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Indirect Pay
Assignment
EXECUTIVE SUMMARY:
Indirect pay or as we all know it as indirect compensation is the Non-
monetary compensation provided to employees. These include; annual leave,
overtime allowance, health insurance, life assurance, company car and mobile
and pension funds. Note that both ‘standard’ contractual features (annual leave)
as well as valuable benefits (healthcare) can be included in indirect
compensation. Indirect compensation compares to direct compensation, which a
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monetary payment is paid directly to employees for their services, starting with
a basic salary. The total reward package is a combination of direct compensation
and indirect compensation, but our main focus is the indirect compensation of an
employee in Canada. Therefore, throughout the paper we will touch on a few
trends in Canada, which relate to indirect compensation. You will see some
outlining of issues and implication regarding employers, employees, and maybe
perhaps shareholders. Finally, this research paper will identify some potential
strategies or consideration for addressing the above areas of concern.
What is a good benefits package?
Typically when an employee hears of benefits before and, the first
assumption is good dental plan or good health plan or two week vacations and
so on. Now a days indirect pay for a lot of people is on a whole different ball
game. Employees are no longer looking at indirect compensation as an extrinsic
viewpoint but rather as intrinsic benefits. With the Market being highly
competitive and the number of new employees entering the workforce dwindling,
employers are challenged to become even more creative and responsive in the
design, timing and generosity of their benefit plans. The more progressive the
organization, the more flexible the structure is in response to today’s challenges:
i.e. having four different generations of employees working side by side.
Employers, who continue to provide the more traditional and limited program,
may find it more difficult to find and keep different types of employees.
The pros of having indirect pay include:
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Giving employees what they need to remain healthy and well taken care
of, can promote productivity and satisfaction.
Employees see this as a way of promoting their contribution to company
with tangible benefits that promote them to do more with quality and
greater efficiency.
Retains talent, as well as provided a good reputation in all sectors
(Unionized and private sectors).
The Cons of having indirect pay include:
If the benefits don’t match up with the employee ‘wish list’ this could be a
de-motivating effect, allowing unions to create a case of mistreatment.
Reduces pay equality among employees, can be seen a liability of fair
treatment (equality) among other employees.
Causes employees to focus on the financial reward more than the
developmental approach to why indirect pay is used.
Issues and implications
The employer or Human Resource department of a company could
undergo many issues that he or she could be faced when hiring employees
during the hiring process in relation to attracting potential talent. There are also
issues in retaining employees that the employer already has; indirect pay is what
companies use to eliminate these issues, however when these non-monetary
forms of compensation do not satisfy employees, it can lead to an increase in
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turnover. Attraction, a concept for employers to consider leads them to asking,
“Why would someone work here?” The main thing is what an employer has to
offer the potential talent that is awaiting a position. When a candidate applies for
a position at a potential company the employer has to stay competitive, but not
always the employer can compete in direct compensation methods and monetary
benefits. The employer will turn other non-monetary incentives that draw
applicants into the organization like the organizational structure/environment. The
environment has many things to offer, for example comfortable settings that allow
the employees to work confidence and easy, by not having these settings the
employee could feel uncomfortable in his/her surroundings, thus productivity
decreases as well as morale among the companies employees. On looking
candidates could feel discourage, creating a smaller pool of applicants, which
doesn’t optimize the chances of receiving the best talents that could further the
organization, an issue for stakeholders, shareholders, and investors. Another
issue for the employer would be retaining employees; retainment can be very
costly, especially when it requires retaining meaningful, talented employees that
shape the organization with their innovative ways of thinking. The organizational
environment, culture, workplace flexibility, and giving employees’ autonomy can
help reduce turnover. Turnover is the ratio of labor that leaves the company
appose to the average amount of labor that stays within the company.
That being said, turnover is a huge issue that also goes back to attracting
new employees. Turnover, in relation to indirect pay, could come from the
environment, whether it is safe, healthy, and/or comfortable for employees to
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work in. turnover can come from the culture of the organization, whether the
culture respects/promotes creativity for employees as well as providing
opportunities to grow within the organization. Turnover can result from workplace
flexibility, whether the employer is giving employees the ability to balance their
lives in conjunction with the work, for example if an employee has kids and has to
work straight from morning to evenings shifts everyday but has no
accommodations for leave when a their child gets sick or the company doesn’t
offer alternatives to help parents find ways of having their children looked after
while they’re at work (pertaining to young children; infancy and early childhood
ages) without these accommodations the employer could lose talented
individuals that shape the company, increasing turnover. Another issue for
employers is cost of retainment; cost of retainment in relation to retaining
individuals that aren’t performing to the best of their abilities employees, and are
taking advantage of employer’s expenses and efforts to make sure productivity,
morale, and satisfaction is maintained within the company.
