Manage Remuneration and Employee Benefits Theory of Compensation Stra

Question: Discuss about the Manage Remuneration and Employee Benefits for the Theory of Compensation Strategy. Answer: Develop organizations remuneration strategy Remunerationis still a critical issue in the managing of human resource. How organizations remunerates its staff has an impact on its capacity to interest the right staffs and to motivate them to remain focused on critical business administration. Remuneration is what staffs get in exchange for their work. It also helps to strengthen important organization culture and fundamental standards and to enable the accomplishment of its business strategy objectives (Stone, 2008, p.4) Employment is of a different type. However, the remuneration of employees is a factor that has always not been communicated officially or even feasible for human resource departments and has its cons. For instance, it has this method of compensation in which paymentis through unit price produced by an employee. If remuneration adopted by an organization does not support their vision, direction goaland culture, they may need to close down business. The teams ideas, leadership, and goal drive the business. Objectives of the proposed remuneration strategy Supports business and human resource strategy. Attract and motivates staffs in their duties. Provides incentives first performance Reward past performance Provide the best return expenditure Design the best rewarding system for workers Staff remuneration and compensation structure Remuneration benefits Overtime compensation Future income reviews/increases Life insurance Paid holidays vacations Company day-care facilities List of Legislations considered in the remuneration strategy Fair Work Act 2009:This act creates a national workplace relations system that is fair to working people, promotes productivity, flexible for business and economic growth. Workplace Relations Act 1996 : It t provides the continuation of the federal award system which provided a minimum set of terms and conditions for employment and helps in maintaining relations at work place Workplace Agreement Act 1993: This is an individual written agreement on terms and conditions of employment between an employer and employee in Australia, under the Workplace Relations Act 1996. Evidence for research on market rates and comparison with other organization According to the government of Australia education department the salaries of a teacher starts at level 2.1 with $66 and reaches to level 2.9 with experience. It is shown in the table below Level Salary as in Dec2015 (per annum) 2.1 $66,475 2.2 $72,937 2.3 AU$79,824 2.4 AU$82,953 2.5 AU$86,206 2.6 AU$89,584 2.7 AU$93,096 2.8 AU$96,744 2.9 AU$100,536 Table 1: Salary as in Dec2015 (per annum) (Source: www.decd.sa.gov.au) The salary range of some of the private educational Institute in Australia is given below: Name Starting Salary(per annum) George Brown College AU$92,312 Humber College AU$ 60,807 Trinity College AU$ 67,407 Marist College AU$65,000 Table 2: Salary of few private colleges in Australia (Source: www.decd.sa.gov.au) Table 2 shows highly competitive rates of different educational institute for the teachers. However the rates vary on the basis of their brand name and facilities provided. The Sai Educational Institute need to compete with them to get quality teachers at competitive price. Motivate employees through proposed strategy The remuneration strategy will motivate the employees as it has given importance to incentives and rewards for the employees. The strategy has taken care of the working conditions of the employees and desires to provide them benefits for their hard work. The employees medical care and family trip, life insurance and other related benefits are taken care of in the strategy. It will motivate them to work better and improve their performance. The Institute has also provided good learning environment in the institute by providing informative library and easy access to resources for their research works. All this benefits will surely motivate the employees and will make the workplace desirable for them. Proposed strategy linkage with organizational strategic objectives. Universalistic approach indicates that some human resource activities such as incentive pay, is always better than others and that all organizations should implement these good practices (Pfeffer, 1994) The basic theory of contingency is that, for any organization to be effective policies must be consistent with the business policy of the organization. (Schuler and Jackson, 1987) Basic salary Every employee should receive his or her salary in time; this should correspond with the pay agreement and policy. The college strives to offer fair consideration remuneration and incentives to all staffs undertaking the contribution to the college. The college aim to achieve this by means of development of appropriate reward and incentives mechanism which are guided by: Fairness and equity (both internal and external) Guarantee to pay equity and gender balance The competitive environment inside which the organization works Balanced against the industrial and wider employment scheme offered tothe team. Health and wellbeing programs for staff members. Factors to consider when developing a remuneration strategy Budget Allocation The strategy should have an approach on how to allocate funds into salary and benefits. They should have clear