Executive Summary
Does the adage ‘You Cannot Buy Happiness’ stand true in organizations of today? When employee satisfaction and happiness is weighed, do the results tell the story of the most highly compensated employees being the happiest or it is a different story. A second version may tell the tale of highly motivated and engaged employees sharing in an organization’s success while finding great happiness on the job. Government regulated laws influence the design of a total compensation package while benefits, tangible and intangible can enhance it. Compensation affects a person sociologically, psychologically, and economically and should be carefully crafted to protect the interests of the individual and the organization.
Legislation
Federal legislation such as the Civil Rights Act, the Age Discrimination Act, and the Americans with Disabilities Act have been established to govern the hiring practices of businesses and to protect the diverse population of job seekers. The regulations, while protecting candidates against unfair or negligent hiring practices, also have a political impact on compensation. A diverse applicant pool complied of minorities from various groups are entitled to the same job opportunities and compensation as the traditional workforce regardless of race, color, sex, religion, or national origin.
Civil Rights Act of 1964
First, title VII of the Civil Rights Act of 1964 in conjunction with the Equal Pay act of 1963 prohibits employment discrimination based on race, color, religion, sex and national origin. This legislation protects the rights of employees to be free from discrimination in the workplace including compensation. Discrimination in compensation may occur in various manners. As an example, an employer may set the compensation rate for a position most commonly held by females at a lower rate. This would be construed as discrimination and a violation of the Civil Rights Act. Thus, it is important for human resource managers to utilize compensation strategies and tools to determine appropriate market wages for each position in the organization.
Age Discrimination in Employment Act (ADEA)
Second, according to the U.S Equal Employment Opportunity Commission, “the Age Discrimination in Employment Act (ADEA) forbids age discrimination against people who are age 40 or older,” (n.d., Para.2). Similar to the Civil Rights Act, the ADEA protects the rights of employees 40 and older to be free from discrimination in the workplace including compensation. Age discrimination related to compensation may take the form of reducing the offered salary to a job candidate over the age of 40 to discourage them from accepting the position. Or alternatively, increasing the compensation rate of a person over the age of 4 because they may be the head of household providing for several dependents. Moving away from a job-based compensation plan and utilization of a skill-based compensation plan may be an effective method to protect an organization from violating the ADEA. Skill based compensation plans also offer advantages to the company creating a more flexible workforce.
Americans with Disabilities Act of 1990
Finally, when reflecting on government legislation protecting the compensation packages of the diverse workforce, the Americans with Disabilities Act of 1990 has an important, although somewhat limited, relationship to compensation. This act was established to require organizations to clearly define the essential functions of a position, ideally presented in a well thought out job description. Legally requiring the essential functions to be defined, provides a clear measure to determine is a person with a disability could perform in the job. “The problem is that since the major function of job descriptions in most organizations is compensation and not selection, the design of the job description is not set up for this purpose,” (Atchison, et al, 2013, p. 64). When designing the total compensation package for a position, human resource professionals employing an effective strategic compensation system use internal equity, market competitiveness, and individual recognition to develop human capital advancing companywide strategies and goals, (Martocchio, 2017, p. 12).
Benefits
Total compensation packages for an organization’s employees is often the largest line item when looking at the overall company budget. For this reason, organizations must weigh the three main components of the total compensation package—base salary, pay incentives, and indirect benefits/compensation—carefully to maintain competitive advantage. Once an employee’s total compensation package is designed at the proper market rate and employee packages offered based on position fit and experience, a unique potpourri of tangible and intangible benefits may be incorporated into the total compensation package. Many benefits are legally required while the offer of additional benefits, intrinsic or otherwise, may be used to effectively motivate employees while advancing organizational goals adding the most value through productivity and innovation.
