Among the areas experiencing change today is the workplace, and, therefore, stakeholders must redefine compensation issues. Much is yet to be experienced in the coming years since organizations are becoming more flexible and agile.
The traditional compensation and reward will soon lose their meaning, as employees are not only motivated by money. Other means such as bonus plans, which are responsible for rewarding flexible work hours and hard workers, are now more welcomed than the usual financial aspects. When employees move and grow out of traditional compensation, they form a network that promotes high productivity levels. Therefore, the purpose of this paper will be to explain total compensation and review how this affects the hiring process in an organization by structurally engaging a few outside sources.
The Total Rewards
Total rewards are all about putting into account all manners in which employees are compensated both indirectly and directly. The resultant action creates dynamism in how the employees feel about their duties and realize they are valued by their employers (Mabaso 82). Such operation makes employees understand their worth in a culture-wide and more dynamized way concerning their relationships, hence assuring the employees’ needs to fine-tune the aspects of compensation. They, therefore, act among the decision-makers of the company.
Some of the issues which characterize a total reward mechanism may include the following. First, the variable compensation and incentive-based models are considered direct compensation in total rewards. Issues such as educational stipends, insurance coverage, paid off, savings, and wellness incentives for getting an annual physical or getting eyes checked as it is in my workplace amount to traditional compensation (Maurer). The compensation can go to the extreme by considering performance strategies, management styles, and rewards that recognize organizational success. Such is traditional compensation, and it has affected hiring practices.
In its reality, the traditional approach to compensation entailed the pay levels set, such as salary and wages. The employees would feel they are valued with the increase which accompanied the set pay. The increase traditionally was given for numerous reasons, among them the concerns about the cost of living, promotions, and merit (Maurer). This strategy has made employees realize and appreciate that due to the cost of living standards, there is ultimate compensation. The notion has been improvised with the introduction of nontraditional compensation. It means that many think compensation increases with the increase of external influence. This idea might be correct, but it is not what the managers are now considering when gratifying the employee with pay issues.
Non-Traditional Compensation and Its Impact on Hiring Practices
Nontraditional compensation is also known as indirect compensation, including long-term incentives, benefits, and reward programs. Today companies are tactical to the extent of choosing the indirect form of compensation as this helps retain workers besides impacting the hiring process. Nontraditional compensation ensures employees feel rewarded and engaged for a job well done. Such a feeling makes other job seekers feel attracted to the company as it acts as a signal of a well-paying company.
The more this method is used, the more job seekers want to identify with it. It means this style of compensation sells the company, and in so doing, the employer is framed as one who values the employees (Maurer). Of course, every employee will want to be associated with such a company, so they will come in looking for employment. When it happens, it makes the talent acquisition professional more open-minded, considering they will have many applicants who want to work for them.
The requirement for managers then will be to have proper ways of looking at resumes so that they do not miss out on diverse and enthusiastic hires. In that perspective, nontraditional compensation attracts a larger pool of people looking for employment, with a company’s preference, which adheres to this technique of compensation. This compensation, therefore, ensures the company is competitive in terms of acquiring influential and skilled workers (Mabaso 82).
Such a benefit male, the company, to easily tip the scale in its favor, making the company’s brand appear attractive and more competitive. When an employee is seeking the right job, the first thing they consider is compensation. Therefore, the hiring process in such an environment becomes competitive for those seeking employment but lucrative to the company because they will have various job seekers to choose from.
Indirect compensation management acts as a pillar of effective human resource administration. When there is reliable indirect compensation, the company can retain and attract the brightest and best employees. When there is high retention of employees, the company then will have a high turnover. According to Manurung, employee turnover is always expensive as it involves issues such as the hiring process and employee training (86).