guidelines on how much will be spent on wages and the percentage to be devoted toremunerations and other incentives. Budget allocation eases control of labor, healthcare and other miscellaneous costs that may arise. Develop Salary Ranges Developing salary ranges makes sure that employee pay is competitive with other organizations. For organizations to remain competitive, scaling of jobs within the same industry must be done so as to determine the kind of work done and be able to establish salary ranges that match with the job descriptions. Set a plan Having a plan on how the payments will be administered to provide for individual pay increases. Performance-based increases, promotions, raises for time spent with the organization or general increases to compensate for the changing economic factors and to remain competitive. Communication Communicate the plan to staff members. Describe how the program works so that expectations are defined. Communication will help build goodwill and good relations with your employees. Appraisals Perform employee performance evaluations under the plan. Explain how workers efforts relate to pay and provide responses to help employees understand job responsibilities and required expectations. Implementation of a Remuneration Strategy This is known a the turning of policies and plans into actions to achieve strategic objectives and set goals. The implementing of strategic plans is very critical more than the implementation of the strategies. Incentive compensation payments are based on achievement of a fixed set of objectives, formula or criteria. If results are realized, payment is made and if not, payment is not effected. The following steps will be considered in the successful implementation of the remunerations strategy. Have a detailed understanding of the knowledge and the background that the plan intends to support. Analysis of the firms professional goals, mission, and aims, the Human resource approach, and the reward philosophy. These forms the basis of the firmsorganization framework that the motivation benefit strategy will be aligned to and reinforced. Identifying core causes that drive the need for improving performance, cooperation, or employee commitment. It can be done by challenging whether there is a problem with payment methods, or any other factors that need more input. Identification of the businesss key tactical objectives. Know the areas that need improvement and allocate different weights to thetargets centered on impact, meaning, and your degree of self-relianceand the ability to measure results. Form a combined set of both fiscal and strategic objectives.There needs to be a range of economic and policy performance and compensation level and a payout opportunity that is consistent with the performance value and meaningful to staff. Define clear objectives for staff. The workers need to understand the goals clearly so that they have clear measures which will impact the sales and ensure production cost are lowered and profits achievable Remain engaged. The plan should be an ongoing process; It should be reviewed each and every year inline with the business settings and new goals and objectives. Communication channels. Use the plan as one way of communicating with staffs by providing feedback. Acknowledge the small and big wins and any other reinforcement or results achieved. Salary Package for Academic and non-academic staff The salary package for Academic and non-Academic staff includes basic pay, dearness allowance, house rent allowance, leave travel allowance, employer provident fund and children educational allowance Salary details of Academic Staff Amount Basic Pay AU$50,000 Dearness Allowances (5% of BP) AU$1,750 House Rent Allowances (10% of BP) AU$ 3,500 Leave travel allowances (3% of BP) AU$ 1,050 Employer Provident Fund( 5% of BP) AU$1,750 Children Educational Allowance(6% of BP) AU$2,100 AU$60,150 Table 3: Salary Package of Academic staff per annum Source: Author Salary details of Non-Academic Staff Amount Basic Pay AU$20,000 Dearness Allowances (5% of BP) AU$1,000 House Rent Allowances (8% of BP) AU$ 1600 Leave travel allowances (1% of BP) AU$ 200 Employer Provident Fund( 3% of BP) AU$600 Children Educational Allowance(3% of BP) AU$600 Total AU$24,000 Table 4: Salary Package of Non-Academic staff per annum Source: Author Outline the steps to implement the proposed remuneration strategy successfully. A company that has salary structure is able to manage their salary spending. It is also a good way of maintaining current employees and makes hiring and recruitment of employees easier. The following can guide in the implementation of a good salary structure. Establish value for every position in the firm When determining avalue for every position in the company, market prices have to be considered. Research on different organizations and how they pay for like jobs will help in establishing where Sai Educational Institute competitive posture The competitive position of a Sai Educational Institute is its global salary level compared to the market average across the scale jobs. The wage rates should be comparative to prices of other competitors. Compensable leverage This is how much more or less pay rate increases in your company, overall, as compared to the market rate increase for higher-paid positions in the organizational ladder. It helps in striking a balance between paying salary increases to staff when they get promotions. Outward