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Total Compensation Methods: An Introduction

Paying workers according to their performance is controversial in some fields, but accepted in other fields, such as sales. The types of bonuses offered to employees in some professions, from sales to investment banking, are another aspect of total compensation that might affect an employees decision to remain at a company. Some bonuses might be traditional lump sum payments while others might take the form of smaller bonuses, paid upon the completion of phases of work (Heathfield, 2010, p.2). Additionally, the potential to work overtime might be attractive to some employees. Conversely, family-friendly hours, on-premise daycare facilities, and flextime might draw prospective employees to specific companies, if the employee has the obligation of looking after small children.

Rewarding employees with raises because of demonstrated excellence is growing more common: “Gone are the days when organizations gave equivalent increases to all organization members. These salary increases, in the one percent to five percent range, sent the wrong message to underperformers.

They left organizations with too small of a budget to adequately reward their top performers. While many companies still use this as their salary criteria, forward-thinking organizations are thinking about salary and compensation in a very different way” (Heathfield 2010, p.1). Salary raises, as specified in some types total compensation packages, are not merely vertical in nature, as an employee proceeds upon the organizational hierarchy, but also horizontal in terms of their ranges. This allows performance review results to affect compensation packages — and hopefully, influence and improve employee performance.

References

Heathfield, Susan. (2010). Salary and compensation trends. About.com. Retrieved May 6, 2010

at http://humanresources.about.com/cs/compensation/a/aasalarytrends.htm

Total compensation @ UMass Amherst (2010). Human Resources. Retrieved May 6, 2010 at http://www.umass.edu/humres/tc_home.htm.

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