Human Resources Best Practices for Compensation


The company’s employees are the most productive when they are motivated to achieve their goals. Often there are cases when an employee is under stress from work, and the absence of days off or vacation only aggravates the situation. As a result, such an employee does not demonstrate efficiency and the company’s metrics fall. The solution to this problem lies in specially developed plans by HR. Compensation programs are a tool used by employers for effective attraction, retention, and stimulation of employees, guaranteeing fair payment for work performance. This essay aims to discuss the HR compensation policy and to analyze two articles on this topic.

Why more Chinese millennials don’t want to work for multinationals

Journalist James Allen described an exciting trend in HR practices of multinational companies in his work. His article is devoted to the reduced interest of Chinese in international companies with parallel increased employment with local firms (Allen, 2019). Between 2014 and 2019, the population was five times more likely to leave the multinationals and move to Chinese companies. Allen writes about the advantages that territorial corporations have over business giants. As a rule, Chinese people choose small but local companies due to their more flexible schedules and close minded.

It is worth clarifying that Allen is only partly concerned with the issue of compensation payments. However, this is one of the most important reasons for the phenomenon observed. According to Allen, the Chinese prefer differentiated compensation to growth opportunities in international organizations. Such a compensation system is quite popular in HRM, as it highlights the abilities of individual staff members. Some of the academic classes in the college were devoted to the study of HR compensation programs. It was noted that such a policy is useful in motivating staff to complete more work tasks. Moreover, the program can be modified by adding an evaluation rating. Each employee, regardless of the position they occupy, performs work tasks and receives a rating for that. The more productive the staff member is the higher their grade, and therefore the chance of being promoted.

It is not difficult to notice that such a differentiated system highlights the talents of some employees compared to others. The policy allows encouraging workers who show better results. The person receives a higher salary, which motivates them to continue being productive. On the other hand, the system helps to identify underperforming workers. The HR department, having the data on efficiency, can direct some colleagues in the correct direction, bringing benefits not only to the employee but also to the company. Otherwise, HR may decide to dismiss a non-productive employee, from which the company will also benefit in the future. The differentiated compensation system is selective in rewarding employees, offering them the kind of bonus that is fair. In other words, the manager of a large department who demonstrates good results can hardly be impressed by a new work phone. Instead, HR can offer them a more substantial office and a personal assistant.

Toyota rolls out bigger compensation plan for top executives

Last year’s article, written by Sean McLain, demonstrates a significant phenomenon for HR practice. As a rule, people are convinced that bonuses and motivation programs are designed only for non-directed workers. When it is said that a programmer or engineer receives additional bonus payments, it does not cause any questions. Nevertheless, top managers of corporations are, in fact, employees who need motivation as well. McLain talks about the experience of the Japanese company Toyota, which has almost doubled its compensation payments to executives (McLain, 2019). Thus, the number of payments will be 63 million dollars, but more than 50% of compensation will be paid in the form of shares.

Executive compensation is a fundamental issue that investors should consider when making decisions. An improperly compensated executive board may cost shareholders money and may create an executive group that lacks incentives to increase profits and share prices. Such an issue was also considered by us during the learning process when it was said that most compensation payments for CEO are made as bonuses rather than in the form of money. HR is working to ensure that such payments are transparent, ensuring that there are no fraudulent schemes. This increases investor confidence in obtaining reliable information, which has a positive impact on the company’s economic growth.

Such a measure can have a remarkably beneficial impact on the management sector. Higher executive compensation will have a double effect on the top manager. On the one hand, a manager, by receiving higher compensation, acquires motivation to increase efficiency. Managers who receive improper compensation may have no incentive to do so in the interest of shareholders, which may be costly for those shareholders. On the other hand, the exciting move made by the CEO and HR makes it possible to make the top manager pay more attention to share values. The person who receives most of the compensation in the form of corporate shares is interested in increasing the value of the securities.


In conclusion, it should be noted that there are many ways to inspire employees to be productive in HR practice. The most effective means is still cash payments. An employee who receives bonuses is more motivated than others to increase his or her productivity. The compensation policy works not only with ordinary employees but also with managers, designing for them the right vector of the company development. The HR department plays an essential role in determining the size and type of compensation. An honest and fair approach to compensation is a crucial component for creating a successful compensation and reward program. Perceived dishonesty or unfairness of payments leads to the reduction of morale and organizational efficiency. If employees feel they are unfairly compensated, they limit their efforts or leave the organization.


Allen, J. (2019). Why more Chinese millennials don’t want to work for multinationals. The Wall Street Journal. Web.

McLain, S. (2019). Toyota rolls out bigger compensation plan for top executives. The Wall Street Journal. Web.

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