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.