Legally Required Benefits
Medicare, Social Security, workers’ compensation, and unemployment insurance (both state and federal) and are legally required benefits. The underlying purpose of legally required benefits is social insurance. According to Merriam-Webster’s collegiate dictionary, social insurance is defined as “protection of the individual against economic hazards (such as unemployment, old age, or disability) in which the government participates or enforces the participation of employers and affected individuals” (Merriam-Webster’s collegiate dictionary, 1999). Ultimately, social insurance is a method the government uses to ensure individuals can continue to manage financial responsibilities. As an example, in the event of a loss of a position due to no fault of their own, help is provided through unemployment insurance. If an injury should occur on the job, workers’ compensation is available to help cover medical expenses. Social Security and Medicare are available to individuals as they advance past the average working age. Organizations are required to provide these basic benefits to all employees to protect employee health and financial well-being.
Additional Benefits
“Research shows that employees severely undervalue their employer’s contributions to indirect compensation or benefits” and “often take their employer-funded benefits for granted” (Gomez-Mejia, Blakin, Cardy, 2016, p.288). Although often undervalued, a common trend has emerged in recent years where employees are putting less importance on pay and more importance on intangible compensation. “In general, companies that emphasize monetary rewards want to reinforce individual achievement and responsibility. Those that emphasize nonmonetary rewards prefer to reinforce commitment to the organization,” (Gomez-Mejia, Blakin, Cardy, 2016, p.298).
Intangible or intrinsic benefits may be a source of employee motivation that alleviates additional stress on the budget yet satisfies the needs of employees increasing job satisfaction and happiness. Examples of nonmonetary rewards may include autonomy over work tasks, career development coaching, worktime devoted to projects of the employee’s choice, flexible schedules, telecommuting, public recognition, gym memberships, or job sharing. Pink exclaims, “Autonomy measures can work in a range of fields – and offer a promising source for innovations and even institutional reforms,” (2011, p. 95).
Career Development
Employee development is an example of a benefit used to maintain employees through increased skills and motivation. Following the employee performance review and interview, training and development opportunities may become apparent. Training and development should encourage learning opportunities for the individual employee that are tied into the company’s strategic plan and in line with the accomplishment of the organizational goals.
Training programs are established to help an employee accomplish performance agreements, the job tasks associated with their role, in essence, what the company is paying them to do. Training ensures employees know “the correct way of doing their jobs” (Gomez, Blakin, and Cardy, 2016, p.236). Employee development ties more closely into coaching an employee to help them, and the organization, advance in the future. Career development is an opportunity to enhance an employee’s skillset to further their professional marketability.
Career development in an organization can have a direct impact on employee satisfaction and motivation in their role. Often development opportunities within an organization have a secondary benefit to employees promoting participation and adoption. Secondary benefits may include an opportunity for employee socialization, a break from routine work tasks, or a chance to experience learning outside of the typical office setting. Employee motivation may be even greater when the employees are surveyed for input that results in the training subject matter and session design.
As an example, an organization may institute a monthly 60-minute employee led career development session. Employees are given the opportunity to lead or attend each session. Topics that align with organizational goals and values are chosen by a cohort including employees of all levels. The agenda and design of the sessions are directed by a staff member for the other employees. In many circumstances worker engagement and motivation are increased when the employee’s input is valued and appreciated by not only their co-workers but also their supervisors. The sessions encourage an employee to step out of their everyday role to educate a peer group on a personal or professional topic of interest to further the goals of the organization. Positioning your employees as an expert or leader in an area will ultimately boost confidence and overall moral. Pink states this theory well in his book Drive, “When the reward is the activity itself–deepening learning, delighting customers, doing one’s best–there are no shortcuts” (20, p. 49).
Work-Life Balance
Recent studies have illuminated the benefit of a positive work-life balance may be one of the most attractive additional benefits an organization can add to their total compensation package. Work-life balance describes the intentions of an employee to better navigate the demands of their job as well as personal and familial obligations. When designing a compensation strategy, the promise of a work-life balance may be the icing on the cake for potential new hires.
Flexible Work Arrangements.
