⭐⭐⭐⭐⭐ Advantages And Disadvantages Of Fringe Benefits
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The Importance of Fringe Benefits
Measuring performance is often a problem in most organizations due to the weaknesses of the available appraisal systems. Most managers find it difficult to measure work in most occupations, especially, if a given task has to be completed by several people. In this case, it is difficult to determine the employee who is supposed to receive financial rewards. Identifying the right metrics for measuring performance is one of the major challenges that hinder the application of performance-related pay systems. Appraisal systems often fail because they do not measure the actual effort or performance of the employees.
Additionally, some employees fail to understand the criteria for measuring performance. The challenges associated with measuring performance often lead to conflicts between managers and employees concerning the amount of bonus or salary increments that should be paid. This leads to low motivation and high dissatisfaction among employees. Similarly, productivity will reduce if employees believe that their contributions to the company cannot be recognized through a fair appraisal system.
Concisely, employees who are underperforming are likely to consider appraisals as a means of punishing them because it leads to a reduction of their salaries. In this regard, employees may become defensive during the appraisals rather than accepting targets that are more challenging. Additionally, underperforming employees are likely to cover up their weaknesses when their salaries are at stake. Consequently, it will be difficult to identify their training and development needs. As a result, the underperformers will continue to record poor results, thereby reducing the competitiveness of the organization. Second, the effect of performance-related pay systems on motivation is unclear Randle , pp.
While proponents of the system believe that it has positive effects on motivation, its opponents opine that it has little or no contributions to employee motivation. Similarly, salary increments are often awarded in small percentages in order to avoid high labor costs. In this regard, performance-related pay systems fail to motivate employees since the financial reward is not likely to be a true reflection of their effort.
This is because most organizations find it difficult to sustain salary increments and bonus payment due to profit reductions in their industries. Payment schemes that depend on profits hardly facilitate motivation. This is because financial performance of the company depends on several factors, which employees might not be able to control. In this regard, a performance-related pay can only be effective if it is used to strengthen a motivational system that has non-monetary rewards such as training. Third, performance-related pay systems often worsen the problem of pay inequality. Since it is not easy to measure individual performance objectively, some employees will always earn more than they deserve while others will receive less.
In socialist communities, an unequal pay system can lead to serious legal battles. Labor suits are not only expensive, but are also likely to tarnish the reputation of the company in the labor market. Performance-related pay systems often weaken trade unions and limit the success of collective bargaining processes Heery , pp. This is because remuneration decisions are related to individuals rather than groups of employees. In this regard, trade unions cannot easily negotiate for better pay, especially, if there are little or no improvements in the value of products.
Fourth, performance-related pay systems often fail due to the unavailability of the right mix of rewards. The most common forms of financial rewards include commission, bonus, and salary increment. Some organizations might not be able to use any of these rewards due to poor financial performance Marsden , pp. In some cases, choosing the right financial reward tends to be difficult. Bonus and commissions are relatively cheaper than salary increments. However, determining the percentage of the bonus or the commission to be paid is often very difficulty. This difficulty is attributed to the complications associated with measuring work. However, paying commissions or bonuses at a high percentage might not be sustainable due to the competing needs of the organization.
Hence, it will not have any impact in the organization. Fifth, recent research findings indicate that performance-related pay systems can discourage teamwork rather than promoting it Marsden , pp. The system can be divisive as employees try to achieve their performance targets. In particular, employees are likely to pay little attention to team activities if they are aware of the fact that free rides will benefit from their efforts. In some cases, employees tend to devote much of their effort to pursuing personal targets at the expense of their teams. In this regard, employees often avoid tasks that require teamwork.
This leads to poor performance and low product quality. Competition among employees can also lead to poor teamwork. Poor performers can opt for unorthodox means such as sabotage in order to reduce the income disparity between them and the high performers within a team. For instance, poor performers can be reluctant to share vital information with excellent performers.
Consequently, the productivity and the earnings of the high performers will decline, thereby reducing the salary disparity in the team. Divisions can also emerge if the overall objectives of the team limit the ability of its members to improve their achievements. In this context, team members might not be able to agree on the objectives that should adopt. Finally, implementing performance-related pay systems is often very expensive. The system can only succeed if the company is able to use an effective approach to appraisal. In this regard, the company might have to replace its appraisal system in order to implement a performance-related pay scheme.
Research indicates that introducing a new appraisal system is often expensive and time-consuming Marsden , pp. For instance, the company might incur high costs by conducting research on the best appraisal system to adopt. In some cases, the organization will have to hire external consultants to design a new appraisal system. Independent or external consultants are often expensive and might fail to understand the appraisal needs of the organization. After adopting the new appraisal system, managers and supervisors must receive adequate training on how to use it. Similarly, the management must create awareness among employees on how the system works. These trainings increase the cost of implementing the performance-related pay system. Finally, the company must have adequate funds that will enable it to offer financial rewards to its employees.
Some pay schemes such as sales commissions can significantly reduce profit margins. Furthermore, providing financial rewards can be unsustainable during periods of low sales and profitability. It is apparent that a performance-related pay system will fail if the company is not able to keep its promise of rewarding employees through financial compensations.
