HRM 635 What is the effect of a total compensation package within a market-competitive pay plan on employee motivation and satisfaction?

HRM 635 What is the effect of a total compensation package within a market-competitive pay plan on employee motivation and satisfaction?

HRM 635 What is the effect of a total compensation package within a market-competitive pay plan on employee motivation and satisfaction?

A compensation package is a summary of all the ways that a company directly or indirectly pays employees. Also known as a total compensation statement, the compensation plan describes details about how the employer pays employees and what non-financial benefits they offer( HR professionals must be strategic to attract the right talent and retain employees. Offering an appealing and generous compensation package is an important part of your employee value

Compensation serves several purposes, which include:

·        Recruitment and retention 

·        Raising or maintaining employee morale

·        Rewarding high-performance workers

·        Achieving internal and external pay equity

·        Increasing employee loyalty 

·        Leverage during union negotiations 

These are just a few of the incentives included in a compensation plan. The plan is geared to assist organizations with maintaining employees and to provided resources and motivate staff to commit to long term and stable employment. To appeal to candidates in today’s job market employers must provide a competitive benefit package that employees want. Employees who are pleased with their compensation packages demonstrate increased morale in the workplace and are more motivated to work hard because they are assured that their hard work will be appreciated and appropriately compensated. When employees feel their integrity is respected, they will have a better outlook on the company and want to be more productive and inclusive in the organization. Building a total compensation package starts with understanding what your organization can offer and then organizing this information in an easy-to-read document. Remember, the purpose is to demonstrate to the candidate or employee all the rewards that they can expect because of working for your organization. Candidates, who are comparing offers, can clearly see what they could be enjoying if they work for your company.  A compensation package consists of direct compensation (cash) and indirect compensation (non-cash) rewards.

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Today’s modern employee is well rounded. Not only is pay and work environment considered, but also benefits. Employees want the whole package when it comes to committing to a company and many times that is what keeps them there year after year. The total rewards concept is an important part of concept management (Dessler, 2016). Total rewards address the many needs of an employee that go beyond pay and bonuses. They show the employees that the organization understands their needs and respects them. “It includes not just traditional financial rewards, but also nonfinancial and intangible rewards such as recognition, the nature of the job/quality of work, career development opportunities, good relationships with managers and colleagues, organizational justice, trust in employees, feeling of being valued and involved, opportunities for promotion, and great work climate (Dessler, 2016, p. 722). I can speak to the total rewards concept in the aspect of being an employee in an organization that offers total rewards. In our HR portal, there is an option to see our total rewards from the organization. It includes everything that I could have possibly gained from the organization and puts a dollar amount to it. Its really eye opening to me, even as a leader, how much money my organization has put into my success through the years. Even in one year, including tuition reimbursement, 401k match, benefits, and trainings the dollar amount is quite substantial. It makes me feel very special and valued. Organizations should have a total rewards program and share this with staff often to improvement engagement by creating those feelings of importance and respect similar to what I feel when I look at mine.


Dessler, G. (2016). Human Resource Management (15th ed.). Pearson Education.

“As the economy continues to improve and job seekers become more confident in securing new positions, organizations must design competitive benefits packages to attract and retain top talent,” said Lee. In an organization, employees are the key resources through which all the other objectives are achieved. Academic staff are the employees of the educational organizations, and their job satisfaction promotes teaching and learning. Employees will demonstrate pleasurable positive attitudes when they are satisfied with their job. Thus, high job satisfaction will increase the productivity of an organization, in turn, increasing the overall organizational performance. Compensation plays an important role in determining an employee’s level of job satisfaction. Reward practices linked to job satisfaction, have been applied differently by public and private enterprises. Higher education is influential in the development of a country, it does not only function as a provider of knowledge, but as a pertinent sector for the nation’s growth and societal well-being. The higher education institutions, play a significant role in development of skills, increased economy, therefore, high quality of staff is required.

HRM 635 What is the effect of a total compensation package within a market-competitive pay plan on employee motivation and satisfaction
HRM 635 What is the effect of a total compensation package within a market-competitive pay plan on employee motivation and satisfaction

Compensation plays a vital role in attracting, motivating and retaining talented employees. According to Ibrahim and Boerhaneoddin, compensation encourages effective employees to remain in employment for longer periods of time. Additionally, Ibrahim and Boerhaneoddin suggested that, generous rewards, retain employees, and ultimately lead to job satisfaction, commitment and loyalty. Evidence from previous study seems to suggest that, there is positive relationship between compensation and job satisfaction; several studies have reported a positive relationship between compensation and job. Compensation is a useful instrument in the hand of the management, to contribute to the organizational effectiveness, and can impact positively on the behavior and productivity of employees. However, compensation determines the attraction and retention of employees, to attain organization objectives. Adeoye and Fields, attested that compensation is a major factor in attracting, and retaining staff. To attract, retain and be profitable, organizations need innovative reward systems, that satisfies employees. What is the kind of compensations are we talking about?

Every company strives to achieve important goals, and business employees are critical for reaching these objectives. Benefits are an effective incentive that encourages employees to work hard and do their best. There are many different types of employee’s benefits that modern businesses should be offering their employees, for example, health insurance, life insurance, family and medical leave (FMLA), retirement savings, disability insurance, paid time off (PTO) and even stock options. These benefits mean a lot to many employees, and can contribute to their well-being, and also, Employees want to feel like they are an important asset within a business. When workers receive this validation, they are more likely to become company advocates, and use their voice to further the company’s objectives. Engaged employees show a vested interest in a company’s growth, which can be an excellent opportunity for employers to train and nurture their brand advocates, and healthy life.

