Reward And Compensation System In Private Sector

Published Date: 02 Nov 2017

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Rewards and Compensation:

Reward management is mainly concerned with the processes, strategies and policies required to guarantee that the worth of people and the contribution and involvement they make to achieve organizational and team goals is acknowledged, recognized and also rewarded. Allocation of reward and compensation system also depends on the job description of a personA lot of organizations make up the employee rewards systems after they set up a wage or salary scheme. But, by synchronizing the two into a comprehensive rewards and compensation strategy, an organization can enhance its profits and personnel productivity. Even better, by putting into practice an employee rewards system an organization can get a chance to optimize the overall compensation package. Organizations may also develop a reward and compensation philosophy and system and sufficient controls to make sure conformity with the system (American Compensation Association,Objectives, p. 1.2, 1992). An organization should determine the strengths and weaknesses of the actual process to ensure if the system developed is reliable and efficient or not .The main purposes which a reward and compensation system caters in an organization are to promote fair emoluments of work being done, hire well qualified and experienced people, to retain the present skilled workforce, make workforce cost effective, reward and motivate high performance etc. (Abdur Rehman, 2012). A typical reward and compensation system comprises of the following process:

a) Develop compensation and reward system.

b) Conduct a market survey to determine salary levels at different organizations and levels.

c) Analyze an organization’s jobs.

d) Maintain all the job positions.

e) Develope a job evaluation system.

f) Evaluate job positions to job descriptions to ensure classification.

e) Settle on which positions are exempted from the classification status.

f) Meet the terms with the Fair Labor and Standards Act (FLSA). (legalities mostly used by the public sector)

g) Build up a rewards program.

There are a variety of legal types of organizations, including corporations, governments, non-governmental organizations, international organizations, armed forces, charities, not-for-profit corporations, partnerships, cooperatives, and universities. A hybrid organization is an entity that operates and functions in both the public sector as well as in the private sector at the same time, fulfilling public duties also developing commercial market activities. Let us segregate the organizations into two categories first public sectors and second private sectors. Each one of these sectors designs the reward and compensation system according to their organization size, profits, human resource, etc. Every organization has a different set of parameters to set up a system to evaluate their employee’s performance to deal with reward and compensation management. Best practices are adopted to keep the human resource motivated and keep them going. Organizations deal with the reward and compensation procedures according to the talent and capabilities of their workforce.

Reward and compensation system in private sector:

Leaders from various companies describe a variety of reward and compensation practices that have been successful in retaining key talents and skills of the workforce. Many of the formalities which are to be fulfilled by both sectors externally are almost the same. Particularly the legal duties. Some of the successful parameters which are being practiced in the private organizations are as follows:

• Main focus on career growth, as well as career opportunities for all the employees, career increase of rate for key skills and talents, and technical career-tracks and skill-pay programs that communicate development and pays in one package. When employees become a number and the company does not focus on their development and career growth, they leave.

• Sharing the organization's success with employees to make them feel comfortable and part of the organization and its momentum.

• Moving off stock options and retention bonuses that destabilize the workforce and do not sustain the organization for the long term even though they put out the initial startup fire.

• Giving incorporated pay and total rewards programs customized to the workforce segment (core technology talent, sales/marketing talent, other talent).

• Making sure compensation also keeps pace with career growth. Pay main talent well; pay the most for the best talent because they are worth that investment.

• Hiring people for creativity, the potential for creativity and idea people, and rewarding those people well.

• Focusing on the organization's core technologies for example, the company is run by technology people, not marketing or lawyers; the company values science and does its own research and development, manufacturing and quality control.

• Business success and hiring great skilled people serves as a magnet for attracting other main talents.

Reward and compensation system in public sector:

The motivation, attraction and retention of talent requires more than simply pay, salary or wage. Whereas there seems to be a plenty of myths over facts when it comes to applying the reward and compensation system to the public sector, there as well appears to be agreement that a more comprehensive approach is necessary. Firstly It is important to simply recognize that attraction, motivation and retention are best influenced through a holistic approval for the full worth of the organization’s reward and compensation system investment in employees.

There are many varying approaches and systems, and some are further along on the journey than others, the reward and compensation system is already being deployed by many public sector organizations. Comparing the experiences of the public and private sectors, it would appear that reward and compensation system is almost the same in the public sector as in the private sector, just different. J Arthur. (2009). Compensation system tools.If we compare the private sector with public sector the public sector organizations face a different set of challenges when it comes to retaining, hiring, and motivating their employees. There are some practices which are slightly differently practiced in public sector as in private sector organizations. For instance, legal practices are different in public sector organization than the practices in private sector organizations. Some of the policies are stringent in organizations depending on the type of organization. Workers' reward and compensation system was first initiated in Germany in the 1800's. It happened due to a need seen to take care of injured workers so that they do not suffer physically or financially from injuries which resulted from working for a company. Workers' compensation then became common in the United States in between the 1930' sand 1940's. It is still practiced today in all 50 states. Workers’ reward and compensation system is same in Canada. Workers' reward and compensation laws and regulations are made by each state and are regulated by state officials. Employee benefits characteristically refers to health life insurance, retirement plans, old age benefits, disability insurance, vacations, etc. Each organization under the head of public sector functions and operates according to their specific set of rules and regulations for example the public sector cannot compete with the pay packages offered in private sector. Legal practices are different in each organization which so ever are suitable for them. For instance, the equal pay act (EPA) requires men and women who work for the same organization be paid the same for work that is equal in skill (such as experience or retaining), responsibility (the degree of accountability), efforts (mental or physical) and working conditions (the physical surroundings and hazards).