Performance-related pay is a remuneration system in which employees are paid according to their performance. In this system, financial incentives such as bonuses, commissions, and salary increments are used to reward employees. Proponents of performance-related pay systems believe that they are a means of providing incentives to employees. Additionally, the system is an important control mechanism that enables organizations to influence the behaviors and performance of their employees. Despite these benefits, the application of performance-related pay system is limited due to the following reasons.
Learn More. Another trending benefit plan that companies now a day benefit the employees with is wellness programs. These programs focus on improving the overall health of the employees in an organization. This could include Gym facilities, stress management classes, smoking cessation, exercise classes, yoga centers etc. This also covers for better time management when these facilities are available right in the office premises and keeps the employees happy. Wellness programs have shown a drastic impact on the overall productivity and efficiency of the employees.
Longer duration has shown that investment in wellness programs have shown a great returns and companies expand the number of such facilities who are able to tap the benefits. Employees are often seen interested in improving their skills and growing with the passing of time. Work and self-improvement balance is regarding high amongst most employees. Most organizations are seen supporting employees with their education plans or skill development classes especially when they are eventually going to benefit from it. Employee development leads to employee retention and it is also an integral part of creating a positive and growth related culture in an organization. Most employees appreciate employers for funding their higher education. Benefits for employers with highly qualified and skilled staff who is loyal to the organization, which is a win-win situation for all.
There are many organizations who take care of employees mental and psychological development also. This plan may range from providing support to counseling for employees who might show the need. This benefit may involve high investment and specified programs. The employees may be going through a rough patch and a support right there will help them take positive decisions for themselves as opposed to some mismanaged, random, in the most moment, self destructive steps. Companies are often seen providing benefits to employees as a need. Here are the main reasons which compels companies to so. There is no denying the fact that the main reason why companies spend so much on designing benefit plans for the employees is — Motivation.
Benefits are designed to increase the work efficiency and keep the employees motivated. When employees receive perks or benefits for creating a new solution or developing an organization, they are motivated to do more and are often seen adding to a positive work culture. Employee Benefit plan can allow the organization to create a special workforce focused on achieving a specific target. For example: a particular sales for a period can be achieved by introducing a plan that would inspire the employees to work towards it. At the time of recruitment, these benefits creates a positive image of the organization that allows young and talented individuals to join the organization. They give positive edge to companies against their competitors.
Organizations are also seen keeping the talent within the organizations because of the benefits plans they offer. This leads to development of strong organization who have experienced professional working for them. With various health benefits and wellness programs that are offered, organization enjoys a healthy workforce. This directly affects the absenteeism and retention of employees. With health benefits for employees also take that initiative to visit a specialist in case of problems and not procrastinate.
Advantages of health insurance benefit plans increase the productivity of the business. Mostly benefit plans are designed to create favorable situation for both employees and employers. The planning issues and execution may sometime lead to situation where these plans result in disadvantageous situation. Risks of such plans could be. High cost of benefits plans is the most poignant disadvantage. This is a lot of load on the company. Even government payout ratio for certain plans is quite high. It is seen that when these plans are not fully utilized then the investment made in them becomes waste and create a burden on the company. There are many benefit plans that can be offered to the employees. Mostly companies have to make an estimate of the benefits that are required by the employees and suits the demands of the states.
This involves a lot of research for which companies have to bear a lot of cost. Along with this an estimation error could mean waste of energy and resources. Most organizations are not in a position to offer certain type of benefits but offer them due to industry demands which is detrimental to the organization. Employee Benefit plan is enormous and involve a high level of paper work and documentation. Also, the phase the organization is in influences the choice of benefit plans offered. If there are changes in the plans due to change in polices the process involves an extra burden and cost on the organization.
A separate department and administration is needed by the organization to keep all the documentation up to date. Mostly small business fall prey to making expensive errors in benefits offered to employees. There are a few simple things that can be kept in mind to ensure that no such errors are made and that the plans offered benefits the employees and saves cost to the organization.
Many a times it is seen that employers make contribution to benefits that are not even needed. This leads to a huge cost that the organization has to bear without receiving any advantages in return. A good strategy here is to involve employees in the plan. Ask for a minimal amount that needs to be contributed by the employees, this helps a lot in identifying who are the ones that really use the benefits. For example: In insurance plans, since they are provided for free the employees opt for them, a simple portion in the premium by them will make them read the offer and sign up for what they would really need. This happens when a separate team for administration is not set up. Mostly small organizations do that in order to save some money, which leads to extra cost instead.
Generally, organization delegates the work to employees who wear 12 different hats.A good strategy here is to involve employees in the define cultural imperialism. Are there any fringe benefits in equine rehabilitation therapy? Advantages and disadvantages of fringe benefits Flexibility Because cashiers advantages and disadvantages of fringe benefits in retail and other businesses that cater to the public, they often have a advantages and disadvantages of fringe benefits of scheduling flexibility. There are several notable advantages -- as well as advantages and disadvantages of fringe benefits -- to having a company clockwork orange beethoven.