Flexibility in work arrangements are a benefit often added to compensation packages by human resource managers to increase the potential for employee work-life balance. Flexible work schedules are designed to increase productivity, job satisfaction and the work-life balance through the alteration of the weekly work schedule. Job sharing, flextime, telecommuting, or a compressed work week are benefits used to increase an employee’s work-life balance.
Many jobs may lend themselves to adopting a flexible arrangement. For example, a position in a call center does not necessarily require you to be in a certain location. Working hours may be assigned, however, with proper telephone and internet access you can answer a call and provide exceptional customer service from any location. Call center telecommute jobs have been implemented by some well know larger companies the United States such as Amazon. Jobs containing a high level of autonomy will lend themselves more easily to a flexible schedule.
Flexible work arrangement options may not be suitable for all types of positions. Jobs less likely to afford this type of flexibility may include production line workers or service professionals. While a production line worker or a medical professional may be able to implement a compressed work week, telecommuting would not be an option. An office manager may not have flexibility to work a compressed work week, although, with a well written job description, a job share opportunity may be an opportunity to gain a better work-life balance. Not only has the workforce seen an improved work-life balance, but also a decrease in brain drain when job sharing has been implemented. With proper training and management, implementing one of the flexible work arrangements may be appropriate for many jobs.
Conclusion
Reflection and adaptation of an organization’s total compensation package will enable the company to remain competitive in a changing market by honoring their most valuable resource, human resources. Legal guidelines exist to guide the design of compensation packages to ensure social insurance and help to eliminate the risk of discrimination claims. In addition to legally required benefits, an organization has many options when adding tangible or intangible benefits to their compensation philosophy. According to Nuñez “Employees tell us that articulating a prosperous career path for employees, hiring a competent executive team, and maintaining a positive culture appear to be far more important ways to ensure satisfied employees,” (2015, Para. 9). Research into and implementation of a compensation plan that is the best fit for the organization may be the first step towards employee happiness. Once employees’ basic needs are met, creating a vibrant culture, led by engaged top leaders, with opportunities for intangible benefits and opportunities for advancement through mastery will solidify the compensation plan leading to job satisfaction and happiness in the workplace.
References
- Atchison, T. J., Belcher, D. W., & Thomsen, D. J. (2013). Internet Based Benefits & Compensation Administration. Retrieved from https://www.erieri.com/dlc/onlinetextbook
- Gomez-Mejia, L., Blakin, D., & Cardy, R. (2016). Managing Human Resources. United States of America: Pearson. Retrieved from https://platform.virdocs.com/r/s/0/doc/243187/sp/10087692/mi/33778009/toc?cfi=%2F4%2F2%5BP700049518300000000000000000782E%5D%2F54%5BP7000495183000000000000000007849%5D%2C%2F1%3A0%2C%2F1%3A0
- Martocchio, J., 2017, Strategic Compensation: A Human Resource Management Approach, 9e. Retrieved from https://platform.virdocs.com/r/s/0/doc/244448/sp/15610597/mi/51744903?cfi=%2F4%2F2%5BP700049921400000000000000000048E%5D%2F10%5BP700049921400000000000000000049D%5D%2F6%5BP70004992140000000000000000004A2%5D
- Nuñez, M., Chamberlain, A., Chamberlain, A., & Chamberlain, A. (2015, June 18). Does Money Buy Happiness? The Link Between Salary and Employee Satisfaction. Retrieved from https://www.glassdoor.com/research/does-money-buy-happiness-the-link-between-salary-and-employee-satisfaction/
- Pink, D. H. (2011). Drive: The surprising truth about what motivates us. Edinburgh: Canongate.
- Social Insurance. (n.d.). In Merriam-Webster’s collegiate dictionary. Retrieved from https://www.merriam-webster.com/dictionary/social-insurance
- U.S Equal Employment Opportunity Commission. (n.d.). Retrieved from https://www.eeoc.gov/laws/types/age.cfm
