When a question is raised regarding the attractiveness of a job, the first thing that comes to mind is the salary. This is hardly surprising since it is the most approachable, transparent, and well-known way of rewarding employees. However, while employers’ market competitiveness can be indirectly assessed based on the salaries they offer to their workers, this is not the only defining factor. A range of bonuses and intangible rewards provided by the company may increase its competitiveness on the job market.
Recent trends displayed in the hiring practices show that salary does not have the dominant position in defining the company’s attractiveness for employees. It still plays a major role for people who seek an immediate and tangible reward but becomes less important once the questions of long-term involvement arise. More and more companies adopt the approach of a total compensation package, which includes some bonuses, compensations, and incentives that add to the attractiveness of the position (Martocchio, 2011). The incentives may include medical insurance, payment for education of employees’ children, vacation coverage, and the membership in certain clubs or other establishments. A growing body of evidence suggests that such incentives contribute to employee loyalty and lower turnover rates more than salary does (Martocchio, 2011).
First, they communicate the company’s policy to the employees: for instance, family-oriented incentives promote the company’s desire to create a more friendly environment that does not compromise personal life. Second, the comprise the “psychological contract” – an intangible concept that defines the employee’s expectations regarding the new job. As long as these expectations (not necessarily related to pay) are fulfilled, the workers stay satisfied, and the company retains its competitive advantage. Admittedly, the introduction of intangible rewards has a weak point: it requires the staff to be interested in the provided benefits. The improperly constructed compensation package can introduce additional spending without providing any actual improvement in employee satisfaction.
Admittedly, some of the compensation options are of limited use for companies with limited financial capabilities – for instance, the membership in a gym or a traveling bonuses still requires financial coverage from the employer. However, they are flexible enough to allow for an effective HRM policy at minimal expenses. An alternative approach may be establishing partnerships. A gym subscription, for instance, may be provided to company A’s employees by company B which owns a network of gyms based on the negotiated terms. Transportation, traveling, cellphone fee, education, and training are some of the other fields which may increase the attractiveness of the job for applicants.
Finally, the companies oriented primarily at profit can utilize profit-sharing bonuses as an alternative. This approach has one notable advantage: it stimulates the employees to maximize their efficiency by establishing a direct relationship between their output and the reward. It also is more streamlined and simple than the fixed pay as it is not dependent on the synchronization with the rest of the job market – instead, it is calculated based on the company’s revenues (Berger & Berger, 2015). It also fosters trust between the employer and the team, as it is a more “honest” way of reward than a fixed salary. However, it requires a certain amount of caution as it can repel applicants with more conservative traditional views. Besides, in its most basic form, it suggests dividing the payment equally across the team, which can create the feeling of unfair treatment among employees with higher output.
To minimize the drawbacks associated with the implementation of these approaches, several preliminary measures should be introduced. First, an analysis of the market must be conducted to determine the estimated bonus derived from the predicted profits. This would allow us to adjust the bonuses to the employee demand and illustrate possible attractiveness for the applicants to prepare the grounds for a hiring department.
Second, the company’s structure must be analyzed to determine the roles each member plays in the process. In case the difference is significant, individual bonus schemes must be implemented to fairly compensate each employee (Berger & Berger, 2015). On the contrary, if the difference can be ignored, a more encompassing approach must be sought to create a sense of interdependence and mutual vision and values.
Third, a target audience should be determined. This will allow excluding unnecessary emphases in the hiring practices and help in conceiving the appropriate compensation package.
Fourth, a study of the needs of potential employees must be conducted to balance the package. For instance, if the company is strongly oriented at profits and decides to introduce the individual profit-sharing schemes, it will likely be attractive to the performance-oriented, energetic, and strongly motivated people. Such an audience rarely considers family-oriented incentives as a primary selling point and focuses instead on opportunities for growth (Martocchio, 2011). Thus, it would be wise to provide them with educational and training options at the company’s expense.
Finally, the selected elements of the package must be analyzed to determine their cost and compared to their perceived value. Partnerships must be sought whenever possible to decrease expenses and increase the net value of each element to maximize the efficiency of the package.
References
Berger, L., & Berger, D. (2015). The compensation handbook, sixth edition: A state-of-the-art guide to compensation strategy and design. New York, NY: McGraw Hill Professional.
Martocchio, J.J. (2011). Strategic compensation: A human resource management approach. Upper Saddle River, NJ: Prentice Hall.