Rewards Systems and Organizational Success Employees that are happy with their work, are equitably compensated and provided benefits are key to the success of an organization. “Today, competitive organizations recognize that aligning rewards with employee performance creates a stronger, more productive workforce and are turning to compensation planning solutions and services to handle complex compensation strategies while increasing shareholder value and corporate dividends." (Turetsky, 2012) This presentation will discuss compensation strategy and discretionary benefits as a part of a strategic rewards system.

Compensation Strategy Strategy must reflect business objectives Monetary Non-monetary Right rewards for right behaviors Cost Effectiveness The reward system must reflect the objectives of the company. This means that the objectives of the company must be clearly defined. Once that is done, one must then design a compensation strategy that will reinforce the cultural organization the company desires to achieve. The right kind of benefits serve as a motivator to employees and can help them to remain productive. They also serve as a way to recruit and retain competent employees. “Monetary rewards include salary, bonus, commissions, medical and health benefits, holidays, and retirement benefits.” (“Use Compensation”, 2012) Non-monetary rewards are items such as “meaningful and challenging works, recognition and career advancement, safe and healthy working environment, and fair treatment” (“Use Compensation”, 2012). It is also important to offer the right reward for the right behaviors. As an example, by only giving salary increases that reflect the cost of living, employees are not rewarded for outstanding performance. Therefore, a cost of living increase is not really a motivator to perform a job over and above expectations. The reward must match the behavior in order to be meaningful to the employee. “When people notice inequities, their morale and motivation will suffer.” (“Use Compensation”, 2012) By achieving the desired behaviors, the effectiveness of the organization increases. One side effect to using compensation strategy is that of determining cost effectiveness of rewards. Another is to determine pay equity, and link pay to performance. And, lastly, compensation strategy can be used to verify legal compliance.

Discretionary Benefits Income Protection Paid Time Off Services Discretionary benefits can be divided into three categories: Income Protection, Paid Time Off, and Services. These benefits contribute to a company’s competitive advantage, especially if they are designed to fit the situation. Income protection benefits include benefits such as short and long term disability insurance, life insurance and retirement programs. All of these programs insure that the employee will have income when needed by providing protection against income loss due to “unemployment, disability, or serious illness” (Martocchio, 2011). Paid Time off gives employees an opportunity for work-life balance, resulting in improved attendance and productivity. Services enable employees to resolve health issues as well as increase their skill levels – both of which can result in increased productivity and improved work attendance.

Income Protection Disability Insurance Life Insurance Retirement Health Protection Disability insurance – This protects an employee by providing income if the employee is unable to work due to illness or accidents. According to Martocchio, “the probability of being disabled for at least 90 consecutive days is much greater than the chance of dying while working; one of every three employees will have a disability that lasts at least 90 days” (Martocchio, 2011). Short term disability is absences of six months or less, while long term disability covers period of six months to life. Life insurance – This protects an employee’s family in the event of the event of the employee’s death. It pays the employee’s beneficiaries a specified amount of money, generally equal to some multiple of the employee’s annual salary. Life insurance comes in three forms: term, whole, and universal life. Retirement – This “provides income to employees and their beneficiaries during some of all of their retirement” (Martocchio, 2011). Some employers contribute a certain percentage to the employee’s retirement based upon the annual salary of the employee as well as the employee’s contribution to his plan. Health Protection – Health insurance coverage is important to employees because it enables them to seek medical treatment for themselves and their families which, in turn, allows the employee to miss fewer work days due to illness. This is a double edged sword because insurance coverage is quickly becoming more expensive, which burdens the employer, yet it serves to attract talent and retain employees while enabling them to be more productive.

Paid Time Off Work-Life Balance Less unscheduled leave More productivity Paid time off enables employees to balance work and life. By allowing the employees to take paid time off, there are fewer occurrences of unscheduled leave which, in turn, keeps the employees working and productive. According to Martocchio, “contribute towards positive employee attitudes and commitment to the company” (Martocchio, 2011). This time off includes sick leave, vacation days, holidays, funeral leave, military leave, jury duty, personal leave, breaks, lunch periods, volunteerism, sabbaticals, integrated paid time off policies, and clean-up, preparations, or travel time.

Services Opportunities for employees Improved quality of products Rise in productivity Services offer the employees opportunities to pursue educational and other goals that they have set for themselves. It also offers them opportunities to resolve issues and participate in activities designed to improve their overall health. Some employers also provide assistance to employees who are facing lay-off or termination issues in their efforts to secure employment elsewhere. The results of offering employee services are seen in the improved quality of products and rise in productivity.

Benefits and Costs Promoting positive employee behaviors Unlocking creative potential Tax advantage One benefit is that management can use strategic compensation to promote the positive employee behaviors “that have strategic value” (Martocchio, 2011). Also, the knowledge unlocked from some programs can unleash the creative potential of employee resulting in improvements to products, methods and technologies that aid in company growth and competitiveness. The tax advantages of certain discretionary benefits result in strategic value for companies. Those with the lower cost strategies fare better in competition because they can lower the prices of products and services without cutting into their profits.

Conclusion Strategic compensation is a significant contributor to different forms of competitive advantage… “Strategic compensation is a significant contributor to different forms of competitive advantage, including better business results, more effective performance, stronger capability, higher staff attraction and retention levels, heightened motivation, and employee satisfaction.” (“Use Compensation”, 2012).

References Martocchio, J. (2011). Strategic compensation, (6 Ed.). Upper Saddle River, NJ: Prentice Hall. “Use Compensation Strategy as a Tool to Motivate Your People”, (2012), retrieved from Strategic Human Resource.com website at http://www.strategic-human- resource.com/compensation-strategy.html Turetsky, D. (May 22, 2012) , «Compensation planning solutions align rewards with performance” retrieved 05/21/2012 from HR Management website at http://www.hrmreport.com/article/Compensation-planning- solutions-align-rewards-with-performance/