inequalities Determine if some of the employees salaries are inconsistent with the firms relationship in the market across all the jobs. When the salaries are inequitable, it will be perceived as unfair Development of salary structures Decide if the salaries will be specifically based on minimum and maximums or if you will have pay grades whereby multiple positions are grouped together with same range Outline how you will review and update the remuneration strategy Review recent methods of reviewing salaries Interview workforce and management to scale how workers perceive the organization Come up with a way of reviewing salaries Define salary ranges that suit the firm Conduct workshops and training and integrate them with the human resource systems Considered factors and procedures during the review of the remuneration strategy The factors and procedures that should be that should be considered and followed when reviewing the remuneration strategy are discussed below: The pay review policy should have linkage with HR process so that the business needs are met. Planning should be done in advance about the review dates and effective connection should be made between the functions of HR, rewards, finances and business. Data should be gathered on inflations and cost of living of the country so that dearness allowance can be changed accordingly. The procedure of calculation should be simple with keeping in mind the requisite requirements. The management tools and technical back-ups should be used for completing the procedures effectively. The review of previous process should be done to understand it better The roles and responsibilities of the concerned people should be clearly defined in the procedure so that no loopholes emerge. The risk of reducing the incentives should be minimized and rewards should be given importance. Conclusion A firms strategy is a critical factor for a company, and it can last four many years. If an organization does not monitor the efficiency of the approach, it may lead to failure instead of success. There may be deviations in the result, which can be corrected as time goes. Normally, it is easy to fix errors is differences are found early Superannuation Superannuation is a savings plan whereby funds accumulateover a given periodto provide an income during retirement. It allows money to be reserved aside on a fixed interval basis for a specific duration of time. The money can be invested activities that will earn interest or in projects. The objective of this scheme Facilitate consumption smoothing over the course of a persons life. To help people manage financial risks during retirement. Help a person to be fully funded from savings To provide income in retirement Invest resources in the best interests of superannuation fund members Be straightforward and efficient, and provide safeguards to people during retirement. Method of implementation Employer contributions Compulsory superannuation guarantee (SG) contributions amounts must be paid to a selected pension fund for their workers at a rate of 9.5% of their earnings. Personal contributions Voluntary contributionscan be made by people towards their superannuation and in return get they get tax benefits for doing so. Benefits to employees A person's funds are combined with other investors, letting them make investments which are impossible for a single investor. Having a person's savings inaccessible for a set period is an attractive benefit to the individuals who might be drawn to "dip" into their superannuation fund. Itsa tax effective way of saving. Superannuation is the best tax effective way of saving for a longer duration. Governments have a concern about people who will retire without savings and depend on the government for support. Due to that, they have developed ways to encourage people to save within Super funds. Recent changes $1.6 million limits on the total amount of super that can be transferred into a tax-free retirement account The annual concessional contributions limit reduced to $25,000 and allowing catch up contributions of good caps over five years for balances of $500,000 or less A lifetime cap of $500,000 will be applied to after-tax concessions on super to reduce the capacity for superannuation to be used for capital accumulation effective immediately and backdated to 2007. Performance Based Remuneration ( PBR) Performance-based remuneration provides companies with the flexibility to attract and retain great staff. Performance payments are one-off payments made to employeesbya documented performance-based compensation plan, based on set performance targets. Payment is non-recurrent and based on achievements within specific timeframes Outline the concept of performance based remuneration Research indicates that performance-based compensation leads to the opposite of the desired outcomes when it is applied to any work involving reasoning rather than physical skill. The objective of this remuneration strategy A performance-based plan employs objective criteria to decide the incentive to be paid. These ideas form precisely known goals that the organization must achieve to receive the benefit. It is objective oriented and designed to identify specifically and incrementally reward the top performers. Method of implementation in the organization PBR methods tie the reward directly to particular business goals and management objectives. Firms must deliver competitive pay for the people