COMPENSATION AND EFFECTIVENESS OF BONUSES

Compensation and the Use and Effectiveness of Bonuses

Compensation and the Use and Effectiveness of Bonuses

Introduction

The majority of jobs and careers in today's global marketplace have a workforce that depends on fair compensation for a dedicated output of work. Because pay is important both in its effect on employees and on account of its cost, organizations need to plan what they will pay employees in each job (Noe, Hollenbeck, Gerart, and Wright, 2007, p. 361).Without adequate planning it is difficult to estimate the costs establish an equitable pay structure. Human resource professionals develop this pay structure based on legal requirements, market forces, and the organization's goals, such as attracting a high quality work force and meeting principles of fairness (Noe, et al, 2007, p. 362).

Compensation and the Use and Effectiveness of Bonuses

In contrast to decisions about pay structure, organizations have wide discretion in setting incentive pay. Organizations continually connect incentive pay to individual performance, profits, or many other measures of success (Noe, Hollenbeck, Gerart, and Wright, 2007, p. 391).

In addition to equitable pay and incentive pay, benefits are important to employees in the workforce. Benefits serve functions similar to pay. Benefits contribute to attracting, retaining, and motivating employees (Noe, Hollenbeck, Gerart, and Wright, 2007, p. 422). There are many possible benefits that can be tailored to attract a specific workforce. Benefits can offer a competitive edge when establishing and maintaining a quality workforce (Noe, et al, 2007).

This paper will examine various benefits programs and analyze the impact of salary and benefits programs on employees and organizations. It will also relate salary and benefit administration strategies to organizational culture and performance.

Many companies have incorporated different attributes in order to attract a constant flow of potential employees. The one thing that all companies have in common is the basic needs that cover many of the same benefits, such as total pay component. Total pay components consist of base pay, bonuses, benefits, savings, and stock plans. Base pay is usually a competitive pay rate for the services rendered by an employee. Base pay usually a paid as salary, hourly or a piece rate, which is increased as the employee shows either increased knowledge or outstanding work performance. Bonuses are rewards of achievement of a specific goal. For example, let's look at the foreign auto industry, specifically Toyota. Due to an increase of production and good sells of economically sound and gas saving automobiles produced by Toyota; it was able to give a bonus to employees to at its non-unionized U.S. facilities. In at least one case last year, workers for the foreign automaker for the first time averaged more in base pay and bonuses than UAW members working for domestic automakers, according to an economist for the Center for Automotive Research and figures supplied to the Free Press by auto companies. (Press, 2007) Benefits are one of the most scrutinized areas of the total pay components. Many potential employee candidates look at what the organization is going to offer them in ...