Introduction
Among other types of rewards, non-monetary bonuses, such as flexible working, extra leaves, additional opportunities for responsibility or creativity, and others, provide several advantages. These are the more cost-effective options because acknowledgment is the main focus that delivers value from employees’ perspectives. Non-monetary incentives have an immediate effect and may severely impress candidates and workers (Thireskumar & Jayathilake, 2019). Retention is enhanced as well because it becomes more challenging for other companies to entice an employee away if the latter enjoys many non-monetary rewards. Non-cash incentives foster relationships with employees, and workers value such an approach (Tunison et al., 2019). Thus, according to studies, 65% of managers name non-financial acknowledgment as a standard incentive that promotes their drive, satisfaction, and motivation (Society of Human Resource Management, 2019). These are the main reasons why non-monetary rewards should be included in a new compensation package.
The three non-cash incentives included in the new compensation package are flexible scheduling, personal projects, and extra time off. The former has proven to be one of the most well-liked workplace benefits available because it shows that employers value their staff’s time. Further, allowing workers to work on their own projects is an opportunity they will value. Since people are rarely motivated by things they are not enthusiastic about, it is significant to let employees spend time on projects they are interested in (Sureephong et al., 2020). Finally, the third non-monetary bonus is extra time off. For example, employees may be rewarded with an hour’s early departure or a half-day off. As a result, the mentioned non-financial incentives help raise employees’ self-esteem, assist them in realizing their potential, and increase their sense of job security (Thireskumar & Jayathilake, 2019). Even highly paid employees can depart a company if they are unhappy with these elements. Excellent non-financial incentive programs help businesses recruit, inspire, and keep talented employees.
Compensation System
When discussing the role of the team in creating a compensation system to support the organization’s strategy, it is vital to mention a number of specific steps and explore their value. First, it is required to ask employees about elements they would want to be included in the plan (Lotich, 2022). Their responses should then be evaluated based on the company’s resources and strategy, as well as against other firms’ offerings (Kristal et al., 2020). For instance, if innovation is the strategy, then more creativity and responsibility can be offered as non-monetary compensation. If the desired rewards are competitive and support the organization’s strategy, the team can begin allocating the budget.
Further, the team should verify whether the selected rewards can help the firm achieve the desired purposes like retention, better performance, or creativity. The next step is to define pay grades or levels, and then it is significant to ensure that the plan complies with the laws (Kristal et al., 2020). Communicating the strategy and receiving feedback are the final steps before it can be implemented (Lotich, 2022). Overall, this is how compensation specialists apply their knowledge to create financial compensation plans that reward workers based on their job seniority, performance, or acquisition of job-related information and abilities (Matrocchio, 2019). Some people refer to this transaction as a pay-effort agreement.
Stakeholders
A number of stakeholders should be included in the team because they play an essential role in developing the compensation plan. These stakeholders are employees, executives, line managers, compensation professionals, and representatives from labor unions (Matrocchio, 2019). First, employees are a crucial component of every business or organization, so they should also play a role in deciding what bonuses and rewards they will be offered (Lotich, 2022). Surely, they are not the most active part of the team, but it is crucial for employers to let their workers express their opinion. Further, line managers can contribute valuable information about their workers and provide insights about the best ways to reward them and promote motivation and higher performance.
Next, compensation professionals can employ their in-depth understanding of the regulations that affect pay and benefits practices. These professionals can make sure that there is no gender discrimination and that both sexes are entitled to equal compensation, depending on the position they are in (Matrocchio, 2019). Further, executives examine the conditions that must be met for these entitlements to be satisfied with all legal compliances (Kristal et al., 2020). Finally, labor union representatives are responsible for defining whether the needs and rights of employees are the primary focus of the compensation plan.
National Law
There are numerous laws and regulations that should be considered when creating a new compensation plan. For instance, since the Fair Labor Standards Act establishes minimum wage and overtime compensation requirements, the team needs to study this act to make sure that the overtime compensation they offer meets or exceeds the requirements of the FLSA (Office of Financial Management, 2021). Second, it is vital to pay increased attention to what the Equal Pay Act states in order to double-check that no bonuses and rewards included in the plan can be qualified as discriminating (U.S. Equal Employment Opportunity Commission, n.d.).
The third regulation is known as the Employee Retirement Income Security Act. It secures workers included in retirement compensations, which are also involved in the newly developed plan (U.S. Department of Labor., n.d.). ERISA is helpful to consider closely when including such persons in the bonuses system because there are many elements and critical details to pay attention to.
Conclusion
To conclude, if the three mentioned acts are not referred to, there is an opportunity for the final compensation plan to be unethical or not quite legal.
References
Kristal, T., Cohen, Y., & Navot, E. (2020). Workplace compensation practices and the rise in benefit inequality. American Sociological Review, 85(2), 271-297.
Lotich, P. (2022). 7 keys to an effective compensation strategy. Thriving Small Business. Web.
Martocchio, J. J. (2019). Strategic compensation (10th ed.). Pearson Education. Web.
Office of Financial Management. (2021). Fair labor standards act (FLSA). Web.
SHRM. (2018). SHRM – The voice of all things work. Web.
Sureephong, P., Dahlan, W., Chernbumroong, S., & Tongpaeng, Y. (2020). The effect of non-monetary rewards on employee performance in massive open online courses. International Journal of Emerging Technologies in Learning, 15(1), 88-102.
Thireskumar, T. T., & Jayathilake, P. M. B. (2019). The effect of monetary and non-monetary rewards on employee motivation: A review. Journal of Management Matters, 6(2). Web.
Tunison, E., Sylvain, R., Sterr, J., Hiley, V., & Carlson, J. M. (2019). No money, no problem: Enhanced reward positivity in the absence of monetary reward. Frontiers in Human Neuroscience, 13(41). Web.
U.S. Department of Labor. (n.d.). Employee retirement income security act (ERISA). Web.