{"id":928,"date":"2019-08-21T18:01:10","date_gmt":"2019-08-21T18:01:10","guid":{"rendered":"https:\/\/courses.lumenlearning.com\/wm-humanresourcesmgmt\/?post_type=chapter&p=928"},"modified":"2024-04-25T01:31:17","modified_gmt":"2024-04-25T01:31:17","slug":"why-it-matters-compensation-and-benefits","status":"publish","type":"chapter","link":"https:\/\/courses.lumenlearning.com\/wm-humanresourcesmgmt\/chapter\/why-it-matters-compensation-and-benefits\/","title":{"raw":"Why It Matters: Compensation and Benefits","rendered":"Why It Matters: Compensation and Benefits"},"content":{"raw":"

Why learn about\u00a0various compensation and benefits plans and their effectiveness?<\/h2>\r\n\"AerialPersonnel costs (including compensation, benefits, and taxes) represent a business\u2019 largest expense. According to Paycor, \u201clabor costs account for as much as 70% of total business costs.\u201d However, despite this, Paycor found that HR professionals invest only 15% of their time managing these costs.[footnote]\"The Biggest Cost of Doing Business.<\/a>\" Paycor. August 7, 2018. Accessed August 22, 2019.[\/footnote] Given the significance of personnel as a human capital and cost, it\u2019s critical for HR management to ensure that these resources are being allocated in a way that supports organizational strategies and values. That is, that the types of compensation and benefits offered are what employees value\u2014and, therefore, are effective in motivating them\u2014and that they are distributed intentionally and equitably.\r\n\r\nThe reality is, this generally doesn\u2019t happen. As we will discuss in Module 9: Performance Management and Appraisal<\/a>, evaluations are often corrupted by bias and traditional appraisal methods aren\u2019t relevant in what is (and is expected to remain) a dynamic, disruptive operating environment. For perspective, a People IQ survey determined that 87% of both managers and employees considered annual reviews ineffective.[footnote]Dickson, George. \"9 Research-Backed Reasons to Rethink Your Annual Employee Evaluation.<\/a>\" Bonusly. Accessed August 22, 2019.[\/footnote] Lack of buy-in or an inability to have difficult conversations can also undermine motivational and development goals. In some business cultures and, indeed, entire industries, expectations of self-sacrifice are endemic, and equity is a term that is interpreted in a manner that evokes George Orwell\u2019s Animal Farm; that is, \u201call animals are equal, but some animals are more equal than others.\u201d Although different roles clearly have different values to an organization, equity and ethics require that compensation be based on performance, not bias or politics.\r\n

Meeting Employee Needs<\/h3>\r\n\"SomeoneThe challenge in evaluating compensation and benefits is understanding employees\u2019 needs and where they are in terms of their development\u2014especially in a workforce populated by five generations that include a broad range of cultures. Although some small percent of working Americans don\u2019t need a paycheck, the majority do.\r\n\r\nA 2017 study conducted by employment website CareerBuilder found that the majority of working Americans live paycheck to paycheck.[footnote]\"Living Paycheck to Paycheck is a Way of Life for Majority of U.S. Workers, According to New CareerBuilder Study.<\/a>\" CareerBuilder. August 24, 2017. Accessed August 22, 2019.[\/footnote] Additionally, 25% of workers are unable to contribute to savings monthly, and 61% don\u2019t have a six-month emergency fund, as is recommended.\r\n\r\nThis vulnerability became obvious during the 2018\u20132019 government shutdown. The shutdown jeopardized the security of almost 5 million workers. After over 3 weeks of \u201cfinancial limbo,\u201d the President signed a bill guaranteeing that the 800,000 furloughed government employees would receive back pay.[footnote]Zhou, Li. \"Federal Employees are Now Guaranteed Back Pay After the Shutdown is Over<\/a>.\" Vox. January 16, 2019. Accessed August 22, 2019.[\/footnote] However, there was no provision made for the over 4 million contractors who were simply collateral damage.[footnote]Martin, Emmie. \"The Government Shutdown Spotlights a Bigger Issue: 78% of US Workers Live Paycheck to Paycheck<\/a>.\" CNN. January 9, 2019. Accessed August 22, 2019.[\/footnote]\r\n\r\nThis sense of vulnerability is something that organizations\u2014and society\u2014will need to address. And it\u2019s a vulnerability that makes Simon Sinek\u2019s quote \u201cWhen people are financially invested, they want a return. When people are emotionally invested, they want to contribute\u201d sound elitist. Yes, most of us aspire to the top of the pyramid\u2014to self-actualization and contribution. But first, let\u2019s address worker\u2019s basic needs and perceptions of fairness. Consider how motivating (or not) it is when the CEO makes 200 or 20,000 times the median employee salary[footnote]Molla, Rani. \"Facebook, Google, and Netflix pay a Higher Median Salary than Exxon, Goldman Sachs or Verizon<\/a>.\" Vox. April 30, 2018. Accessed August 22, 2019.[\/footnote] or when you have to work an additional three month\u2019s to match your peer\u2019s salary. Workers have a right to a fair financial return as well as safety and health (discussed in Module 14: Safety, Health, and Risk Management<\/a>). HR management has an ethical and fiduciary obligation to ensure that that happens.","rendered":"

