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Incorporating benefits and compensation programs in an organization, as pointed out by Pravin (2009), reflects the organization’s commitment in not only attracting and retaining talented employees, but motivating them as well. Through a well-designed package of compensations and benefits, employers and organizations are able to incorporate a comprehensive pay program that ensures that the talented employees are excelling both at work and at home.

As defined by Dunn (2010), compensation package is a combination of benefits that an organization or employer offers to employees. These packages may include disability insurance, wages, guaranteed high base salary, paid time off, free daily lunches, and other perks. However, the modes at which employees may enjoy these compensating packages depend on whether an organization incorporates direct or indirect compensation programs. According to Pravin (2009), both direct and indirect compensations are forms of value offered to employees in return for their top most contribution they have mandated to the organization.

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While direct compensation is attributed to employee’s base wage such as annual salary or payment for unscheduled time in exchange of employee’s labor and services, indirect compensation differ sparingly. According to Pravin (2009), indirect compensation entails benefits that are not given directly to the employee. They include such benefits as; contribution to their retirement accounts, medical insurance, and tax contribution. But as he points out, when developing a comprehensive and benefit packages, it is suitable to design packages that employees want to ensure that they understand and appreciate the role played by employer’s cost of benefits they receives.

Event though a report released by Rhode Island Public Expenditure Council (RIPEC) (2011) notes public and private sectors’ wages as primarily dictating the development of a well-designed compensation and benefits programs, there are similarities and differences to both sectors. The report points out that just like the private sector, public sector normally provides hourly rates or salaries and benefits such as sponsored healthcare, retirement plans, and paid leave in order to attract and retain top talented employees. However, the demographic composition has limited the compensation benefits especially that being enjoyed by employees in the private sectors as opposed to those on public sectors. In the report, employees in the public sectors tend to get higher salaries and increased benefit coverage which outpaces those in the private sectors.

Therefore, essential considerations must be taken into account in designing compensation and benefit packages. As Pravin (2009) points out, the necessity of the compensation and benefits to complement specific needs of employees should be considered when designing such plans. Additionally, he notes that the flexibility of well-designed and tailored compensation package in offering a combination of both direct and indirect financial and non-financial compensation should be looked at keenly. This will ensure that the offered benefit packages provided to employees adequately suit their every stage of their career. For instance, offering paycheck, commissions or even bonuses to younger and middle age workers keeps them off from paying more income tax which may affect their work levels. On the other hand, providing social security benefit, unemployment compensation, family, and medical leave to nearing retiring workers would attract more employees of such caliber as they would be able to share the same with their family members.


In conclusion, compensations and benefits are essential for the attraction and retention of top talented employees. There is thus the need for both the employer and the organization to assess the suitability and basic cost considerations that allow the effectiveness of incorporating comprehensive compensation plans. Employers should know that educational attainment and hard work coupled with motivation is a key for them to achieve their outlined objectives or goals.

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