LESSON 3: FRAME WORK OF COMPENSATION POLICY
MANAGEMENT
Learning Objectives
• To understand the concept of Framework.
• To know the Framework of a Compensation Policy
A compensation framework that supports a long-term strategic
vision for compensation and implements new initiatives, will
provide the needed direction, changes will involve moving
towards solving special salary problems using innovative
concepts.
The way we do compensation is undergoing major change
towards a more flexible and timely corporate compensation
systems. The new system will have increased delegation to
managers and will be driven by the business needs of
Government and ministries. It will be faster, more efficient and
eliminate duplication, focus on a long term approach to
compensation management.
Move from being highly centralized to a decentralized approach
whereby deputy ministers and senior mangers will have
increased authority to make decisions.
Integrate compensation with the other areas of human resource
management. And Emphasize transparency, monitoring,
reporting and accountability.
The vision for compensation will assist the pubic service in
attracting and retaining key employees.
Managers will have more accountability for the compensation
of their employees, and will be profiled with the required tools,
systems and support. Senior mangers will approve, within the
framework, exceptional compensation changes, based on sound
business decisions. Senior managers will also have authority to
approve the classification levels of pre-identified jobs within
their organization.
Framework of a Compensation Policy
Employee motivation and performance management depend
on good systems that offer both financial and non-financial
rewards (non-monetary rewards). This performance
management article applies to all organizations.
Constant change and high expectations are taking their toll in
some organisations, as well as in industry and government
generally. Sometimes this is shown in employee turnover.
Sometimes it is hidden because of job insecurity. Many
employees make a New Year’s resolution to seek other
employment. Many are also seeking more balance in their life.
Rewards and remuneration must be scrutinised. Employee
motivation and performance are critical. Non-monetary rewards
can be as important as monetary rewards.
In some organisations, a multitude of different salary and pay
arrangements exist. It is time to bring these different systems
into a new framework. Employees at all levels need to have
confidence in the salary administration system. Employees want
the rewards to be shared fairly and equitably. If they are not,
dissatisfaction can cause severe morale and performance
problems.
If they haven’t done so already, leading organisations will need
to establish an improved salary administration structure.
It is possible to develop a simple structure that overcomes the
difficulties of the past, yet is simple enough for everyone in the
organisation to understand. This structure can be tied to a
completely new performance management approach, including
better performance appraisal mechanisms.
Some industry’s remuneration systems have been dominated by
the industrial relations system. Enterprise bargaining and local
area work agreements, individual performance based contracts,
and the effect of competition on organisational structures, have
had a big impact.
A good rewards and remuneration system ensures that each
person receives appropriate financial and nonfinancial
recognition to account for the personal contribution they are
making and the overall value of their position to the
organisation.
This includes
• Creating and maintaining an organisational structure and
culture that facilitates both employee and organisational
performance.
• Recognising and rewarding individual and team performance,
financially and otherwise, in relation to the overall
contribution made.
• Implementing compensation systems that fairly treat and
recognise all employees,
regardless of their level within the organisation. This is the
equity issue. It involves matching remuneration with the
contribution made, particularly where job requirements can
change rapidly.
The best performance appraisal system in the world will not
work if it is linked to a rewards and remuneration system that
employees do not trust or support.
A motivated employee will achieve a great deal. A demotivated
employee will be slow, prone to error and not likely to achieve.
Motivation influences performance. It also suggests that the
‘lack of’, ‘promise of’, or receipt of either financial or non-
financial rewards may also influence motivation. A feedback
loop between motivation and performance exists, with each
potentially impacting the other.
Remuneration is a component of both financial and non-
financial reward; financially, in terms of cash and benefits
received; non-financially in terms of recognition, status and
esteem, e.g. the status of full private use of a motor vehicle.