who show reults, and low pay for low performers.For companies to achieve, this, they need to match quantifiable and manageable performance targets to company objectives. The common variables include: - Equity - the quantity and amount to be paid is normally centered on a part of value additional as determined by the system measuring performance of workers. Improvement sharing The company may adopt a system of distributing a portion of results to employees, based on performance versus plan. Bonuses These are awards in form of cash paid to the employees for amazing accomplishments or other activity-related deliveries; Benefits to employees Increase in Earnings: - It allows employees to increase their income since they are in control of their earnings. Over holiday seasons, workers can increase production to earn more money. Benefits to employers The increase in retention: - There is a positive link between effort and performance, and employee retention is enhanced since the staff that performs best is rewarded for his/her efforts. This makes them retainable to an organization. Less Supervision: - Organizations that use PBR experience a decrease in the need to supervise their staffs since they know their work output translates to their pay. Disadvantages of this remuneration strategy Less Input by employees: -This makes employees to fear giving managers their contribution for changes. Employees shelve their ideas even if they think they are right for fear of reduction in earnings. Various firms value and depend on their employee's input in order to make decisions concerning the company. Conflict among employees: - A disadvantage of pay based on performance policies is that they can create conflict among workers. An employee may that a supervisor displays partiality to other staffmembers and assists them to attain bonuses. Distrust and conflict create hostile working environments, which lessenefficiency. Fringe benefits- These are additional benefits provided to workers other than usual payment in the form of salaries. They offer a measurable value to individual employees. Fringe benefits are not connected to the performance of workers since they are an indirect form of reward and are given to staff because they are members of the company. Outline the concept and objectives of fringe benefits They create and increase good working relations. They promote the welfare of They act as a form of security to employees Help to motivate the employees Employees health is protected. Benefits to employees Contributeto boosting the morale of workers and pride in a company. Employees who have personal life policies enjoy additional protection. Employees have a peace of mind which ensures increased productivity. Benefits to employers Helps attracts and retain high-performing employees: - Fringe benefits play a significant role in keeping present employees content with their work environment while maintaining the competition from poaching top talent. Financial advantages: - employers pay premiums which in turn are tax deductible as an insurance expense to the company. Recruiting Talent: - There is much competition among companies. Thus they may find it difficult to attract a workforce based on salaries alone. Fringe Benefits Tax (FBT) and calculating FBT Fringe benefits tax- This is atax that companies pay on certain benefits they provide to their workers. The family members of the employee may also be included. The benefit may be a top up to, or part of, the employees income. Calculating FBT Assume a company pays the manager $500,000 P/a and provides a car benefit with a taxable value of $30,000 during the 2015/16 FBT year. The $500,000 is taxed at the applicable PAYG withholding rate which is withheld and pays to the ATO. The $20,000 car benefit is taxed as follows: Taxable Value $20,000 Multiplied by Gross-up rate x 2.1463 Grossed-up taxable value $42,926 FBT Rate 49% FBT Payable (rounded) $21,033 References Leow, LP Murphy, S 2008, Australian master superannuation guide, 12th edn, CCH Australia, North Ryde, New South Wales. Balkin, D. and Gomez-Mejia, L. 1987. Toward a contingent theory of compensation strategy. Strategic Management Journal, 8, 169-182. Beal, D 2008, Superannuation and retirement income planning, John Wiley Sons, Milton, Queensland. Ellig, B. 1981, Compensation elements: market phase determines the mix. Compensation Review I Third Quarter, pp. 30-38. Gupta. C.B. 2005, Human ResourceManagement, Sultan Chand Publishers, New Delhi Kerr, J. 1985, Diversification strategies and managerial rewards: an empirical study. Academy of Management Journal, 28, pp. 155-179. Lawler, E. 1981, Pay and Organizational Development. Reading, MA: Addison-Wesley. Pay, wages and salaries | Department for Education and Child Development. (2016). Decd.sa.gov.au. Retrieved 1 August 2016, from https://www.decd.sa.gov.au/working-decd/working-department/pay-wages-and-salaries Pfeffer, J. (1994), Competitive Advantage Through People, Harvard Business School Press, Boston Schneier, C.E., Beatty, R.W., Baird, L.S. 1987, The performance management sourcebook. Massachusetts: Human Resource Development Press. Stroh, E.C. 2001, Personnel Motivation: Strategies to stimulate employees to increase performance. Politeia, 20(2), 5974. Wils, T. and Dyer, L. (1984). Relating business strategy to human resource strategy: some preliminary evidence. Paper presented at the 44th Annual Meeting of the Academy of Management. Boston, MA.