What is the impact of compensation and benefits on organizational effectiveness?

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Abstract

This article addresses the relationship between benefit and compensation policy and practice and a number of attitudes and behaviors that affect productivity. A model for understanding how benefit policy is translated into organizational productivity is also presented. It is clear from the research discussed that compensation/benefit policy can have a sizable impact on employee turnover, motivation, performance, and attitudes. However, because of changing employee and employer needs, coupled with stagnant reward systems and outdated benefit plans, most compensation/benefit programs are far from optimal and almost all programs will undergo substantial redesign in the next decade.

Journal Information

Journal of Business and Psychology is an international forum for the publication of empirical research, case studies, and literature reviews dealing with psychological concepts and services implemented in business settings. Written by psychologists, behavioral scientists, and organizational specialists employed in business, industry, and academia, peer-reviewed original articles deal with all aspects of psychology that apply to the business sector. Typical subject matters include, but are not limited to: Mentoring, Socialization, Coaching, Leadership Development, Counterproductive Behavior, Emotions at Work, Withdrawal, Cross-Cultural Issues, Groups, Inclusion, Diversity, Creativity, Job Analysis, Job Design, Job Attitudes, Job Performance, Citizenship Behavior, Judgment and Decision Making, Leadership, Employment Law, Measurement, Motivation, Occupational Health, Stress, Organizational Culture, Climate, Organizational Justice, Organizational Performance, OD, Performance Appraisal, Feedback, Research Methodology, Staffing and Selection, Strategic HR, Training, Work and Family.

Publisher Information

Springer is one of the leading international scientific publishing companies, publishing over 1,200 journals and more than 3,000 new books annually, covering a wide range of subjects including biomedicine and the life sciences, clinical medicine, physics, engineering, mathematics, computer sciences, and economics.

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Compensation is the reward given to employees in return for their services rendered and it is often the cornerstone of a productive workforce. The quality and performance of your company’s talent pool is usually directly dependent on how well you execute your compensation planning strategies.

The Impact of Compensation on Employee Performance

A compensation package does not necessarily mean rewarding in the monetary form. It also includes flexible benefits, medical care, work-life balance, as well as employee perks. Today’s employees not only work for the money, but also place equal emphasis on other aspects of compensation. A good compensation package ensures:

• Retention – A compelling compensation plan helps to reduce the turnover rate of the company. Employees will be more incentivized to stay in their role and this saves potential expenses related to turnover.
• Motivation – Compensation is the primary motivating factor for employees to continuously push themselves to strive for greater heights. It offers them a reason to work hard and keep driving towards achieving the next milestone.

On the other hand, employee performance and efficiency can be drastically affected if a good compensation package is absent. Here are a few reasons why:

• Low job satisfaction – Employees will feel under appreciated and derive low satisfaction from their job. This may lead to discontent amongst coworkers and put a dent in workplace morale.
• Low productivity – Poor compensation induces low productivity. There is less motivation for employees to strive for excellence
• High turnover – If the reward versus effort ratio is low, employees are incentivized to cast their sights away from their current job. Employee churn incurs a hefty cost to the company (retraining, relocating and time wasted).

Systemize Your Compensation Planning Process Today

A well-crafted compensation plan is imperative to the success of the company. But many of today’s compensation processes rely on Excel spreadsheets that offer no room for optimization and streamlining. Using specialized compensation software to plan compensation allows compensation managers to use hard data to identify compensation strategies that provide the greatest return on investment.

HRsoft – The Compensation Management Software Leader

HRsoft is a leading provider of compensation management solutions for strategic HR departments. For more information on our compensation management software, COMPview click the link below!

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