Compensation and Benefits Philosophy

Compensation and Benefits

    Compensation and Benefits Philosophy

  •           In PHR, the term Total rewards philosophy is used to guide provided by employer to develop and execute compensations and benefit programs in order to attract, motivate and retain employees. 

              HR team gathers input and builds agreement with key stakeholders such as executive team and organizations governed by board of directors involved in board's compensation committee in process as well while developing total reward philosophy.

              By creating total reward philosophy, organization defines the method or strategy to achieve organization’s hiring and retention objectives. When it comes to small organization, total reward philosophy differs, as a result compensation program are implemented to meet a specific needs and decisions for individual employees.

              In PHR, compensation philosophy has to balance the diverse conditions has to be face by the organization that is consistent with organization culture.

              It can be divided into,

    Philosophy: Internal conditions

              Financial constraints or poor business results can be an internal condition which prevents bonus program in an organization.

              Another condition is organization structure, which can be an impact on total reward philosophy where the compensation committee has significant input and in many cases provides approval for several types of total rewards programs which includes stock option grants, executive compensation.

              Organizational justice in compensation related to establishment of pay equity, where it ensures the employee brings to job and receives when compared to both internal and external conditions.

                   •  Procedural justice is internal process and procedures while determining pay scales where pay rates can be identified and decisions are made.

                   •  Distributive justice briefs about similar pay replicates actual performance discussed in PHR

                   •  Pay openness briefs about degree of secrecy present around pay issues. It can be prohibited to employees from disclosing their pay rates.

    Philosophy: External conditions

              Compensation and benefits programs are decided by executive team differentiates lag or meets the market. When the organization’s total reward philosophy leads the market, then it provides compensation and benefits above the market rate. If the organization’s total reward philosophy below the market rate, then the organization’s TR philosophy lags the market. When the organization’s total reward program in equal to market rate, then it will meet the average market rate.

              Organization culture reflects values and beliefs advocated by organization’s leadership and the ways where a member of the organization reflects value and benefits to reinforce the culture.

    Performance based philosophy: 

              To achieve the organization’s goals, organization utilizes compensation as an important component of corporate culture, employee behavior by rewarding performance. If an employee performs well, rewards would be higher.

    Entitlement philosophy

              States about the compensation pay based on seniority only not for their performance. Since performance is considered as secondary factor base on company to particular job.

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