Compensation as a Human Resource Function

Compensationas a Human Resource Function

Compensationas a Human Resource Function

Compensationis a chief human resource management function that is geared towardsmotivating employees to achieve the organizational mission andobjectives. Sustainable growth of a company’s profit correlatedwith the productivity of the employees, which is affected by howtheir expectancy is rewarded. The human resource (HR) manager isexpected to create dynamic solutions that add value and appreciation the workers to achieve the organizational objective (Arthur, 2001).Compensation is a core HR function of establishing a monetary valuethat fit the effort of the employees as an exchange for the work done(Arthur, 2001). The best compensation management system should boostthe morale of the workers to engage in delivering of effort in asystematically efficient manner. The HR management must provide thebest compensation program that aligns the worker’s duties to thebusiness performance.

Compensationinfluences the rate of talent retention that a company can keep inthe dynamic labor market. The fast growing HR management practicesrequire the HR manager to keep the most competent workers by usingreinforcing competitive compensation programs that keep the besttalent from leaving the organization to a larger competitor (Arthur,2001). Compensation of worker’s effort requires constant monitoringof their duties to ensure that their work is rewarded. Similarly, HRshould allow the workers to form a collective bargaining group thatfacilitates representation of the least to the most valuable employeethrough collaborative consultations.

Arange of activities accompanies the HR function of determining theright compensation package for the employees. The compensationprogram is much more than the mere setting of the salary scale andgiving out of money to workers at the required time. Besidesadministering the payroll, the HR is expected to attach a salaryrange according to the work requirements, skills, andresponsibilities of workers (Arthur, 2001). Thus, the HR is mandatedto consider and draw up job descriptions that fit the objectives thatthe workers carry at the end of the day. Observation and listening toincumbent workers and managers could help alleviate possiblecompensation inequalities. Accurate observational data and statisticsconcerning the input and output of each worker compared with the jobdescription show the performance and a correlating reward. In thatcase, a worker is compensated for the extra effort in line with thegovernment legislation. The evaluation criteria of each job should befair enough and include the comments and observation of the affectedemployee to ensure transparency and encourage performance.

TheHR manager is expected to work under the guidelines of the Fair LaborStandards Act (FLSA) that regulates the minimum wage, maximum workinghours, and overtime remuneration (Arthur, 2001). Moreover, the actdirects the manager to ensure that every worker is paid the set wagesper hour. Any employee working overtime must be paid a wage that isone-and-one-half times the company’s base salary (Arthur, 2001).Therefore, it is the responsibility of the HR to conduct audits ofthe social legislation to maintain a beneficial compensation planthat fits the government legislation. Workers are motivated to workif they know that they are highly compensated for their effort,according to the set social wages.

Constantreviews of the compensation program within an organization arecrucial to reveal inequalities and address them appropriately. Salarydiscrimination issues can attract torts against an organization sincethe law requires equal monetary accessibility for all workersemployed in comparable jobs. The duties review should include anupdate on the job group classification to seek to clarify on howeach worker should be compensated for their effort. Studies show thatfemale workers are paid 9% less than male counterpart, which alludesto gender-based discrimination in many organizations besidesdelivering on comparable requirements (Arthur, 2001, p. 107).Therefore, it is the responsibility of the HR manager to reviewdifferent job descriptions and correlate the requirements with thesalary scale to rectify a discriminating employment culture.

Asalary paid to a worker is in reference to satisfied performance ofassigned duties and the value of exchanging labor should match theskills and productivity. A high-end salary scale motivates workers toachieve their duties on time and help a company make more profit in ashort-term. The Equal Pay Act of 1963 requires HR managers to pay allworkers an equal salary regardless of the gender for comparableduties performed at the organization (Arthur, 2001). Essentially, themain duty of compensation is to “attract, retain, and motivatemaximally productive employees” (Arthur, 2001, p. 108). Therefore,every organizational compensation plan should seek to offer the mostcompetitive rates that retain workers for performing comparableduties. Employees are quite sensitive to receiving equitable pay thatappreciates their time, cost of working, and the effort spent to growthe organizational profit. Flexible salaries attract the best workersand motivate them to use their talent effectively to achieve theoptimum performance.

