How to determine salaries and benefits is a matter of importance for human resource professionals. Compensation management is also known as emolument administration or reward management. Being a function of HRM, employee compensation encompasses plenty of constants and variables.
According to Dale Yoder, compensation is simply paying the people for the work they do in a commercial system. Let’s have a look at the goals of reward management!
- Set a proportionate system of benefits
- Fulfill common financial goals
- Increase focus of the employees on outcomes
- Attract and retain quality employees
- Motivate employees to yield more
- Instigate high-performance culture
Fulfill common financial goals
Common financial goals mean various objectives the organization has already set at the time of its inception and from time to time in the future. The employees are supposed to generate saleable products and services to earn revenues. From amongst the net revenues, a suitable portion is allocated to compensate the employees.
Increase in focus on outcomes
The major objective of every reward is to enhance the focus on outcomes that may take the form of productivity and sales growth. It may be anything that is defined by the organization.
Attract and retain the quality employees
A fair system of compensation attracts the best talent from the human capital market. Employee retention rate increases under the effect of better reward management. According to the surveys, 77 percent of the employee retention rate depends on exemplary compensation management.
Rewards and financial incentives are the major components that grab the attention of the employees. It motivates the employees to perform their tasks in a better and proficient manner. Financial benefits are the real benefits. It definitely matters. Money has the power to motivate.
Inculcation of a high-performance culture
Performance is the product of knowledge, practice, and motivation. Bonuses, rewards, and good salaries instigate a unique, performance-based culture.
Types of Rewards
There are four main types of employee rewards.
- Extrinsic and non-extrinsic rewards
- Financial and non-financial rewards
- Performance-based rewards
- Membership based rewards
Total Rewards Model
Three key areas create a dynamic relationship between the employees and the organization. These areas foster how to determine salaries and benefits.
- External influence
- Internal influence
- Total Rewards Strategy
Practiced worldwide, all the reward models focus on the principles of proportionality, performance, and long-term organizational goals.