How Compensation Attracts, Motivates, and Retains a High-Quality Workforce
The role of the human resource department in organizations is changing rapidly from the traditional duty of maintaining a payroll to a more strategic function to enhance organizational success. The change is motivated by the increased competition in the corporate domain, making it challenging to maintain top talents in the place of work. Therefore, the human resource department is mandated to attract high-quality employees and motivate and retain them to maintain a competitive advantage. The success of an organization depends on how well the human resource department compensates and encourages its employees. Compensation in the corporate landscape is a systemic method of offering monetary value as an award to work executed (Martocchio, 2015). Compensation includes salaries, commissions, or other incentives to increase satisfaction and empower the employees to perform better. It is prudent to note that while the human resource department may introduce compensation to motivate employees, it must be done within the dictates of corporate law.
Role of Compensation in Attracting a High-Quality Workforce
Talented employees are ever searching for employment opportunities that meet their expectations. A survey conducted on 2000 American employees found that 41% of employees quit their jobs to join new organizations that pay well (Stansbury, 2021). Organizations that attract new talents use compensation packages to lure employees to join their organization. The organization can include fringe benefits in their advertisement for prospective candidates to feel underpaid in their current employment, and by so doing, companies attract devastated employees to quit their roles and join them. Whenever an organization revises its compensation plan to be ranked as one of the best places to work in the world, it will attract new employees, especially the top talents.
Compensation plays a significant role in employer branding, which helps in improving the company’s profile. Research on the most-paying employers on LinkedIn discovered that 81% of top talents are likely to move to organizations with a comprehensive compensation plan (Divandari et al., 2018). In creating the brand, the human resource department should find out the market rate and its impacts on employment and use a higher package to attract top-talent job seekers (Skelton et al., 2019). The compensation plan should be improved to be above the market rate as new talents always search for a compensation plan above the market standard. Setting compensation above the market rate is likely to attract new talents and consequently improve the talents in the organization.
Role of Compensation in Motivating a Workforce
Motivation in the corporate domain is any reason, energy, or commitment to act in a particular way. A motivated employee is enthusiastic, creative, and highly energetic to perform tasks. Most organizations fail to motivate employees, and whenever employees are not motivated, it is a prerequisite for low performance (Divandari et al., 2018). Once the human resource department acquires top talents, they must be motivated to perform their role effectively in the organization. The human resource department can use compensation packages to motivate employees by ensuring that the compensation is fair and makes the employees happy. For example, a company can introduce awards to pay the most creative employees or the ones that arrive to work early. In that case, the compensation technique will motivate employees and make them more creative and encourage them to arrive early at work.
Compensation plans, such as paid leave, give employees a work-life balance that makes them happy and more productive at work. Further, other incentives, such as commissions offered to salespeople, give them the energy to work harder and improve their commission amount. When bonuses are given to the best-performing employees at the end of a fiscal year, it will motivate them to work harder to maintain the rewards (Skelton et al., 2019). Additionally, those who did not get them work harder to be awarded in the subsequent fiscal year. When the human resource department plans compensation packages to make employees happy, they will be motivated and perform better.
Role of Compensation in Retaining a Workforce
Retention in employment is the ability of the organization to maintain employee sustainability. Retaining employees saves training costs and improves efficiency since people working in the organization gain experience over time. One of the main reasons why employees leave an organization is to advance their careers through academics (Stansbury, 2021). The human resource department can set aside a compensation package for career advancement where employees are entitled to a career advancement package after some time. When employees know that career advancement is possible in the organization, they are not likely to quit, hence maintaining higher performance in the organization. In China, 34% of the employee turnover is caused by underpayment or stagnant compensation schemes (Ezzamel, & Zhao, 2019). The human resources department must, therefore, ensure an annual compensation adjustment to make people enjoy increased pay due to staying longer in the organization. Developing a special package for the longest-serving employees motivates people to stay with the organization longer. As people strive to enjoy the compensation associated with the time of service, the employees are motivated to stay.
Summary
The human resource department plays a strategic role in organizations, and once it becomes dysfunctional, it negatively affects performance. The high competition in the corporate domain requires that a company attracts the top talents, motivates them to perform better, and ensures they are retained to achieve low employee turnover. Compensation plays a significant role in attracting new talents, primarily when it is used to brand employers. Further, compensation packages are fundamental in motivating and retaining employees. Organizations must therefore, empower the human resources managers to use compensation packages effectively.
References
Divandari, A., Nazari, M., Seyed Javadin, S. R., Haji Karimi, A., & Rayej, H. (2018). Investigating the Effect of Compensation on Individual Performance: A Study on the Mediating Role of Internal Motivation and the Moderating Role of Self-efficacy and Reward Expectancy. Journal of Business Management, 10(3), 673-694. Web.
Ezzamel, M., & Zhao, Y. (2019). Compensation disparity, underpayment and director turnover: Evidence from China. In Research Handbook of International Talent Management (pp. 247-272). Edward Elgar Publishing. Web.
Martocchio, J. J. (2015). Strategic compensation: A human resource management approach. Pearson Education India.
Skelton, A. R., Nattress, D., & Dwyer, R. J. (2019). Predicting manufacturing employee turnover intentions. Journal of Economics, Finance and Administrative Science. Web.
Stansbury, A. (2021). Do US firms have an incentive to comply with the FLSA and the NLRA? Peterson Institute for International Economics Working Paper, (21–9). Web.