TYPES OF COMPENSATION

The new world of work demands employee performance instead of loyalty, creativity instead of compliance, and earned rewards instead of entitlement- The Economist Compensation is an important factor affecting how and why people choose to work at one organization over others. Employers must be reasonably competitive with several types of compensation to attract and retain competent employees. Rewards can be both intrinsic and extrinsic. Intrinsic rewards Intrinsic rewards involve helping employees find success and job satisfaction from within. Intrinsic rewards help build confidence in an employee and his ability to be successful in the workplace. While extrinsic rewards provide temporary satisfaction, intrinsic rewards build prolonged satisfaction within an employee and create an attitude of success throughout the workplace. While intrinsic motivation largely comes from within a person, companies have the responsibility to design a workplace that leads employees to be intrinsically motivated and experience intrinsic rewards. Goal Setting Encouraging employees to set goals and to reach them provides intrinsic rewards and motivation. A company should require all employees to set goals with regard to personal growth at work, education and the completion of projects. Provide employees with training on how to set measurable goals and encourage them to set a variety of short- and long-term goals. Teamwork and Collaboration Develop an environment of teamwork and collaboration, encouraging employees to work together to complete projects and come up with solutions to company problems. Being part of a team and feeling a sense of belonging provides intrinsic rewards for workers because it brings a stronger sense of meaning and responsibility. When a worker appears to lack motivation, other team members will work to encourage that worker and make him feel like an important part of the team, building his self-esteem and confidence. Meaningful Work The feeling that an employee is doing meaningful work every day creates an intrinsic reward. Companies must stress the importance of each position in the company and develop an attitude that each position, from the janitor to the CEO, is essential to the well-being of the company. Involving the company in community service activities and volunteer initiatives may also provide intrinsic rewards for workers.

Extrinsic rewards Extrinsic rewards are tangible and take both monetary and nonmonetary forms. Tangible components of a compensation program are of two general types (see Figure 1). With direct compensation, the employer exchanges monetary rewards for work done. Employers provide indirect compensation like health insurance to everyone simply based on membership in the organization. Base pay and variable pay are the most common forms of direct compensation. Indirect compensation commonly consists of employee benefits. Compensation Direct Base pay - Wages - Salaries Variable pay - Bonuses - Incentives - Stock options Indirect Benefits - Medical/ life insurance - Paid time off - Retirement pensions - Workers compensation - Others

Figure 1: Components of a Compensation Program Base pay: The basic compensation that an employee receives, usually as a wage or salary, is called base pay. Many organizations use two base pay categories, hourly and salaried, which are identified according to the way pay is distributed and the nature of the jobs. Hourly pay is the most common means of payment based on time, and employees paid hourly receive wage, which are payments directly calculated on the amount of time worked. In contrast, people paid salaries receive consistent payments each period regardless of the number of hours worked. Being salaried typically has carried higher status for employees than being paid wages. Some organizations maintain an all-salaried approach with their manufacturing and clerical employees in order to create a greater sense of loyalty and organizational commitment. Variable pay: Another type of direct pay is variable pay, which is compensation linked directly to individual, team, or organizational performance. The most common types of variable pay for most employees take the form of bonuses and incentive program payments. Executives often receive long-term rewards such as stock options. Benefits: Many organizations provide numerous extrinsic rewards in an indirect manner. With indirect compensation, employees receive the tangible value of the rewards without receiving the actual cash. A benefit is an indirect reward health insurance, vacation pay, or retirement pensions given to an employee or group or employees as a part of organizational membership, regardless of performance.

A. Check your understanding

Answer the following questions. 1. How many types of compensation are mentioned in the text? 2. What benefits do intrinsic rewards bring about? 3. What fields should the employees set goals in? 4. Why should an employee have a sense of belonging to a certain team? 5. In general, what will a worker receive in exchange for work done as a direct compensation? 6. Distinguish between wage and salary. 7. Why do almost people prefer being salaried paid to receiving wages? 8. What will employees receive as extrinsic rewards without taking the actual cash?

B. Language focus C. Vocabulary

I. Word map Benefits (i.e rewards companies give their staff in addition to money) are often called fringe benefits or perks. Choose words/ phrases in the following list to add to the map. childcare facilities fuel canteen pension scheme mileage allowance flexible working hours life insurance sport club membership
10.. 8..

20% off membership staff lunch

.....................9............ ..........

1..

.. 7...

Fringe benefits
Company car

...........6............ ........

5.

II. Matching

3.. ..

. 4.

Two companies have posted their remuneration packages on the job page of their company websites. Label the descriptions of benefits (1-12) with items a l. a. performance-related pay b. sports club membership c. employee assistance program d. flexible working hours e. relocation expenses f. pension scheme g. profit-sharing bonus scheme h. life insurance i. cafeteria j. crche/ childcare facilities k. shares in success l salaries

Benefits & rewards We want to attract, motivate and hold on to our best personnel by rewarding you fairly with the following benefits: 1 A first-class non-contributory retirement scheme (i.e fully paid by the employee). 2 Coverage for your loved ones of four times your annual salary. 3 Free shares after one years service, dependent on company profits. 4 Fitness, sports facilities, massage, and yoga classes plus 20% off membership of a wide selection of fitness clubs. 5 Daily nursery/ kindergarten provision. 6 Counseling and advice on personal and domestic issues.