High turnover, however, if not taken with appropriate consideration, lowers the morale of the workers. On the other hand, when an employee leaves a company, the organization loses knowledge and skills. Ultimately, if the company spends time recruiting, it means the managers also need to spend more time encouraging and engaging the high performers. In that regard, as much as nontraditional compensation is reasonable, when it comes to hiring, the process becomes slower because of the countless numbers of interested workers.
Hertzberg talks about motivation-hygiene theory, which he did as an investigation. Among the 200 accountants and engineers he engaged, the researcher noted that there are aspects of maintenance and distinction in every workplace (Alrawahi et al.). The author also discovered an interconnection of hygiene, motivation, and satisfaction (Johnson). From the writer’s observation, some conditions usually dissatisfy employees or do not strongly motivate the employees. Traditionally, most managers would perceive these conditions as motivators but appear as dissatisfiers. The unfortunate part is that factors that are dissatisfying lower employee motivation to a zero mark. Hiring appears as one type of motivation for employees, although not directly linked to the indirect or traditional incentives.
The theory of motivation-hygiene, together with Maslow’s hierarchy of needs, has worked to establish what works best in a work situation. Herzberg reveals that attention is essential if the managers are to ensure positive motivation (Alrawahi et al.). This means motivators are the non-financial issues occurring in indirect compensation. Therefore, opportunities for employee training and the appreciation of those who have served long, and issues about promotions are essential to motivation. An environment that is motivating controls the hiring process, and in most cases, makes the hiring process slow.
It makes sense to agree that when employees are motivated, they commit to delivering the best and become responsible for their duties. Therefore, the only reason for hiring would be to replace those who die or get retired. Otherwise, the production will be high because all the employees, when motivated, invest a lot in their work (Manurung 87). Thus far, it is arguably correct to note that indirect compensation offers motivation and ultimately hinders the hiring process.
What people look for are satisfiers, who work to support both the sides the employers and the employees. When indirect compensation is continuously used, the organization becomes satisfied and hence reduces the rate of hiring. On the other hand, when indirect compensation is used in a company, the employees become satisfied and therefore find no reason to leave but attract newcomers. Nontraditional compensation, therefore, established that those who gain are satisfied (Maurer).
Hiring, therefore, becomes blocked in a region where newcomers are many, and the outgoing or the layoffs are few unless another company is created. The ultimate reasoning in this regard is that nontraditional compensation discourages the demands of hiring new employees. The fortunate part is that the strategy works best to lure employees from competitors and entice new talents to enter the workforce.
In conclusion, compensation models have transitioned to embrace modernity for the past ten and more years. Managers are no longer confined to giving money to the employees as compensation but have improvised other means to ensure the workers feel valued and rewarded. This approach attracts new entrants to the workforce and, therefore, alters the hiring process. However, it can either make the hiring process occur positively or negatively, depending on who gets the favor.
This approach is a threat to the competitor because it easily lures employees of the competitors into abandoning their work to another company offering similar products and services. This means nontraditional compensation and hiring processes collaborate in ensuring companies get what they want in terms of employees and productivity. That is why the managers who understand the secret are now confined to this strategy.
Alrawahi, Samira, et al. “The application of Herzberg’s two-factor theory of motivation to job satisfaction in clinical laboratories in Omani hospitals.” Heliyong Journal, vol. 6, no. 9, 2020, pp. 1.
Johnson, Blake. “Total Rewards and Compensation: Understanding the Essentials.” HR Gazatte, 2019. Web.
Mabaso, Calvin. “Impact of Compensation and Benefits on Job Satisfaction”. Research Journal of Business Management, vol. 11, no. 2, 2018, pp. 81-83.
Manurung, Siska. Purnama. “The Effect of Direct and Indirect Compensation to Employee’s Loyalty Case Study at Directorate of Human Resources in PT Pos Indonesia.” Journal of Indonesian Applied Economics, vol. 6, no.1, 2017, pp. 84-102.
Maurer, Roy. “Lesson for Recruiters: Take a Chance on Nontraditional Candidates.” SHRM, 2019. Web.