- 11 Marks
BMIS – L1 – E18 – HR – Other human resources functions
Question
Kumasi Bank Limited is a leading financial institution and is well-known for its strength in rendering highly efficient professional services to its customers and keeping ahead of the competitors.
The bank follows a policy of recruiting staff at the entry level after careful evaluation of the qualifications of the candidates, their potential for advancement, professional aptitude and career objectives. Staff are groomed and entrusted with increasing responsibilities after careful career-path planning for each employee.
The bank operates in a highly competitive environment where the skills, knowledge and commitment of its human resources are of critical importance for the success of its business. The competitors are always on the lookout to identify professional staff and hire them at more attractive compensation packages.
Required:
(a) What do you understand by the term ’employee compensation package’?
(b) List and explain the essential steps involved in the formulation and implementation of a well-conceived employee compensation strategy which the bank should incorporate in developing its overall HR strategy.
Answer
(a). Employee compensation package refers to all forms of pay and rewards received by the employees for the performance of their jobs, including cash, bonuses, benefits, facilities and perquisites.
(b). The steps which should have been followed in the formulation and implementation of a well-conceived employee compensation strategy are:
(i) Identification of the objectives of the employee compensation strategy
Compensation objectives should have been identified and articulated as part of the bank’s overall planning process. The objectives should be in line with the organisation’s overall corporate strategy and lead to the creation of a work force that is capable of implementing its plans.
(ii) Review of compensation plan
Examination of the strengths and weaknesses of the existing compensation policies should have been carried on a regular basis to enable the management to formulate new or improved compensation package.
(iii) Identification of the positions and prepare their job descriptions
Identification of the positions at various levels and precisely defined job descriptions are essential for the development of a meaningful compensation program. Job descriptions should be reviewed periodically to ensure that they are in conformity with the employee skill requirements, assignments and responsibilities.
(iv) Evaluation of the relative importance of the positions and their significance for achieving the objectives of the bank
Evaluation and comparison of the positions is necessary to establish their relative importance and the relationship between the compensation for different positions. The standards must be well-defined and applied specifically to the positions rather to the individuals in these positions.
(v) Comparison of the compensation packages with the packages offered by the competitors.
Development of a rational compensation program in accordance with the competitive environment by collecting relevant data of compensation packages offered by the competitors. The bank should identify the competitors and offer competitive compensation packages to attract and retain skilled and motivated employees.
(vi) Administration of the compensation program
Administration of a comprehensive compensation program to be applied uniformly for all employees. By adopting formal procedures and standards, arbitrary or unfair personnel decisions can be avoided.
(vii) Communication of the compensation package
Communication of all aspects of the compensation package to the concerned parties including the employees, supervisors, administrators and management who must have a thorough knowledge of the program to avoid any misunderstandings.
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