How Total Compensation and Total Rewards Affect the Productivity of Employees

In Business Skills, Management Skills
Total Compnesationi V.S. Total Rewards

Understanding the strategic talent management is a must if an HR Manager wants to improve the manager effectiveness and bring about positive business results in an organization or company. There are a number of important efforts in the strategic talent management such as compensation planning, total rewards, and performance management. In this topic, you are going to find out how compensation and rewards affect the productivity of your employees. But before discussing further, firstly, know the difference between total compensation and total rewards.

The Difference between Total Compensation and Total Rewards

Understanding Total Compensation

Commonly, organizations give total compensation to the employees as a ploy to value the employees. So, the definition of total compensation is the value in term complete pay package handed over to the employees annually, either direct or indirect. The total compensation covers;

  • Basic Salary
  • Incentive Pay, and
  • Equity

Meanwhile, the total compensation of an employee is to another employee based on the occupation in the organization and may vary from one company to another company.

Understanding Total Rewards

Total Rewards are the strategy to motivate and attain employees in the forms of programs such as health care benefits, retirement, vacation, and travel that are given to the employees based on their value or position in the organization.

The total rewards programs are given to the employees based on the company policies. In other words, the total rewards programs of an organization or company are the benefits and perks of joining the organization or company. Generally, the HR Department of a company communicates this information to establish a better engagement with the employees.

Total Compensation V.S. Total Rewards

Basically, the total rewards programs are a more consistent than the total compensation in the approachment. Typically, total compensation is an annual program to award the work performance of the employees. While total rewards programs are given to the employees as the facilitation in a continual approach by intensifying them to get the benefits perks of working in the company.

So, the Human Resource Department of a company should communicate the total compensation and total reward before the prospective employees join the company. Both total compensation and total rewards information can be used to attract valuable people to join the company.

The Factors That Affect the Productivity of Employees

There are several factors that should be performed to achieve employees’ productivity such as managerial factor, employees’ health, the motivation of the employees, and interpersonal communication within the operational process. The motivational and health factors are strongly influenced by the well-being of employees. Meanwhile, the welfare of the employees is strongly linked with the given total compensation to the employees. The compensation factor is enormously affecting the productivity of the employees.

The main purpose of compensation is to encourage the employees to work by offering a decent salary compensation rate to cover their personal costs and family welfare. Generally, a company that is capable of giving good compensation to the employees will automatically encourage them to contribute good productivity towards the company.

The good compensation for employees either will be able to stimulate them to generate good ideas and innovation. Fresh and good ideas from the employees in an organization or company are very useful for the efficiency and effectiveness in running the business as they would be used in the evaluation and improvement of the performance of the employees itself.

Providing a set decent compensation combination towards the employees can help them to make good health. As a result, they would be capable of contributing maximum work performance and the company earns good productivity in total.

Whereas, if employees only get the regional minimum wage of salary as the compensation, they have no encouragement and there’s no doubt that they would be often absent for various reasons. Such condition would make ineffective production planning in the company.

Additionally, the low compensation plan of the employees will trigger them to have their own business or side job. As a result, their focus is more toward their own business instead of the company’s goals. The low concentrations of the employees in a company have a negative impact towards the quality of production in the company.

Finally, instead of getting quality goods can be sold, the company should think about how to prevent failures in production process. The failures in the production process could be the disposal of raw materials, production cost waste, and could be other wastes in lean manufacturing.

In this modern era, giving priority towards the principle of balance between the employees and the company is a must. Finally, giving a reasonable compensation to the employees is strongly encouraging them to make good productivity.

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