Employee Compensation Benefits

Schliemann, (1987) in his article mentioned that organizations aim at maximizing their labor output by minimizing labor cost. The major labor costs come from direct compensation and fringe benefits. For this reason organizations need to use compensation and benefit policies that improve output yields while controlling costs. Employee compensation and benefits package play a strategic role in raising organizational performance and profitability (R. Mangel, M. Useem, 2000)

Organizations need to communicate to employees about the compensation and benefits package being offered and must allow them to participate in the compensation and benefits decision making process. Employees are often unfamiliar with the value of their benefit packages. This

If the benefit is not positively valued by the employee, it falls within the employee’s “zone of indifference” and the presence or absence of such benefit in the workplace have little effect to that employees (Kroeger, 1995). A benefit will be valued more highly if employees have accurate knowledge of the benefits offered to them (Tremblay, Sire, & Pelchat, 1998).

Employees who have accurate view of their benefit coverage seem to have higher valuation of the benefits they receive and are satisfied with their benefit packages than employees who are less informed of their benefits (Dreher et al., 1988).

Employee’s attitude towards various benefits offered differs from employee to employee. For example; younger employees prefer health and life insurance while older employees prefer pension plans and provident fund and women employees prefer benefits like maternity leave than the other benefits offered. In some cases employees may not be aware of the benefits that are available to them. To overcome this and other problems, organizations need to continuously asses their employee’s attitude towards compensation and benefits

Thus, the rewards are used as a key tool to record behavior and activities in order to attract and retain the most competent employees and keep them satisfied and motivated (Bellenger, Wilcox et al. 1984, Bratton and Gold 2003, Rynes, Gerhart et al. 2004). Benefits are not linked with employee performance and for this reason some employees may perceive them as a part of the organizations social responsibility action. For employee benefits to be effective motivational tools, they must be properly