Subject: Business and Management
Language: English (U.S.)
Pages: 2
Discuss the organization compensation systems in organizations

Organizational Compensation Systems

Discretionary benefits are granted to employees with the aim of incentivizing them to improve their performance. Employees usually harbor some form of expectation that they shall be paid these benefits if their work improves (Cohen, 2010). However, a discretionary benefit is provided to the employee at the sole discretion of the employer. There are certain considerations that the company needs to make before bringing into full effect a discretionary benefit system.

1.     Benefit Eligibility

Permanent employees will be the sole recipients of the discretionary benefits when they are available and when it is financially viable to implement such incentives in the company. Employees become eligible for some benefits after initial employment. Such discretionary benefits include joint ownership of tips between the employees and the company when and where applicable. Employees who get promoted receive more benefits as they continue to scale the corporate ladder.

2.     Paid Time Off Benefits

The company realizes that paid vacations or paid time off is very attractive to the type of employees that it is trying to attract. As such, the company seeks to have paid time off benefits for its permanent staff members who would have worked for the company for more than a year. We will give the employees who have worked for the company more than a year, two weeks off and they will continue to receive their regular salaries. No monies will be deducted from their monthly salaries when they go on their 2 week paid vacations every year. However, additional days from work will not be considered a part of the paid time off benefits plan.

3.     Retirement Plans

When it comes to retirement, the company is dedicated to seeing that all its workers lead a comfortable life in their later years when they are no longer capable of working. Thus, the company has come up with a defined contribution plan. A DC is a retirement whereby an employee or an employer or both make regular contributions. The company has a 401 k contribution plan in place for its employees. This is a plan whereby the employee and the employer make regular contributions to the former’s retirement fund. The employee is then responsible for selecting which types of investments that these funds will be directed towards. The funds will continue to grow in the account until the individual reaches a certain age, usually the age of retirement.

The rationale behind this plan is to distribute company stock to our employees. Distributing corporate stock serves as an external motivator to the employee as they now feel that they are a part of the company. This feeling of belonging stems from the sense of ownership of part of the company. They are thus motivated to work harder and remain committed to the company for several years until they retire. In addition, this plan motivates employees to work harder because they feel a sense of financial security in their future.

Since this will a contributory plan, both the employee and the employer will be contributing towards the fund. The company has set the rate of employee contribution at 18% of his annual salary.

4.     Health Insurance Plans

The company will implement the Health Maintenance Organization Plans. With this type of plan, the company will acquire the services of a host of health care providers with doctors from different fields in medicine. As HMO plans are usually for catering for preventative care, employees and their families will be entitled to regular visits to the doctor to ensure overall health and proper growth.

The current estimates for providing health care insurance to our employees is at about $16,834 annually for family plans. This was based on a survey by the Kaiser Family Foundation and the Health Research & Educational Trust (Mathews, 2014).


Cohen, T. (2010). Employees’ Rights to Discretionary Benefits. The South African Law Journal,127 (3): 443-462.   

Mathews, A.W. (2014, Sept 10). Cost of Employer Health Coverage Shows Muted Growth. Retrieved on 11/1/2016 from