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The aim of every employer is to have quality employees and to keep them for as long as possible. It has become very easy for employees to be poached to other companies and firms. It is, therefore, advisable for employers to ensure that they sweeten their employment packages to avoid this. Compensation salary systems are very essential in maintaining employees. Employees are attracted and willed to stay by what is included in their compensation salary packets.

Compensation salary systems include the salary, equity, bonuses, benefits, and other non-financial compensations. It is also important for the concerned parties to design a system that best suits the organization. The needs of the employees should be attended to but they should be relative to the work that they carry out and the organization itself.

Importance of compensation salary systems

The institution of a compensation salary system influences the company or business greatly. It does not only affect the motivation of the employees but it also affects matters such as the quality of workers and the quality of the work that is produced. The following are benefits that can be achieved through instituting an appropriate compensation salary system;

  • Motivation increase

In most cases, proper compensation does not go unnoticed on the side of the employees. Offering compensation salaries that are beneficial to the employees will show them that they are valued and that they are important to the firm or business. In return, the employees will show their appreciation by working hard in their various fields. The morale levels for the entire company rises and the employees are motivated to show up for work on time every day.

Bonuses and commissions entice the employees to work even harder. This is because they are determined by the extra work a person does. By working hard to achieve the commission or the bonuses the employees will be working to achieve the company’s goals.

  • Attracting quality top talented employees

When it comes to seeking employment, people strive to find the best paying jobs. For financial security, people do not only concentrate on their salaries but also on the general compensation packets. They look at the bonuses, the benefits, the insurance and other factors. By tailoring a compensation salary system that benefits the employees, a company will attract the very best employees in their job market.

It is advisable for employers to do a research in their specific market. This will give them a range when it comes to salary offered to various employee positions. A research of the job market will also indicate for them what their competitors offer when it comes to compensation packages and thus they can decide how to improve their own. A favorable compensation system will attract talented and motivated employees that are ready to work.

  • Increase in job productivity

Job productivity is dependably tied in with employee satisfaction. The results of an employee all depend on the employee’s level of motivation, working conditions and other such factors. Therefore, the motivation of the employee is tied to the compensation salary system. This relationship affects the level of satisfaction of the employee. It has been commonly said, a happy employee is a productive employee. Hence, it is essential to make an employee happy.

Compensation salary systems play an essential role in ensuring the employee is contented and motivated. A favorable compensation system will motivate the employees to work hard to provide quality work in short durations of time. For instance, when it comes to bonuses and commissions, employees are motivated to earn the extra money hence they are motivated to work harder.

  • Employee loyalty

The kind of compensation offered by an employer determines whether the employees are satisfied or not. In most cases proper compensation makes the employees stay with a company longer because they feel valued. Unsuitable compensation will have the employees ready to jump ship at the very first opportunity they get. Employees that feel valued and integral to the running of the company are more likely to work harder to ensure the survival of the business or company.

Loyalty in business is very important. It is necessary for the employer to be able to trust his or her employees at all times. To achieve employee retention and low-turnover rates an employer has to craft an enticing compensation package. This will not only make the employees loyal but it will also benefit the employer. It is highly beneficial for an employer to cultivate a sense of loyalty from his or her employees by offering them compensation packages that are favorable to them.

  • Increased Job satisfaction

To attain employee job satisfaction a number of factors need to be considered. Matters such as conducive working environment are key but the most important is the compensation plan. Job satisfaction leads to increased productivity, quality work, loyalty to the company and many more benefits. It is, therefore, to the employers’ best interest to ensure the employees are satisfied with their job environment.

The best compensation plan that leads to job satisfaction looks at matters to do with internal equity, external equity, bonuses, benefits, insurances, salaries, and scheduled salary increments. Providing a suitable compensation plan will have the employees work harder and be more dedicated to the company as they will be satisfied with the conditions they are working in and the compensation they receive for it. 

Compensation packages are an integral part of any company or business. The lucrativeness or lack of lucrativeness affects the productivity of the business, the levels of motivation of the employees, and the possibility of the employees seeking other sources of employment. The value of compensation salary systems is therefore great enough to affect the running of the business or company. For that case compensation salary systems should be designed with caution and after adequate research.

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