Total Compensation Methods
Impact of various compensation methods and benefit programs on employees and organizations.
The compensation term is used for the combination of salaries, benefits and wages for the employee. It also includes hourly or annual salary, bonuses, benefits and incentives like short-term disability insurance, retirement plan and health coverage. Thus, a comprehensive package includes a combination of different components. The collection of all components is relevant to "Employee Compensation Plan" along with the way of payment and the reasons individuals collect salary increases, incentives and bonuses (Milkovich and Newman, 2005).
Hourly Wage
Employees who are not exempted, receives hourly wages with an addition of overtime payment for working more than 40 hours in a week. The rate of overtime to hourly wages is one and half. Employees having a bargaining and collective contract with the management have already set wages according to the contract for certain period and this known as "Labour union Contract." For instance, the employers may have to pay $17.75 to licenced plumbers, $19.75 to master and 15.75 to apprentice plumbers on hourly bases as a combined bargaining contract (Hadley et al., 2006).
Annual Salary
There are different salaried person who have been categorized as unspecified and thus allowed for overtime yet term salary usually relate to annual salaried employees or we can say that it is compensation without overtime. This means that a worker who is a salaried employee is the one who is not entitled to have overtime. Salary scales that take into consideration the respective years of education and professional experience, credentials, qualifications such as work competency and the functional expertise required, is sufficient to determine a compensation plan for employees. Annual salaries and all increments on the basis of grade promotions for employees in the federal government are annually published by the U.S. Office of Personnel Management. These are paid in accordance to the General Services and the Senior Executive Service wage scales (Hadley et al., 2006).
Retirement Savings
Employees can avail the opportunity of participating in an employer sponsored 401k scheme. Tax deductible contributions that are to be subtracted from every month's pay check are separately designated. Companies equate 50% to the contribution of the employee. Thus, for instance, an employee designating 10% of his gross salary would be assisted by the company which would, in this scenario, sponsor 5% of the employee's gross income. The time duration, before the joint contribution is completely available to that employee, is called vesting which could vary around 1 to 5 years. A vesting scheme of 4 years would imply that after the first year from the initial deposit of the company to the 401k scheme, 25% of the contribution would belong to the particular employee. Subsequently, 50% at the end of two years, 75% at the end of the third, and eventually 100% at the end of the final. However, an employee would be forfeiting the non-vested contribution of the employer if he/she resigns from the job before the vesting period expires (Hadley et al., 2006).
Raises, Bonuses and Incentives
Salary increments of a compensation plan are driven by the employer's performance management systems, which consider the performance rankings and respective ratings of all the employees. For instance, an exceptional performance appraisal might result in certain percentage increase in salary. Usually, bonuses and the incentives are in cash forms and are awarded to employees as per a certain percentage of their gross pay or a distinct share of any optional fund raised by the organisation for the purpose of employees' benefit as they were mainly responsible for the overall profit earned by the firm. In addition to this, incentives and bonuses of executives are also linked with increasing share value of the public limited company (Conrad et al., 2004).
Group Health Benefits
Health care benefits are also included in the total compensation of an employee. Most of the monthly premium is usually paid by the organisations on employee's behalf and a small amount is deducted from a worker's salary. Many organisations...
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