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How Reward Structure Be Designed For Compensation Plan

Any corporation can develop as many as reward structure types as measure of performance of its employees. Many types of considerations are coming for a fair reward structure and policy. For instance-

Tax benefits vary among reward structure types. For the employee, rewards may be  fully and currently  taxable,  tax  deferred, or  tax exempt. Although  regular pay is generally  fully and currently  taxable, certain employer-provided  fringe benefits are  tax  exempt  to  employees while providing  current deductions  for  employers. Additionally, some elements of incentive compensation plans can be structured to defer  taxation.

In designing reward structures, consideration should be given to ethical questions.  Three  changes  that  have  influenced  the  power  structure  in  the  corporate world  are  the  rise of professional managers, dispersion of  stock ownership,  and extensive  involvement  of  institutional  investors  in  capital  markets.

Additionally, some top managers’ compensation grossly exceeds pay to ordinary workers. Such excesses can be counterproductive, causing a demoralizing effect within  the  firm and, ultimately, the failure to succeed in maximizing long-term stockholder wealth.

Additional stress between management and workers is being created by employee layoffs that are driven by management’s pursuit of higher profits. These situations create ethical issues that should be considered when establishing a compensation strategy that will ensure fairness, effectiveness, and efficiency in an organization.

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