Running Head: HUMAN RESOURCE MANAGEMENT PROJECT
Human Resource Management Project
Hadeel Al.Dossary
Bshayer
Afnan
1
HUMAN RESOURCE MANAGEMENT PROJECT 2
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.
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TABLE OF CONTENTS
EXECUTIVE SUMMARY ....................................................................................................... 2
TABLE OF CONTENTS ........................................................................................................... 3
Introduction ................................................................................................................................ 4
1.Compensation and Benefits .................................................................................................... 4
2. The Organization’s Compensation and Benefits Programme ................................................ 5
3. Differences is the Compensation and Benefits Program ....................................................... 6
4. Purposes of Employee Benefits Programme.......................................................................... 8
4.1 Recruitment and talent ..................................................................................................... 8
4.2 Engagement and Morale................................................................................................... 8
4.3 Plans to address employee needs ..................................................................................... 9
Conclusion ............................................................................................................................... 10
References ................................................................................................................................ 11
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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.
1. 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.
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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).
2. 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).
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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).
3. 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
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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.
Differences in employee benefits program for different
Full time employee
Part time employee
Local-hire employee
International Hire
employee
Eligible for retirement
No retirement
Eligible for security
Subject to
benefits, Eligible for
benefits, health
benefits, e.g
international
security benefits, e.g
insurance, Eligible
contribution to
policies,
contribution to
for security
unemployment
eligible for
unemployment
benefits, e.g
compensation.
security benefits,
compensation, and other
contribution to
Eligible for medical
e.g contribution
membership
unemployment
benefits, employee
to unemployment
compensation and
compensation.
makes part of the
compensation.
benefits, medical benefits
Eligible for medical
contributions.
with options, life
benefits, employee
insurance benefits, death,
makes part of the
etc
contributions.
Table 1
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4. Purposes of Employee Benefits Programme
4.1 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).
4.2 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
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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.
4.3 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.
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(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.
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References
Atchison, T. J., Belcher, D.W., & Thomsen, D. J., (2010). Internet Based
Benefits & Compensation Administration. Employee Benefit Programs. Retrieved
from http://www.eridlc.com/index.cfm?fuseaction=textbook.chpt20
Benefits & Compensation (2012). Retrieved from
http://www.jobsataramco.eu/c/2
Ehrenberg, R.G. & Smith, R.S (2003). Modern Labor Economics, Reading, Mass., AddisonWesley,
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.