Organization experiencing challenges with its compensation and benefit Research Paper

Organization experiencing challenges with its compensation and benefit system - Research Paper Example This research paper describes the compensation practices undertaken in organizations have far reaching effects on the competitive advantage of the firm. In order to develop competitive advantage of a firm in the global market, the compensation plans developed by the firm must align with the strategic plans and actions of the same. Apart from the attainment of competitive advantage compensation practices also have influence over recruitments, turnover, productivity of labour, etc. in firms. Thus it is crucial that firms make thorough analysis of how people perceive about the firm’s compensation and how these perceptions consequently affect their behavior. A substantial amount of job satisfaction of employees depends on the amount of compensation that he receives as well as the benefits he derives from the organizations. The financial compensations complemented with adequate benefits such as insurances, sick leaves, paid vacations, discounts, pension plans etc. impacts on the sa tisfaction level of employees and subsequently their behavior and commitment towards the same. The American Airlines (AA) confronted with serious compensation and benefit issues due to the restricting of their compensation plans for employees. Due to the great losses incurred by American Airlines, one of the world’s largest airlines, the management had to undertake massive cost cutting and restructuring campaign with the purpose of restoring profitability. This resulted in massive job cuts of employees. The policy only invited random resistance from employees which further aggravated the amount of losses incurred by the company. ... The problem would be supported by presentation of critical literature which would include various arguments presented by researcher, practitioners and author and also empirical evidence on the subject. Thesis statement Following is the thesis statement developed for the study; Due to the critical role played by compensation and benefit plans on employees’ job satisfaction, commitment and productivity, companies need to strive to exploit full potential of their human resources through adequate compensation and benefit structures. Review of the Literature As organizations continue to be confronted with increased competitive pressures, they seek to achieve more using fewer resources. Along with the rise in emphasis on such aspects as sales volume, innovation, profits, quality etc, many cases have revealed tight control over employments with substantial employment cuts. The idea to manage human resources effectively using fewer employees has evolved over the years. Subsequently th e emphasis has shifted towards the system of employee compensation with the view to manage human resources better (Gerhart, Minkoff & Olsen, 1994, p.1). Employee compensation and benefits play a key role as it lies at the heart of employment relationships having critical importance for both employers and employees. The financial compensation paid by employers in the form of salaries and wages comprises of the main income of the employees. On the other hand benefits account for the health and other security of employees. A large proportion of employee’s job satisfaction and performance depends on the combination of both the compensation and benefits he receives. From the perspective of the employer, the compensation decisions undertaken influences the costs associated with doing the