Challenges in Compensation and Benefits

 

Source - https://www.hcamag.com/us/specialization/benefits/

Welcome to my 4th Article on modern challenges faced by Human Resource Management. In this article, we are going to discuss the challenges faced by HR in the compensation and benefits function (Remuneration function).

A compensation system reflects the company’s HR objectives and policies and covers all tangible and intangible employee remuneration forms (Poór, J. ed., 2020).

Compensation and benefits have a direct impact on performance management, the topic we discussed in the earlier article gives a descriptive idea of challenges faced in performance management and some recommendations on how to overcome those challenges. Let's see some of the challenges I have identified in modern HRM concerned with compensation and benefits.

Challenges

Source - https://transcosmos.co.uk/blog/just-how-important-technology-is-to-customer-service-in-todays-time/

• Incorporating technology – One of the main challenges in compensation and benefits in modern HRM is incorporating technology. While there are positive uses of technology such as faster and more efficient payroll processing, improved data management, and cost savings because of lesser errors in automated processes, there are challenges in incorporating technology. High implementation costs, training costs, data security issues, and organisational resistance to change towards automation are some of the challenges that HR faces in incorporating technology.
• Attracting and retaining top talent – As we discussed this topic in my 1st article on the challenges of recruitment and selection, retaining the recruited employees is interconnected to the employees’ compensation and benefits from the company. While the higher management tries to minimise cost, operational and tactical level personnel expect benefits and compensation in return for the performance. Finding an optimum situation of budgeted compensation and benefit vs balancing the needs of employees is critical in this process as employees could choose much more attractive packages in the dynamic competition in the job market and companies offering better competitive compensation packages.
• Managing diversity and inclusion –With the diversity in the job market, HR should be able to ensure fair and equitable compensation and benefits irrespective of gender, race, age group, ethnicity or any other demographical differences in employees. For example, millennials would prefer flexible working environments with more communication tools and benefits while Gen X and early generations would prefer the retirement plans and health insurance offered by the company. Due to these differences, remuneration has become a challenging task for HRM(Ngotngamwong, R., 2020).
• Managing remote work – With the Covid-19 pandemic, corporations, and organizations were forced to enter remote work. While remote working increased flexibility in employees, and reduced workforce politics within the company, it also changed the employee expectation of compensation and benefits against the expectations of employees who work at the office. For example, remote-working employees expect flexible work arrangements, and communication tools while working at the office employees expect an increased fuel allowance. Therefore HR needs to consider how they could offer compensation and benefits that meet the needs of employees working remotely (Mihhailova, G., 2009).

Other than the above challenges HR needs to stay updated on what employees' needs are to satisfy them through compensation and benefits, nowadays due to the dynamic job market employees' needs also change which has become a challenging task for compensation and benefits.HR practitioners also need to be vigilant about changes in compliance and laws relating to labour compensation and benefits to stay complying with the laws, rules and regulations of the respective country.

How do we overcome the challenges of compensation and benefits

Source - https://www.commbox.io/6-best-ways-to-keep-your-employees-happy/

• Choose the correct technology and train employees – With the emerging technological innovations, HR could use technology to automate routine tasks of data entry, and enrolments and give more focus on the strategic matters of the organization. Employees should be trained on accessing their necessary files through technology rather than requesting manual documents from HR. This would increase the accuracy of the data, enhance the transparency of the processes and enhance employee satisfaction with the company because of the easy access to their own data 24x7. Although HR practitioners need to ensure the data security of these processes while taking advantage of them (Mohamed, S.A et al 2022).
• Prioritize data security – The next step HR needs to take with the automation of processes is to prioritize the security of data. As compensation and benefits are a sensitive area in HR, certain access control methods, and data encryption methods should be followed. In emerging markets such as Asia and  South America data protection has become more serious. (Meng, X. and Ci, X., 2013.)Therefore encryption and access control should regularly be audited and monitored for continuous assurance of data security.
• Use of data analytics – With emerging technological innovations, HR could make use of big data analytics to determine the correct level of compensation and benefits given to a specific employee. Through big data, HR is capable of making an informed decision on compensation and benefits. With the advantages of the new technology, HR should not be over-relying on these data as some data could highlight potential bias and discrimination.
• Regular reviews – To determine the correct level of compensation and benefits, HR should have regular reviews on each employee. Contrary to the traditional year-end review, HR needs to focus on continuous reviews to ensure employees keep adapting to modern trends in the market, and facilitate them with proper training to perform better, thereby eventually compensating the employee for their performance. With better communication and workplace relationships HR can handle this process effectively (Baeten, X., 2010).

Conclusion

The list of challenges faced by HRM in the modern context is getting much longer due to the dynamic job market. Making use of technological innovations while ensuring data privacy and security would make the remuneration management process accurate and increase employee trust towards the company due to the enhanced transparency within the automated system. I hope you got an idea about the challenges and overcoming approaches to this. You may include your ideas on how the challenges could be overcome by HRM.

References

Baeten, X., 2010. Global compensation and benefits management: the need for communication and coordination. Compensation & Benefits Review, 42(5), pp.392-402.

Meng, X. and Ci, X., 2013. Big data management: concepts, techniques and challenges. Journal of computer research and development, 50(1), pp.146-169.

Mihhailova, G., 2009. Management challenges arising from the use of virtual work. Baltic Journal of management.

Mohamed, S.A., Mahmoud, M.A., Mahdi, M.N. and Mostafa, S.A., 2022. Improving efficiency and effectiveness of robotic process automation in human resource management. Sustainability, 14(7), p.3920.

Ngotngamwong, R., 2020. A Study of Millennial Job Satisfaction and Retention. Human Behavior, Development & Society, 21(3).

Poór, J. ed., 2020. Global, Regional and Local Trends of HR practices. J. Selye University.