Use strategic benefits to get results

Indirect compensation or benefits form an important part in the Management’s Kit for satisfaction and motivation of employees.
Indirect compensation is defined as rewards or benefits which an organization provides to its employees in addition to salary.

There are several categories of benefits which are required by Law to be provided. Whereas there are some which are voluntarily provided, there are others that are subject matter of Collective Bargaining.

In view of diverse nature of benefits, as well as variations in the needs and preferences of employees, not all the benefits are taken positively hence their effectiveness stands diminished. There are cases where although benefit may be regarded as reward, but its importance against salary, status or development opportunities, etc. may be on a lower footing making it less attractive to a certain category of employees.

There has been a general realization that as is the case with direct compensation, indirect compensation or benefits are not serving the organizational objective of attracting and retaining good employees, increasing morale and productivity, reducing turnover, motivating employees increasing job satisfaction and enhancing organizational image.

The employees do not always consider indirect compensation as part of compensation or reward and hence there is no motivation. There are many reasons for this phenomenon and the following measures can help change this outlook and make indirect compensation or benefits a medium of meeting organizational objectives through motivation.

Effective Communication

Complete knowledge of the benefit provided by the organization including the cost involved is very important in enhancing its effectiveness. Benefits are not given as charity.  It is, therefore, necessary to fully reap the advantages flowing therefrom and this can only be done if there is an effective communication of the benefits granted.

The efficacy of Employee Benefits cannot be under rated. There are many opportunities and ways of communicating the benefits to the employees. This can be done orally as well as in writing in the form of Hand Books, Brochures, bulletins or the Annual Benefits Statement.

Oral communication can be very effective if it tends to involve the employees in the planning and execution of benefits. They began to own the benefits instead of considering these as something handed over to them for specific needs. The communication should also educate the employees about their importance, conditions relating thereto and way and means of availing these benefits.

Some benefits are administered by the state, but are based on the monetary contribution provided by the employers. But at the time of collective bargaining with the union employer is always hard pressed to convince the union that for every rupee they are demanding, employer is required to pay additional amount to the government with respect to these benefits. It is, therefore, necessary to communicate the related facts and figures to the employees in writing in the monthly emolument slip. It must be ensured that the employees know that the employer is not only paying the employee salary, but also paying for benefits provided by the state, even if partially.

Conversion of intangibles into tangibles

Some benefits lose their value and importance and cease to be in lime light because they cannot be calculated in terms of money. It is always good for the Employers to convert them into tangible strategic benefits so that their money value become visible. An example may be the paid leaves. If an employee is entitled to forty days paid leave annually it is considered to be of no significance to the employees in general and are taken for granted, although they cost a lot in terms of hiring temporary workers as replacement or resorting to overtime. Some Companies have policies and rules to minimize its impact. One of such is Attendance Allowance and the other Leave encashment.

According to the first rule every employee who does not avail any leave during a month will be entitled to receive a fixed amount as Attendance Allowance. Similarly, according to the second rule if by the end of year there are leaves outstanding in the Leave Account of an employee he will be entitled to get them encashed by receiving payment on the same rates as if he worked on that number of days. In this way employers were able not only to bring life into the benefit but also solved the problem of low attendance at a cost which was quite less as compared to what it was due to absenteeism,  before its introduction.

Psychological Benefits

There are certain benefits, which are of great psychological value in view of typical local conditions or culture. It is always fruitful for the management to grant benefits which create emotional attachment with the Organization.
In the sub-continental culture of Pakistan, Bangla Desh and India the marriage of one’s sister and daughter is considered as one of the most important responsibility of a family. Some organizations pay a fixed amount as Congratulation Allowance on the marriage of an employee, his/ her sister or daughter. This allowance is taken as a symbol of brotherhood and positively impact the employer-employee relations. Feedback in the form of invitations to the marriage has shown its value in developing a healthy employer-employee relationship.

Another example of productive benefit is the payment of bonus on festive holidays. As there is always an increase in sale of their products  before festive holidays, some auto companies at least a week before the holidays enter into agreement with union stipulating an enhanced production leading to payment of a fixed amount to all the employees with the additional relaxation that in case the production is completed any number of days before the start of holidays, employees will avail those days also as additional holidays. The agreement has always been beneficial to the management and almost always it has been found that cost per unit is much less as compared to the one if the workers had worked on overtime to produce the same number of units. The workers too feel happy as they are getting extra money at the time of rejoicing with a chance for extra holidays. Almost every time the task is completed at least one day earlier which means extra holiday for the workers and less overhead cost for the management.


Human Resource Professional with three
decades of experience, having worked in
multinational companies of repute with
distinction in senior positions. A certified expert author, poet,
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