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Analyzing The Strategic Compensation Essay

Strategic Compensation List and explain the five different stakeholders of a company's compensation system

Government

Both federal and state governments have their own regulations, laws and directives that have an influence on compensation schedules. For instance, the federal government has set minimum wage levels and also has legislation on payroll issues. The federal government also has a lot of influence on economic matters. Governments also draft policies that can help them to increase the ease of doing business. While many governments have free-market and non-interference policies, they also have set rules and regulations, with regards to the treatment of workers, occupational safety, social security contributions and hiring practices (Fred-Adegbulugbe, 2010).

Executives / Managers/Owners or Founders

Company executives and managers ought to actively know the link between their employees and their performance, and reward and budget management. The main objective of compensation systems is to enhance employee productivity so as to increase profitability. If the company is public, increased profitability could mean more dividends for shareholders, while if it is private, the increased profitability could mean more money for its founders. In the same way an effective compensation system brings wealth to the shareholders or founders of a company, an ineffective system would have a negative impact on profitability (Lazear, 2000).

iii. Employees' Unions

The relationship between company managers and union leaders can either be one of cooperation or one which is filled with animosity. The relationship between these two parties has a huge impact on the effectiveness or productivity of almost every company. Cooperation between unions and organizations can result in a scenario in which there is mutual benefit for all parties. For instance, organizations could agree to increase allowances in exchange for a workers' union to convince their employees to attend training classes. This does not only increase productivity...

Local Communities
Local communities also have an influence on the remuneration systems of companies. This is owing to the fact that organizations have to adjust for the cost of living before setting their remuneration system. The cost of living is in turn determined by the economic conditions, housing and the location of the company. Thus, the compensation systems of companies are significantly influenced by the local communities (Pink, 2009; Lazear, 2000).

v. Special Interest Groups (SIGs) and the General Public

Citizens also have a say on the remuneration systems of organizations. For instance, protests have been held and lawsuits filed by members of the public to get higher wages, flexible working hours or even to call on governments to reduce certain taxes. All these have an effect on the amount of money that employees will be paid. Certain interest groups also have a lot of influence on legislators with regards to who gets paid what, at what time and what should be held back as taxes or social security benefits (Pink, 2009; McNamara, 2008).

2. List and describe the seven types of monetary compensation

i. Salary

This type of monetary compensation is a set amount of money paid regularly after set periods of time. Salaries are usually paid in dollar amounts every twelve months and they are the most used tool to pay licensed or professional workers. In general, a salary implies that the employee is committed to working in the organization for a longer period of time (Markel, 2010).

ii. Hourly/Wages

This is a set dollar amount that is paid per hour of work done. This type of monetary compensation is mostly used to pay skilled and unskilled laborers. A worker who is receiving wages understands that during times when work is slow he or she may not be called upon to provide services. Thus, wages imply that the worker is not a long-term employee (Martocchio, 2008; Markel,…

Sources used in this document:
References

Fred-Adegbulugbe, C. (2010). Minimum wage: Law to compel payment by states, firms underway. Punch Newspaper (July 12):1.

Lazear, E. (2000). Performance Pay and Productivity. American Economic Review. 90(5). pp. 1346-1361.

Markel, K. S. (2010). Discretionary Employee Benefits, Society for Human Resource Management.

Martocchio, J. J. (2008). Employee benefits: A primer for human resource professionals, 3rd ed. New York: McGraw-Hill Higher Education.
United States Department of Labor (DOL), (n.d). Wage and Hour Division. Retrieved from http://www.dol.gov/whd/govcontracts on 28 January 2016
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