Why learn about\u00a0various compensation and benefits plans and their effectiveness?<\/h2>\n

\"AerialPersonnel costs (including compensation, benefits, and taxes) represent a business\u2019 largest expense. According to Paycor, \u201clabor costs account for as much as 70% of total business costs.\u201d However, despite this, Paycor found that HR professionals invest only 15% of their time managing these costs.[1]<\/sup><\/a> Given the significance of personnel as a human capital and cost, it\u2019s critical for HR management to ensure that these resources are being allocated in a way that supports organizational strategies and values. That is, that the types of compensation and benefits offered are what employees value\u2014and, therefore, are effective in motivating them\u2014and that they are distributed intentionally and equitably.<\/p>\n

The reality is, this generally doesn\u2019t happen. As we will discuss in Module 9: Performance Management and Appraisal<\/a>, evaluations are often corrupted by bias and traditional appraisal methods aren\u2019t relevant in what is (and is expected to remain) a dynamic, disruptive operating environment. For perspective, a People IQ survey determined that 87% of both managers and employees considered annual reviews ineffective.[2]<\/sup><\/a> Lack of buy-in or an inability to have difficult conversations can also undermine motivational and development goals. In some business cultures and, indeed, entire industries, expectations of self-sacrifice are endemic, and equity is a term that is interpreted in a manner that evokes George Orwell\u2019s Animal Farm; that is, \u201call animals are equal, but some animals are more equal than others.\u201d Although different roles clearly have different values to an organization, equity and ethics require that compensation be based on performance, not bias or politics.<\/p>\n

Meeting Employee Needs<\/h3>\n

\"SomeoneThe challenge in evaluating compensation and benefits is understanding employees\u2019 needs and where they are in terms of their development\u2014especially in a workforce populated by five generations that include a broad range of cultures. Although some small percent of working Americans don\u2019t need a paycheck, the majority do.<\/p>\n

A 2017 study conducted by employment website CareerBuilder found that the majority of working Americans live paycheck to paycheck.[3]<\/sup><\/a> Additionally, 25% of workers are unable to contribute to savings monthly, and 61% don\u2019t have a six-month emergency fund, as is recommended.<\/p>\n

This vulnerability became obvious during the 2018\u20132019 government shutdown. The shutdown jeopardized the security of almost 5 million workers. After over 3 weeks of \u201cfinancial limbo,\u201d the President signed a bill guaranteeing that the 800,000 furloughed government employees would receive back pay.[4]<\/sup><\/a> However, there was no provision made for the over 4 million contractors who were simply collateral damage.[5]<\/sup><\/a><\/p>\n

This sense of vulnerability is something that organizations\u2014and society\u2014will need to address. And it\u2019s a vulnerability that makes Simon Sinek\u2019s quote \u201cWhen people are financially invested, they want a return. When people are emotionally invested, they want to contribute\u201d sound elitist. Yes, most of us aspire to the top of the pyramid\u2014to self-actualization and contribution. But first, let\u2019s address worker\u2019s basic needs and perceptions of fairness. Consider how motivating (or not) it is when the CEO makes 200 or 20,000 times the median employee salary[6]<\/sup><\/a> or when you have to work an additional three month\u2019s to match your peer\u2019s salary. Workers have a right to a fair financial return as well as safety and health (discussed in Module 14: Safety, Health, and Risk Management<\/a>). HR management has an ethical and fiduciary obligation to ensure that that happens.<\/p>\n\n\t\t\t

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Candela Citations<\/h3>\n\t\t\t\t\t
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CC licensed content, Original<\/div>