1. A Total Rewards approach to compensation differs from a more traditional approach to compensating employees in terms of assuming a more holistic stance in providing compensation and benefits that go beyond the traditional benefits, such as: health benefits, vacation leave credits, and sick leave credits. Thus, the Total Rewards approach therefore could include other monetary or nonmonetary benefits, recognition, perks, value packages, and other rewards which could be accorded to employees, as a form of adding value to the performance of their responsibilities in their respective positions.
In one’s opinion, the additional factors that have contributed to the transition include increased competition in various industries brought about by globalization; by changes in the external environment including economic factors; and increasing supply of talented human resources who needs to be tapped, sustained, and developed, accordingly.
As the external environment is continuously changing, within the next decade, there could still be some significant transformations that could influence the Total Rewards approach. For instance, other practices in other countries or in organizations considered as best employers, could influence applications of the Total Rewards approach. Other needs of the employees which could be addressed through provision of additional benefits and perks, as suggested in the work environment, could be integrated among the rewards and benefits packages to ensure that a comprehensive value package is provided which would satisfy various needs.
2. Strategic compensation could be aptly described through emphasizing that this is a type of compensation that has been designed using strategies which aim to effectively motivate the personnel to perform in an optimized manner. On the other hand, tactical compensation could be differentiated from strategic compensation through the use of the following adjectives: tactical could be synonymous with short term orientation, small or micro sphere; and within a more localized work condition. In contrast, strategic focuses on a longer-time frame; is more macro-oriented; and is basically designed to be consistently applied for the achievement of organizational goals.
3. The function of Compensation falls under the HR functional area of maintenance of human resources. The pay and benefits to be provided to various employees are an effective gauge of the manner by which the employees’ needs are being addressed and met by the organization.
As such, compensation is a crucial component of other HR functions, from job organization, acquisition, and development. For instance, during job organization design, each position already considers the amount of compensation that should justifiably support the tasks and responsibilities required from the employee. Under the acquisition stage, compensation forms in instrumental part in luring the potential applicants to accept the position from that particular organization, given the pay and other benefits that are offered, as compared to other organizations within the same sector. Finally, compensation is also impacting the function of training and development through determining potential rewards to be accorded to personnel who consistently excel; or to those who need to undergo regular developmental training to comply with expected responsibilities.
If an employee excels consistently, it would be an indication that he or she should be promoted and a higher compensation needs to be provided upon promotion. On the other hand, if an employee consistently performs below par, the organization could think of firing that personnel and hire a new one since the compensation allotted to the low performing employee does not produce the expected value to the organization. Thus, hiring a new one would be more beneficial to match responsibilities with the needs of the organization.