Indirect pay issue: Employees
Indirect pay issues aren’t just issues for the employer but also issues for
the employee. When indirect compensation methods don’t align with the
employee(s) wants, the employee(s) tend to become discourage, and start
looking for alternative ways of either making the indirect pay methods work or
alternative means of employment. Employees who don’t agree and dislike the
indirect compensation methods offered tend to become arrogant, uncooperative,
and unproductive. These actions can discourage other employees creating
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absenteeism, lateness/tardiness within the workplace environment, not only an
issue for employer but for employees as well as. Absenteeism is when the fact of
being away from the job, whether from controlled situations, or from uncontrolled
situations. In relation to indirect pay the employee is absent from work because
he/she perceives the organization as not providing the right environment for
him/her to work in, and not providing accommodations for the his/her external
obligations (life outside of work). When the employee feels this way about an
employer they become late and/or lazy or even to the point of being absent from
work. This can create stress for other employees that come into work on time
because they’re satisfied with the environment, culture, flexibility of the
workplace. As Human resource professionals, we have learned that not all
employees can be satisfied with all the ideas within a company but we can do our
best in customizing compensation plans, and more specifically customizing
indirect compensation method to suit employees who aren’t satisfied. Employees
who are satisfied, have to pick up for those who are away from the job just to
maintain productivity creating low morale and a negative environment among
employees. Lowering the satisfaction of other employees can result in retention
issues. Employees who see the employer as unable to provide for employee, will
tend to of other employment options and or ways of lessening their work load.
Essentially, employees who aren’t motivated to work won’t be creative and won’t
be productive in their job, making the indirect compensation methods irrelevant to
the employee, thus wasting employer’s money and time, as well as wasting
employee’s time and effort.
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Strategic Objective
Flexible scheduling employees manages their time and energy, which can
help them accomplish in completing task at work and home. Flexible scheduling
includes scheduling their time and adjusting their location of what areas of their
work that needs to be completed. Sometimes work flexible scheduling can cause
tension in the work environment. Creating a detailed outline and timeline will
ensure that all your employees will complete their work on time based on when it
needs to be completed. Another strategy that could be beneficial is increasing
issues of indirect compensation and employees, which is by giving them more
options of benefits and services that will suit them the best. Focusing on finding
insurance providers at reasonable costs that would cover a real amount for all
employers. For an employee, there are ways to solve the turnover issues. First
we hire the right experience people in the beginning, most experts agree, is the
single best way to reduce employee turnover. Secondly, finding the right
candidates carefully, not just to ensure they have the right skills but also that they
fit well with the company culture, managers and co-workers. Setting the right
compensation and benefits is important too. We as an HR we get current data on
industry pay packages, and get creative when necessary with benefits, flexible
work schedules and bonus structures.
There are options for retaining your employees but there are harsh or
within the field of achievement these are some of these examples that we came
up with:
Punishments
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So what I would do in a situation like this is If I wanted to still retain my
employees, I would give them a simple warning ahead otherwise an
expulsion or suspension will be placed towards the employee.
An employee who does not work the way intended could also be in
jeopardy for cut in future pays.
Incentives
Create opportunities for employees to want to help out further ( Bonus
pay, contest, ticket draft, etc)
Counseling for employees who don’t know a certain way to do something
( Scheduling, Positive thinking, elaborate Ideas, etc)
From an HR Perspective:
Many issues faced with employers from an HR perspective can be treated
with proper implementation in order to retain and maintain a fully indulged work
staff. Employee satisfaction Issues at hand can be seen affecting the employer’s
work ethics and overall performance. In order to solve these issues HR
management must ensure that the employees are being treated fairly and are
offered indirect methods of compensation for good and constant work
performances.
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Retaining talent within the organization is an important matter that must be
implemented within employers. In order for employees to be attracted and
wanting to stay within the organization we must ensure to keep a low turnover
rate with employees leaving. To address this issue as a whole, contract can be
assigned to employees giving HR the ability to maintain adequate knowledge of
the employee’s timeline throughout the organization. This allows HR personal or
employers the ability to access all employees overall work performances before
being able to offer extensions keeping the talent within the company, or end
contracts for low performing personals.
Building a healthy and friendly work environment overall helps keep the
employees motivated as well as employers. Indirect pay issues must be
implemented with opportunities benefiting the employee’s as well as employers.
To ensure the indirect payments are meeting the needs of the employee, one on
one HR management and consulting should take place in order to receive
feedback face to face from employees giving them the satisfaction for addressing
importance to the organization.
Motivation is the key implementation needed in all employees to drive for
success. Offering indirect compensation or promotions drives employees to good
work ethics as well as feeling importance within the organization. HR
management is what allows the right environment that meet the needs of each
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individual employee in order to do so implementation as stated above must be
addressed with full intent of success.
Work Cited
"Compensation & Benefits." Compensation Systems: Design and Goals.
N.p., n.d. Web. 05 Apr. 2015.
Indirect Compensation." - Non-Monetary Benefits. N.p., n.d. Web. 05 Apr.
2015.
"Compensation & Benefits." Employee Benefits. N.p., n.d. Web. 05 Apr.
2015.
Compensation & Benefits." Sample Policies on Common HR Topics. N.p.,
n.d. Web. 05 Apr. 2015.
"What Are the Critical Issues Concerning Total Employee Compensation?"
Bright Hub. N.p., n.d. Web. 05 Apr. 2015.
