According to statistics, it has been noted that the current workforce is growing more and more disloyal and dissatisfied. The companies that do not respond to the current trends will end up paying a high price later. This is because, with the improvement in the job market, these companies will end up losing key employees to their competitors, which leads to reduced employee productivity. Companies need to establish a well-designed employee compensation and benefits package in order to retain its top talent and attract others. There are numerous companies that desire to attract, retain, and motivate their employees in order to meet the company's strategic objectives. Currently, employees are considered to be part of the company's assets because they have to be effectively and efficiently managed. There are numerous instruments that companies can use to attract, retain, and motivate employees. Compensation and benefits are some of the tools that companies can use. It is vital that an employer identifies and offers the right pay and benefits to retain top talent within the company. Having a compensation strategy is a vital piece of the company's HR Strategy for keeping the company successful and competitive. The compensation strategy would also assist the company to keep the personnel budget under control and manage jobs by offering the right salary.Nazir (2010) posits compensation is defined as a systematic approach to providing monetary value to the employees in exchange for the work they have performed. Compensation includes direct financial compensation, indirect financial compensation, and non-financial compensation. Direct financial compensation includes the pay an employee receives in the form of wages, salaries, commissions, and bonuses provided at consistent and regular intervals. Indirect financial compensation includes all the financial rewards that are not included in the direct compensation, and they form the social contract between employee and employer like leaves, benefits, retirement plans, employee services, and education. Non-financial compensation includes career development, and opportunities for advancement, recognition, and work environment conditions. Nowadays, employees are not willing to work for a salary or cash only they expect to receive some extras. This extra is what is referred to as employee benefits, or fringe benefits. Anything that is non-financial is considered to be employee benefits that are offered in order to enrich the lives of the employees. Employee benefits are not based on an employee's performance, and they might not have a direct effect on the performance of employees. However, having inadequate benefits could result in low satisfaction levels and increase employee turnover.
Benefits and compensation are important in Human Capital Management in the following ways:
Job Satisfaction
It is no lie that employees like to feel appreciated, and one of the ways to make them feel appreciated is offering them a competitive benefits and compensation package. Employees who are content with their job, like their job or the nature of their job is vital in increasing the employees' productivity within the company. Job satisfaction means that an employee is happy with their current job and they have a positive emotional state in regards to their job and work. Having such a positive state could be a result of many factors, but the most underlying factor is compensation and benefits offered to the employee. A company that wants and demands the best from its employees should be prepared to ensure that employees stay happy and positive all the time. Rewarding employees well by offering them competitive salaries and additional benefits would ensure that employees stay positive and handle their work in the best way possible. Job satisfaction is also guaranteed by eliminating employee stresses. Stressed out employee are most likely to abscond duty and be less productive in the performance of their daily responsibilities. Human Capital Management is charged with ensuring that employees perform at their optimal levels at all time when they are at work. Ensuring there is job satisfaction is vital if an employer wants their employees to perform at their optimal levels....
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