Jobdescriptions influence the total amount of reward that fits anemployee’s work. Therefore, the HR management should keep logs thatsketch out the primary duties of each worker to enable them in makingdecisions regarding the best compensation program. Moreover, thecompensation plan is highly influenced by the level of skills andexperience in performing duties. Usually, more experienced workersare compensated more since they have a cumulative knowledge acquiredovertime that is crucial to the success of an organization.Therefore, workers who have more experience and knowledge are usuallypaid higher to younger and newly hired employees. The job descriptionidentifies the ranks and provides job titles that also influence thecompensation program. Likewise, periodical jobs have attracted adifferent compensation plan since the time a worker spends in thecompany is crucial to determine the rate of the reward. Ultimately,the function of the HR is to strike a balance between meeting thecompensation needs of the employees and the resources that theorganization requires to maintain a sustainable market-drivencampaign (Arthur, 2001, p. 2).

Employeesare motivated by their respective position at work and properevaluation of the kind of job requirements at every level of theorganizational structure guarantee a proper remuneration plan.Usually, higher hierarchical managers are paid more than lower endsupervisors and workers. However, the scenario is changing in themodern world whereby the employees in the lowest ranked job might beperforming the most essential functions that advance the objectivesof an organization. Whereas the traditional salary scheme is based ona hierarchy of the employees, transformative leadership is changingthe scenario by bridging the gap between the workers to increaseproductivity. If the job description reveals that the lowest rankedworkers are skilled in their respective field of work, while the topmanagement exists only to provide direction, then the differencebetween the two ranked positions is closed up by giving theprofessional employees an attractive compensation package. High ratesof pay motivate employees to increase performance. Thus, the HRshould make a compensation plan that is reasonable enough to alignthe essential human resource with equal wages and bonuses.

Accordingto Arthur (2001, p. 116), analysis of job position influences themanagement of compensation program as a critical HR function thatrewards the human resource for its effort and time. Therefore, the HRmust benchmark organizational positions in every department to ensurethat the log acts as a tool for ensuring precise job evaluation.Collecting information through salary survey may benchmark similarand comparable jobs. However, the method is vulnerable in identifyingdiscrepancies between incomparable positions. Whereas informationabout incomparable jobs is available from competitors, it is crucialfor the HR to study and determine the profit gained from the dutiesand responsibilities of the positions. Eventually, a possible mergerof the diverse pay grades would encourage more output. However, thatdoes not include reduction of the top management salaries, but theincrement of the lowest salaries to match their responsibilities.Cross-sectional analyses of different job categories and theirrespective groups would help the HR to discover the least appreciatedworker, which translated to reduced performance. Then, the HRmanagement can use the information to customize a compensation planthat appreciates all the job groups to avoid creating monetaryinequalities that discourage workers within an organization.Underpaying the lowest workers is ethically wrong as it underminesthe functional units that operate together to create more profit fora business. Since the compensation plan includes base pay, overtimewage, and bonuses, the HR is further required to maintain a realisticand market-driven merit salary increment system that should bedesigned to provide a reward for effort. The merit increase systemsshow the capacity of an organization to offer career advancementopportunities.

Retentionof workers is best achieved by using a high merit increase systemthat is presently used by both Google and Apple Companies to maintaintheir employees. New workers with high skills are liable to switchfrom low merit increase systems to companies awarding higher meritprograms based on the length of time on a job. Apple products likeiPhone is a representation of a product that comes from a companyoffering an attractive compensation program, with merit increaseplans to retain the top professionals (Morillon, 2010). The companyis sensitive to competition and the HR has the obligation to pay theworkers more to retain their talent and innovation that has seen thedevelopment iPhone in its subsequent versions that add morefunctionality to the user. Similarly, Google operates an ambitiousmotivation system through its compensation programs that includesperks like free meals, transportation plans, medical insurance, andbonuses for the most performing employees (Morillon, 2010). Theeffort-rewarding compensation plan has seen Google develop innovationproducts that like Adword, Gmail, and Google Maps. Adword is apopular among advertisers and agents who make money using the Googlesystems to make sales. The development of the application wasinspired by Google’s search engine logarithm that uses linkagesbetween sites to reveal the kind of advertisement to forward topossible customers. The management of Google has continued to hiremore experts, besides reporting high retention levels because ofusing the best compensation programs.


Arthur,D. (2001). Fundamentalsof human resource management(4thed.). New York, NY: American Management Association.

Morillon,S. (2010). Google, Microsoft, Apple, and Amazon. Object: Financialanalysis-key analysis of the competitive advantages for future lead.CybionOnline Business Intelligence.