Compensation Philosophy



Compensation philosophy is an important aspect of my organization. It helps in determining the level of compensation that different employees within the organization are going to get for their work by the end of the day or month. The philosophy is used as basis of ensuring that employees of the organization receive fair compensation for their work and there is no form of discrimination when it comes to rewarding employees’ efforts within the organization. The organizational compensation philosophy is the basis for promotion to be given to employees, pay increments and bonuses that employees will receive for their good work. The current organizational compensation philosophy needs a lot of improvements to cater for the growing needs of the organization as well as employees.

Current Compensation Philosophy

Currently the organization bases compensation on the employee’s skills, his educational levels and level of an employee within organization. Employees with high level of skills and experience tend to get higher compensation in comparison with those employees whose level of skills and experience is low. On the other hand, the company recognizes employees with higher education whereby they receive higher payment than their colleagues without higher education. The company bases increment of payment on the prevailing economic conditions, new level of skill and education, and number of working years within the organization. Bonuses are given to senior employees when their departments perform well in line with the goals and objectives of the organization.

Improvements in the Compensation Philosophy

A clear look at the reward and compensation system within the organization reveals that there are a number of factors that the system is based on. Management of the company is quite aware of the fact that reward and compensation system is the foundation of building a motivated workforce for the organization. The organization bases its compensation on a number of factors, such as experience, educational background, skills of employees in relation to their responsibilities and duties, though issues of performance of an employee and compensation of similar employees in the same industry are largely ignored. On the other hand, compensation should be a system based on the individual performance in relation to the achievement of set goals and objectives. The organization should provide incentives to its employees in form of rewards, such as in job training, career and development programs, promotions and others forms of rewards that are provided by the organization to its employees.

For purposes of building a highly motivated workforce, the management of the organization has been able to build an organizational culture that allows employees to seek for and at the same time achieve self-actualization (Jones, 2008). According to Maslow’s Hierarchy of Needs theory, there are five kinds of needs that human beings have. These needs are dependent on each other whereby one needs to fulfill the most basic ones before fulfilling the secondary ones. These needs include physiological needs, safety, love and belonging, esteem and self-actualization. Organization management should be aware of the fact that the organization is made of the people who have desires as well as wants that tend to influence their conduct (Murphy, 2009). The theory argues that only those needs that have not been satisfied tend to influence behavior of employees in an organization. If the organization is to build a highly motivated workforce, it must ensure that it make changes in the current compensation plan to include needs of all the employees, given that the current one discriminates junior employees who form an important part of the organization. Financial resources of the organization should be directed towards compensating employees depending on their individual as well as group efforts, rather than the current system that only recognizes skills, education and level of employee in the organization.

Management needs to use the strategy of creating a culture of giving gifts to the best team in order to encourage team work. Modeling collaborative behaviors as well as building heritage relationships can be vital in building an organization that has collaborative teams. Management of any given organization that intends to build collaborative teams in an organization needs to employ the above strategies with the aim of making the ideas workable (Schultz et al., 2010). It is crucial for the management to put in place structures in the organization that encourage collaboration within teams as well as across various teams in the organization. Using the strategy of gift culture has been effective in building collaboration within teams as they will be competing to produce the best results and this can be achieved only through collaboration (Steel & K?nig, 2006). The organization also needs to use its reward and compensation system to encourage innovation and creativity among its employees in order to come up with products that will always be competitive in the market at all times. The only way the organization can motivate its employees is by having a reward and compensation system that takes into account expectations of employees and follows ensuring that their expectations are met through salaries, rewards and wages they receive for their efforts and performance in the workplace.


In conclusion, motivation in any given organization largely depends on the reward and compensation system that has been put in place by an organization. Application of appropriate reward and compensation system in the organization helps in building a highly motivated workforce and this should be the case of my organization.

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