Remuneration package In return for your contribution to our organization, you can expect a role that offers considerable variety and a chance to pursue your ambitions with the company both nationwide and internationally. Depending on level, role, and experience, we offer attractive salary packages to recruit and retain the best personnel.
8 7

Payment is reviewed on a merit basis, based on how well you carry out your You can adjust working hours to suit personal and family commitments. Paid out twice a year dependent upon business results. Hot meals, salads, and snacks at heavily subsidized prices.

job.
9

10 11

Comprehensive moving expenses if you take up a new position or age transferred.

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III. Parts of speech 1. Scrambled words Rearrange these letters to make adjectives that can come before wage and salary. The first letter of each word has been put in bold. balelevi honymtl ginilv graevea cabis alnuan moinnla eyyrla iuimmmn

2. Complete this paragraph with verbs from the box *command *cut *fall *offer *dock *pay * draw *raise *rise *earn * reduce

An employee can (a) ________ or (b) ________ a wage or salary. An employer can (c)________, (d)________, (e)________, (f)________ or (g)________ salaries or wages. If an employee is persistently late or does something wrong, the employer can (h)________ his wages. Wages and salaries can (i)________ or (j)________. An experienced worker who is in great demand can (k)________ a high wage or salary from a new employer. IV. Words families Complete these dictionary definitions with words from the box. * bands *drift *ceiling * cut *expectations *deductions *review *structure

(a) Salary ________ refers to money which a company removes from salaries to pay to the government as tax, National Insurance, etc. (b) A salary ________ is the organization of salaries in a company with different rates of pay for different jobs. (c) Salary ________ is a situation where an increase in pay is greater than that of officially negotiated rates.

(d) Salary ________ are the hopes of an employee that their salary will increase. (e) A salary ________ is a re-examination by an employer of an employee's pay. (f) A salary ________ is the highest level on a pay scale that an employee can achieve under his or her contract. g) Salary ________ are all the salaries at different levels in a company. (h) A salary ________ is a sudden reduction in salary. V. Gap-filling Complete the text with appropriate words and expressions from the box. The first one has been done for you. *acceptance bonus *attendance bonus *basic *benefits *commissions *comradeship *development *direct *duvet days *extras *extrinsic *fixed *flexible *gainsharing *growth *incentive *indirect *insurance *intrinsic *motivation *pensions *performance-related *premium bonus *production bonus *profit sharing *status *recognition *satisfaction *security * share * skill Rewards for work fall into two main groups. The first, and in many opinions the most important, is that of 1. direct or 2. __________ rewards. These are real, material rewards, and include 3. _________ pay (a guaranteed wage or salary paid by the hour, or on a weekly or monthly basis), and 4. __________ pay, which is linked to how well an employee or a group of employees works. This includes 5. __________ money paid to a salesperson or group of salespeople which is usually a percentage of the sales made. Some companies also offer 6. __________ pay, usually given only to individual employees who work particularly well, or who make a significant contribution to the company. 7. __________, which is similar to this, is extra money paid to a group or company for increased productivity, and is often offered in order to increase 8. __________: it is also sometimes known as a 9. __________. If an employee takes less than the standard time to finish a task, s/he might receive a 10. __________. Some employers also offer an 11. __________ for employees who are very rarely absent from work. If an employer is particularly keen to recruit somebody, they might offer him / her an 12. __________ when s/he agrees to join the organization. 13. __________, the practice of dividing profits among the employees, is another reward which is often offered. In addition to payment, other rewards may be offered. These include 14. __________ (known informally as 15. __________) such as a company car, 16. __________, free meals, 17. __________ option schemes, holidays, health 18. __________ and 19. __________ (a new concept, especially common in the USA, in which an employee can call their office and say they do not feel like coming to

work even though they are not ill). Benefits are usually 20. __________, which means that the employee is not able to choose what s/he gets, but some companies offer 21. __________ benefits, where the employee can choose from a menu of benefits on offer. 22. __________ plans, which offer employees increased rewards and benefits for good attendance, behavior and productivity are becoming increasingly common. The second group of rewards are 23. __________ or 24. __________. These are non-material, and include 25. __________ (people enjoy being in an important position or a position of authority), job 26. __________, the opportunities for personal 27. __________, the chance to learn a new 28. __________, and career 29. __________ opportunities. Safety and 30. __________ at work can also be included in this group, and for most employees, 31. __________ (being with a group of people you like and get on with) is also a very important reward.