However, there are some consequences that goes with an organization that does not care about compensating their workers. For example, if an employee believes that he/she is underpaid, that employee will likely reduce expended effort, by working more slowly and being absent, noted (Byars and Rue, 1997). Moreover, motivation is described as an inner force that derives individual to act toward something (Ivancevich, 2007). Netswera et al. stated that unfavorable working conditions, and unattractive remuneration packages, have in most industries led to skills migration. Numerous researchers forecast that talent shortages are going to increase well into the next decade, which will limit the ability of organizations to expand, and will jeopardize their chances of survival as global competition becomes more intense. In my own organization, it is always like a fight for the executive director to give incentive or compensation to the workers.


Byars, L., & Rue, W. (1997). Human Resource Management. 5th ed. Times mirror Higher education Group: Inc company.

Dessler, G. (2015). Human resource management. Boston: Pearson.

Employees’ Performance, (2017). A Study of Audit Firms in Bahrain. Iarjset, 4(5), 175–183.

During the recruitment process, employers and employees should discuss the terms of employment in detail. Employees should always be adequately informed about salaries and other benefits that the organization offers on a short-term and long-term basis. Total compensation represents the collective compensation an organization provides to its employees in return for their services (Elkund, 2020). It includes the basic salary, fringe benefits, bonuses, and commissions. An organization may offer all or some of the components of total compensation depending on its resources, employment terms, and the organization’s policies.

A total compensation package implies giving employees all the benefits an organization owes them. It is an incredibly effective tool for employee motivation and satisfaction within a market-competitive pay plan since it makes employees feel appreciated and inspired to work. DeVaro (2020) found that total compensation is associated with high job satisfaction since it makes employees feel appreciated and derive high satisfaction from their job. Such satisfaction prevents discontent amongst employees or loss of morale. According to Formanek (2021), total compensation induces high productivity since employees are highly motivated and strive for excellence. Accordingly, it is a core component of workplace motivation that organizations should prioritize to grow and retain top talents.

Generally, an organization’s relationship with its employees plays a fundamental role in its success. One of the ways of promoting a healthy relationship is ensuring that employees are fully compensated. Accordingly, the organization’s management should understand what total compensation represents and its role in employee motivation and satisfaction. All organizations should be led by leaders who understand the critical role of total compensation towards winning and retaining top talent and apply it appropriately. Doing so will make employees feel appreciated and strive to achieve excellence and meet the organization’s goals.  


DeVaro, J. (2020). Strategic compensation and talent management: Lessons for managers. Cambridge University Press.

Elkund, M. A. (2020). Fairness Of CEO Compensation: A multi-faceted and multi-cultural framework to structure executive pay. Springer Nature.

Formanek, K. (2021). Beyond D&I: Leading Diversity with Purpose and Inclusiveness. Palgrave Macmillan.

In today’s job market compensation packages play an essential part of employee’s motivation, job satisfaction, and retention along with helping to attract the best candidate for the position (Wilke, 2019). According to Wilke (2019) the five top employee benefits that employees look at when comparing compensation packages consist of health insurance, paid time off (vacation, sick days, and paid holidays), retirement savings plans, dental insurance, and vision insurance. Since the covid-19 pandemic the healthcare industry has seen a huge fluctuation for shortages in all areas of nursing which has contributed to the challenges of hiring and retaining staff. Two compensation packages consist of direct and indirect plans. Direct compensation plans consist of salaries, wages, incentives, and bonuses; while indirect compensation consists of various incomes protection programs such as pension plans, insurance, and workers compensation. The purpose of compensation packages within the organization helps retain and attract employees to and from organizations while motivating and providing growth within the organization which will result in sustaining high morale and employee satisfaction (Coker, 2015). According to Taylor (2019) around 71.6% of organizations offer compensation benefit plans that exceed the normal health and financial benefits that are seen within the standard workplace. This helps attract employees from one organization to another in helps of recruiting and retaining employees. 80% of organizations use market pricing as their primary form of evaluating job salaries and market-compensation pay to help keep their organization compatible with other organizations within the same industry and region. Competency-based pay in practice usually comes down to the pay for knowledge or skill-based pay (Dessler, 2017). It is important for organizations to evaluate on market-base due to employee’s greater focus on competitive rates to help motivate and retain staff; provides employees with focusing on their worth within the market, living within the market and focusing within the “now”; and helps identify positions that are in a shortage position to help identify and drive pay rates up (MRA, n.d.). There are many factors to look at when reviewing compensation packages and market-competitive pay to help retain staff and enhance employee satisfaction within the workplace.


Coker, D. (2015). The importance of compensation plan in an organization.

Dessler, G. (2017). Human resource management (15th ed.). Pearson.

MRA. (n.d.). Is market pricing the preferred method to determine pay?

Taylor, T. (2019). Importance of employee compensation and benefits.

Wilke, A. (2019). Does Your Benefits Package Appeal to Job Seekers? Benefits Magazine, 56(11), 70–71.