Importance and Roles of Employee Compensation

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When thinking about a job, considering the salary and the benefits offered by and employer is important. Many benefits play a critical role in the lives of employees and their families by assisting in health needs, future financial security, needed absences from work, and more. Benefits may include programs like paid time off, medical insurance, dental insurance, disability, life insurance, retirement benefits, family leave, education and training programs, bonuses, commissions, and stock options. Employee compensation was first introduced to America by Europe and imbedded in the colonies. “The Plymouth Colony settlers’ military retirement program, which was established in 1636, was of the first compensation programs recorded.” (EBRI, 2008) Employee benefits are now offered from many companies to attract, retrain, improve morale and promote employee productivity. Many companies feel that employee compensation is the dominant factor in employee satisfaction. Several theories have been proposed on employee compensations and benefits and what motivates them. Abraham Maslow is known for establishing the theory of a hierarchy of needs, writing that human beings are motivated by unsatisfied needs, and that certain lower needs need to be satisfied before higher needs can be satisfied. Compensation and benefits satisfy the two most basic needs of Maslow's Hierarchy (physiological and safety). Emotional needs satisfy the three upper needs of Maslow's Hierarchy (love, esteem, and self-actualization). (Dr. Boeree, 2006). Fredrick Herzberg developed another popular theory of motivation called the two-factor theory. The theory suggests there are two factors that contribute to employee dissatisfaction and satisfaction. The First being motivators, which includes responsibility, advancement, and recognition. The other is known as hygiene factors, which include work environment, management, salaries, and company policies. (Greene, 2005). Victor Vroom developed a theory, which is...
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