D. Translation
Organizational incentives reward people based on the performance results of the entire organization. This approach assumes that all employees working together can generate greater organizational results that lead to better financial performance. These programs often share some of the financial gains to the firm with employees through payments calculated as a percentage of each employees base pay. Also, organizational incentives may be given as a lump-sum amount to all employees, or different amounts may be given to different levels of employees throughout the organization. The most prevalent forms of organization-wide incentives are profit sharing plans and employee stock plans. For senior managers and executives, variable pay plans often are established to provide stock options and other forms of deferred compensation that minimize the tax liabilities of the recipients.

E. Glossary
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approach(n)['prout] the method used or steps taken in setting about a task, problem - Cch tip cn, ng li attitude(n)['titju:d] the way a person views something or tends to behave towards it, often in an evaluative way - Thi , quan im base pay (n)[beis pei] An amount or a rate of compensation for a specified position of employment or activity excluding any other payments or allowances - Vic chi tr lng bonus(n)['bouns] A sum of money or an equivalent given to an employee in addition to the employee's usual compensation - Tin thng calculate(v)['klkjuleit] To make an estimate of; evaluate - Tnh, tnh ton cash(n)[k] Money in the form of bills or coins; currency - Tin mt category(n)['ktigri] A specifically defined division in a system of classification; a class - Hng, mc

clerical(adj)['klerikl] Of or relating to clerks or office workers or their work thuc vn phng collaboration(n)[k,lb'rein] the act of working with another or others on a joint project - s cng tc commitment(n)[k'mitmnt] The act or an instance of committing - cam kt compensation (n) [,kmpen'sein] The act of compensating or the state of being compensated - s n b, i ng comradeship (n) ['kmridip] A person who shares one's interests or activities; a friend or companion tnh ng ch, ng nghip consistent(adj)[kn'sistnt] In agreement; compatible - ph hp, kin nh, nht qun dock (v) [dk] To withhold or deduct a part from (one's salary or wages) ct bt lng extrinsic(adj)[eks'trinsik] Originating from the outside; external - t bn ngoi, ngoi lai fringe benefit (n) [frind 'benifit] an incidental or additional advantage, esp a benefit provided by an employer to supplement an employee's regular pay, such as a pension, company car, luncheon vouchers, etc. phc li ngoi lng, ph cp ngoi lng health insurance(n)[hel in'urns] insurance against loss due to ill health bo him y t initiative(n)[i'nitiv] A beginning or introductory step; an opening move sng kin intrinsic(adj)[in'trinsik] Of or relating to the essential nature of a thing; inherent - bn cht, bn trong janitor(n)['dnit] One who attends to the maintenance or cleaning of a building - ngi trong nom nh ca loyalty(n)['lilti] A feeling or attitude of devoted attachment and affection lng trung thnh lump-sum (n) A single sum of money that serves as complete payment thanh ton trn gi, tng s tin thanh ton meaningful (adj)['mi:niful] Having meaning, function, or purpose - C ngha measurable(adj)['merbl] Possible to be measured - o c, va phi monetary(adj)['m nitri] Of or relating to money - thuc v tin t motivation(n)[,mouti'vein] The act or process of motivating - ng c, ng lc premium bonus (n) ['pri:mim 'bouns] A sum of money or bonus paid in addition to a regular price, salary, or other amount - tin thng prevalent (adj) ['prevlnt] Widely or commonly occurring, existing, accepted, or practiced ph bin, thnh hnh

prolonged (adj)[pr'ld] To lengthen in extent - ko di regardless(adv)[ri'g:dlis] In spite of everything; anyway - bt chp, khng ch ti retain (v)[ri'tein] To keep or hold in a particular place, condition, or position gi li retirement (n)[ri'taimnt] Withdrawal from one's occupation, business, or office - ngh hu reward (n)[ri'w:d] A satisfying return or result; profit - tin thng, phn thng salary (n) ['slri] Fixed compensation for services, paid to a person on a regular basis - tin lng satisfaction (n)[,stis'fkn] The fulfillment or gratification of a desire, need - s hi lng, toi nguyn set (goal) (v)[set] to set specific, measurable and time targeted objectives t (mc tiu) self-esteem (n)[,self i'sti:m] a person's overall evaluation or appraisal of his or her own worth - lng t trng status (n)['steits] High standing; prestige: a position of status in the community - a v, thn phn stock (n)[stk] the shares of a specified company or industry - c phn tangible (adj)['tndbl] Possible to be treated as fact; real or concrete - hu hnh, r rng teamwork (n)[ti:m w:k] Cooperative effort by the members of a group or team to achieve a common goal - Lm vic theo i/nhm vacation (n)[v'kein] A period of time devoted to pleasure, rest, or relaxation, especially one with pay granted to an employee - k ngh variable (adj)['veribl] Likely to change or vary; subject to variation; changeable - c th thay i wage (n)[weid] Payment for labor or services to a worker, especially remuneration on an hourly, daily, or weekly basis or by the piece - tin cng