Diminishing ETO by proper Remuneration and Benefits

 Remuneration is the reward paid to the employee for the work the service they provide to the organization. Remuneration consists of money, free food, unlimited paid time off, healthcare benefits, bonuses, and pension schemes. In some organizations this package is created according to the qualifications and work experience of the employee while other companies provide a fixed compensation according to the designation. All this forms a part of the employees’ remuneration, which can be financial or non-financial in nature (Wooll, 2022).

Benefits refer to a non-financial reward given to an worker as token of appreciation for their work. Among most companies’ popular benefits are work from home, gym memberships, meals, flexible dress codes and to work at flexible work hours. These are called benefits and they varied according to the company of the employee (Vulpen, 2022).

 

Why are Remuneration and benefits important?

In a company employee need to be well treated to reduce the employee turnover. Best method to retain the employee within the organization is to pay a proper industry standard remuneration package. In the globalizing world, most of the remuneration packages are transparent and employees may try to migrate to a well-paying company. Therefore, organizations should create a globalized, updated and individualized remuneration package when employee get hired.

 

Proper Remuneration in Globalizing Environment

In the modern world with the globalizing environment, integration of goods, factors, technology has coincided in the past two decades with a shift in labor demand away from less skilled workers to highly skilled workers. This shift has widened the inequity between two types of worker types. In the increase of demand to highly skilled workers in the globalizing world, remuneration competition also been started along with the companies of same industry (Matthew, 1997). As an example, In Sri Lanka Dialog Axiata company has started a higher remuneration package to get the highest skilled employees to their organization. Then the competitor Mobitel has also incorporated high levels of remuneration packages along with the Dialog Axiata, As the largest telecommunication provider in Sri Lanka these two companies are in a competition to recruit most talented workers to their organization.

Another main example is that the initiative taken by the company Starbucks to eliminate gender and race pay gaps within the organization.  They started sharing pay equity data with everyone and pay ranges with candidates when asked.

Ten years ago, the Starbucks set out to study wage disparities among its workers and close any existing gender and race pay gaps. Last year, they announced a breakthrough, and it was 100% pay equity across its U.S outlets. Above initiative has provided less employee turnover and high retention rate. Therefore, we can assume that this is a good initiative that has been taken by Starbucks in a globalized competitive work culture. These efforts earned Starbucks a lot of positive publicity, helping boost its employer brand and making it easier to attract great talent (McLaren, 2019).

 

By providing proper remuneration packages and benefits to employees will easily increase the employee retention while gradually increasing organizational performance since employees work hard to achieve the company goals with the motivation, they get from their compensation package.

 

 

Creating Remuneration Package using SHRM

In the process of creating a proper remuneration package for employees, employer should consider number of criteria’s that should be included. They are,

·        Salary or hourly wages

·        Retirement savings

·        Paid time off

·        Health insurance

·        Performance bonuses

·        Profit-sharing

·        Stock options

·        Supplemental insurance

·        Travel reimbursement

·        Uniforms/suits

·        Relocation bonuses

By considering all the factors of a remuneration package employer should consider the amount that should be allocated according to the qualifications, experience, and resources of the employee.

When we consider creating a compensation package to the employees, there are two main types of compensations. All of those types combined will be called as Total Compensations of the employee. This is the factor that employees look when retaining in a company (Taylor, 2022).

·        Direct Compensation

·        Indirect Compensation

 

By including both types of compensation benefits to the employee’s wage will increase the employee retention. Therefore, we can easily increase the organizational performance.

As below, Intel Company has created an animate video regarding the remuneration and benefits given to the employees of the Intel.

 

How can an attractive remuneration package be useful for the organization?

In the process of discussing the remuneration package, we should identify the advantages of giving an attractive remuneration package to the employees. There are number of advantages that will help gain a positive outcome towards organization.

·        Recruitment and retention – By using an attractive remuneration package, company can easily recruit the needed talent over their rivals and retain the recruited staff for a long period of time

·        Raising or maintaining employee morale – increasing employee moral will lead to work efficiency and it will directly affect the organizational performance.

·        Rewarding high-performance workers- By rewarding high performance workers, employer can easily retain that specific work to get his performance to achieve company goals.

·        Achieving internal and external pay equity – By maintaining a pay equity will help in increasing team spirit and positive work culture of the organization.

·        Increasing employee loyalty – Employee loyalty conducts a main role in managing a organization without frauds.

Remuneration to Increase organizational Performance

In the process of reducing the employee turnover organization’s goal is to increase their organizational performance to a higher level. By compensating the employees in a proper manner, employees may tend to work towards achieving companies’ goals and targets with a motivated manner.

Most of companies may give cutting edge compensation packages with benefits like allowing employees to buy stocks from their own company. By this strategic management can easily motivate employees to work achieving company goals since they are willing to increase the value of the stocks they own. Whatishr.com says that social networking companies like, Facebook offered "stock option" to its employees those who stick to the company for a period of two years. similarly, Twitter, Google and Amazon have included stock option in the compensation package of their employees. Management experts feel that stock option is showing positive influence on retention of employees and termed it as a "Golden Handcuff ". There we can conclude that this ETO reduction practice can easily benefit the organizational performance in a positive manner.

Domino's Pizza chain in Worldwide give a task to its store managers to reduce ETO from a 158% down to 107%. To achieve this target, Domino's HR staff deployed a store manager strategy of hiring much more selectively, coaching them on how to create better workplaces, and motivating them with the promise of stock options and promotions. This has been a positive impact on the organizational performance since most of the experience workers retain within the business due this initiative.

By considering all the factors we can easily conclude that reducing employee turn over by providing an attractive remuneration package directly increase the organizational performance in a higher manner.

References

Matthew, 1997. The Effect of Globalization on Wages in the Advanaced Economics. International Monetory Fund, 1(1), pp. 1-3.

McLaren, S., 2019. Linked In Talent Blog. [Online]
Available at: https://www.linkedin.com/business/talent/blog/talent-strategy/why-these-companies-are-sharing-how-much-employees-make
[Accessed 20 November 2022].

Taylor, T. C., 2022. Compensation Package: A Guide For HR, s.l.: AIHR.

Vulpen, E. v., 2022. AIHR. [Online]
Available at: https://www.aihr.com/blog/compensation-and-benefits/
[Accessed 14 November 2022].

Wooll, M., 2022. Better Up. [Online]
Available at: https://www.betterup.com/blog/compensation-and-benefits
[Accessed 11 November 2022].