Various factors influence the basic total compensation design and decision-making in an organization, and this comprises of budgets, wage decisions, incentive plans, and retirement plans.
Budgets
The budgetary process is very crucial in any organization. Budgets are anticipated to conduct three broad functions:
Planning
Budgeting is necessary for the planning process since it enhances programming. It determines the activities undertaken by all entities in an institution. It deals with resource acquisition and allocation of resources and determines how to pay for services
Controlling and administering
Budgets help organizations to obtain and utilize resources in the appropriate manner. Managers can monitor how resources flow, and pinpoint organization needs for operational adjustments.
Reporting and evaluating
Managers are expected to submit end-of-period reports for evaluations. It is possible to perform comparisons using the budget allocated to evaluate whether the revenues and expenditures were utilized in the right manner.
Wage decisions
A variety of factors influences the wage decisions, and this includes; the purchasing power of currencies, the productivity of the business, the level of education, economic conditions and the cost of living. Other factors include legislative influences, market influences, and the political and social environment. In summary, many factors determine wage decisions, and they should be considered in the decision-making process. A firm that wants to be competitive in the labor market must thoroughly contest for specific labor, to acquire applicants with the top skills. These employees must be highly compensated because they will transform the organization in a massive way.
Incentive plans
Incentive plans are fundamental as they assist the top executive in motivating the workforce and also assists in attracting more clients and retaining them. They cultivate a culture of exceptional performance since they comprise extra bonuses, paid vacations, and other non-monetary values that reward employees.
Workers are committed to meet the set goals and objectives. The system instills self-discipline that leads to improved productivity. Most incentive plans have amplified the earnings of most organizations. The increased revenues are as a result of the reward system guaranteed to the workforce. The sales personnel, for instance, are motivated to increase sales to get high rewards. The performance of the business improves because incentives plans are self-supporting to all workers (Barringer et.al, 2005).
Incentive plans also increase loyalty to the company. It creates a positive impact and boosts the culture of the organization. Employees are motivated to increase their potential in earning, and this enhances the permanency in the professional relationship. It prevents workers from looking for other firms that offer high compensation.
Besides, incentive plans lead to a reduced turnover. In many organizations, the top management ends up allocating more funds for employment opportunities that emerge after turnover. The incentive plans prevent under-compensation in an organization. The employees feel highly appreciated because of the reward system. Increased loyalty and a reduced turnover are essential elements in every institution. The benefits of incentive plans are massive and will increase the level of competition in most organizations. The end products of a proper implementation plan of an incentive plan guarantees improved productivity, profits, and employees satisfaction.
Retirement plans
Every institution must come up with a retirement plans program for its employees. Retirement plans are concerned about the future of employees and every organization should actively support employees decisions concerned with their future. Forward planning is vital as it gives enough time for the organization to transfer knowledge. Moreover, these plans back up the decisions that result to a positive and productive career of workers. It is also possible to retain the employees for an extended period if they are still productive. The organization benefits from the reduction of training costs that results from recruitment.
References
Barringer, B. R., Jones, F. F., & Neubaum, D. O. (2005). A quantitative content analysis of the characteristics of rapid-growth firms and their founders. Journal of business venturing, 20(5), 663-687.
