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  • Thamar Albaqami

The Philosophy of Compensation & Benefits, and the Five Principles

The issue of benefits and compensation is essential and of critical importance due to its effective contribution to attracting and retaining talent, especially in economic growth cases, which necessarily reflects the increasing range of competitiveness in various sectors currently in the Saudi market. Organizations offering compensation and benefits packages attractively enjoy the best opportunities and competitiveness. Accordingly, any organization must have a carefully studied philosophy in its benefits and compensation, aligning with its objectives and values.

Towards the Five Principles

The philosophy of benefits and compensation is based on the idea that employees should be fairly compensated for their efforts, including financial and non-financial benefits. The financial benefits may include basic salary, bonuses, and stock options. In contrast, non-financial benefits may include arrangements such as flexible working hours, sponsorship programs, and career development opportunities.

Fairness is one of the first and most significant principles of any philosophy of benefits and compensation. Which means that employees who perform similar jobs should be compensated equally. Therefore, clear criteria must be considered when designing and formulating this philosophy, to determine what is identical work, as well as to ensure transparency in the process. Furthermore, all organizations should review their practices about compensation regularly, to ensure that they are in line with market standards, relevant regulations and legislations, and the different behaviors of the generations working in the market, as well as to avoid any unintentional cases wage inequality.

As a result, Transparency is another significant principle that requires attention, and employees should clearly understand how their salaries and benefits are determined. This should include justifications and announcements about the organization's salary structure, how bonuses are calculated, and what benefits are available. It should be recalled that any organization, through transparency, can support and enhance building trust and engagement with its employees.

In this context, any philosophy for benefits and compensation must realize the importance of Performance. In a broader sense, the employees who perform well must be rewarded for their efforts, which serves as a reward policy based on performance. Therefore, it is more important to ensure that the performance measures are transparent, objective, and consistent with the organization’s objective, which can be invoked through making notes and regularly providing employee feedback on their performance. To help employees to understand how to improve their performance, fairness must not be achieved at the expense of justice, otherwise the organization would expose itself to the risk of its employees' failure to exert further effort, especially when they see that there is no place for good performance in the organization, in return for their underperforming colleagues, who are rewarded similarly in the name of achieving fairness.

In light of the increasing competitiveness, the last two significant principles related to the holistic understanding of the organization's position in the market, are to be more Strategic & Customizable about your benefits and compensation packages. This in turn means understanding what your competitors provide, which also means understanding more precisely what employees value and prioritizing those benefits. Some employees, for example, may prefer flexible working arrangements to higher salaries, while others may prioritize career development opportunities to meet their unique needs. The employees are individuals who have special and distinct needs from others. This means that organizations must be flexible, adaptable, and customizable in their benefits and compensation approaches according to their organizational needs, goals, and the employee's desires.

Many organizations work accordingly to present a series of options enabling employees to choose between them. Some employees may prefer savings plans, while others, in the light of the ongoing economic changes in the context of the rising cost of living, and the upcoming challenges of privatizing the health sector, may prefer health insurance benefits for their family members and parents. As a result, the organizations, through providing a series of options, can support and ensure that they meet the diverse needs of their employees.

In conclusion, the philosophy of benefits and compensation is crucial for organizations in the market. In light of the current pattern of economic growth and the expansion of competitiveness rules, this philosophy would help organizations attract and retain the best talent by providing fairer and more equitable packages for the employees and providing them with a set of options that match their needs and preferences. These basic principles of the philosophy include fairness, transparency, performance, competitiveness, and flexibility. By adopting these principles and practices, an organization can build trust and engagement that helps it grow and survive in the most competitive markets and achieve its organizational and strategic objectives.



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