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Designing Compensation Systems Essay Example

Designing Compensation Systems and Employee Benefits

Job analysis refers to the process of collecting relevant information relating to a job position. The primary goal of job analysis is to come up with a job description. The process involves the collection of data that is relevant in establishing the mental and physical abilities of the individual to fill the job position. It establishes the skills, experience and educational capacity of the job’s candidate. It also involves the definition of the nature of the job, amount of work required of the job position. The process involves the description of the occupant’s responsibilities and duties.

Job evaluation refers to the process of determining the comparative job worth of an organization’s work in order to create the organization’s job structure. The process involves determination of the content of the job, the skills needed to perform the job, the value of the job to the organization. The process also involves the evaluation of the company culture and external market. The process determines how well the job fit into these two forces. A human resource manager achieves job evaluation by using such methods as job ranking, job classification/grading or point method, which involves assigning values to the different job components of a job from which the sum total is used for evaluation.

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Job analysis is done prior to job evaluation. The two processes are essential in ensuring internal consistency. Organizations perform these processes to comply with legal regulations of equal pay and to ensure internal consistency in the job structure. Internal job consistency is achieved by determining the relative worth of each job to the organization based on the job’s complexity and value to the organization.

2. Describe the challenges in developing compensations that are both internally consistent and market competitive.

Compensation plans exist in organizations for such reasons as to retain the existing workforce or for the purpose of attracting a competitive workforce. The plans exist in both formal and informal modes depending on the intended purpose of the compensation plan. Compensation irrespective of the size of the organization can be identified due to its features that should be considered in designing compensation plans. Designing an effective compensation plan ought to undergo the following processes. Definition of the different jobs, the analysis of the organization’s compensation composition and patterns of other compensation plans in the industry and determination of a fair reward range. The process also involves the provision of all elements that constitute the compensation plan, revising the existing plans and finally the implementation and regular evaluation of the plan.

Challenges that arise in the construction of compensation plans may affect the internal consistency of the organization as well as the market competitiveness of the compensation plan. A HRM’s key challenge is maintenance of equity as regards internal, external equity and individual equity. The development of a fair pay structure is crucial but posses a great challenge to the managers. Human resource managers face challenges in ensuring that the goal of formulating the compensation plan is consistent with organizational overall objectives. Decisions in the formation of the plan should also be made while considering the decision making process practiced in the organization. Decisions in establishing rates that are market competitive while taking consideration of the financial position and strategic plan of the organization may prove challenging. This relates to the ability of the organization in maintaining its market position in paying wages at or above the market rate. Challenge may also arise in the implementation and change over process to the new plan. The implementation process should not be seen to alter the organization functions and should match the overall organizational goals. An overall challenge for human resource managers would be in establishing a balance between internal consistency and market competitiveness in the formulation of the compensation plan.

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3. Two employees perform the same job and each received exemplary performance ratings.

Employees performing similar jobs which result to them being awarded a similar performance rating which in the case is exemplary deserve similar reward. The reward,  salary increment, should be equal irrespective of the pay quartile in which the two employees fall. This would serve to ensure that the organization uphold the standards of equity and fairness in its compensation structure. It would be unfair for an employee to receive more pay for the same kind of work. The organization should come up with pay structures that reward performance in other forms such as bonuses and benefits. Salary increment could be awarded but at similar percentage for both employees in order for the organization to uphold equity.

4. Discuss the basic concept of insurance and how it applies to health care

Insurance is a risk transfer mechanism used by individuals. The insurance involves the transfer of risk to an insurer at a fee known as premiums. The procedure involves two major parties the insured and the insurer who is the insurance company. Premiums are determined based on the value of loss at stake and the likelihood of the risk actually occurring. The premiums are calculated using various actuarial and statistical techniques. There are many forms of insurance covers among them health insurance, property insurance and life assurance. A health insurance also known as healthcare insurance applies the same concept as any other insurance policy. It is thus a contract between the insured who is the policy holder and another individual (company) or government for the reimbursement of medical costs incurred by the policy holder for the treatment or preventive care of any ailment provided by medical institutions and their personnel.

5. Except for the Family and Medical Leave Act, the remaining legally required benefits were conceived decades ago. Describe the changes in the business environment and society that might affect the relevance or perhaps the viability of any of these benefits.

Employee benefit plans such as the family and medical leave provided by various Acts of parliament face the risk of being seen as irrelevant in the changing business environment. The legal environment is in constant change where laws are amended. Changes occur relating to taxes and legal compliance is likely to cause inconsistencies with employee benefits established in the past years. Changes in financial environment resulting from varying growth rates may interfere with the viability of employee benefits. An organization facing financial difficulty may be forced to cut down on the payment of employee benefits. Organizations facing financial success may also have an ability to pay for more benefits than are provided for by the law. The employee benefits are not consistent to the financial variations in the country.

Mergers are a common scenario in today’s business world. The mergers often involve organizations from different fields, which results to variations in the employee benefits paid to the employee from different organizations. The implementation of old policies may result to unfair remedies to individuals taking into consideration current structural changes in organizations. Employee demographics were not considered in the formulation of various employee benefits in the Acts of parliament. Employee demographics involve the changing composition of a company’s employees where an organization may consist of many parents. Such an organization may need to come up with day care benefits that have not been considered in the family and medical leave Act in order to retain its employees. The changing business environment as a result may make the benefit plans redundant.