Running head: RECOGNIZING EMPLOYEE CONTRIBUTIONS 1

Recognizing Employee Contributions

Shawndolyn Cogshell

Strayer University

Financial Accounting for Managers

Dr. Karin

June 10, 2018

RECOGNIZING EMPLOYEE CONTRIBUTIONS 2

Recognizing Employee Contributions

Employee recognition describes an organization’s attempt to acknowledge the efforts of

outstanding employees (Ali & Ahmed, 2009). Employee recognition reinforces desirable

behaviors and increases employee engagement. The effect of recognizing employee

contributions has a positive effect that reaches far beyond the recognized employee. It is through

employee recognition that organizations build cultures that attract and retain the best talent. The

following paper will examine the key elements of a Recognizing Employee Contributions,

specifically examining: 1) methods to determine incentive pay 2) core legal requirements

affecting employee benefits 3) legally mandated benefits 4) additional benefits organization

should providing to its employees 5) concepts to consider when designing benefit plans.6) the

efficiency of communicating compensation and benefit plans to employees. 7) ethical risks of

making incentive pay a large portion of employees’ total compensation. 8) ways the company

might mitigate or reduce these risks.

Two methods to determine incentive pay

Incentive pay can be determined by exemplary job performance or by achieving pre-

assigned performance quotas. Incentive pay describes giving monetary benefit to high

performing employees in addition to their normal wages or salary (Gupta & Shaw, 2014). Two

methods to determine incentive pay are casual and structured incentives.

Casual incentives. A casual incentive is a token of appreciation for an exemplary job

performance (Gupta & Shaw, 2014). Casual incentives are typically informal. A casual incentive

is considered an intrinsic benefit.

Structured incentives. The reaching of pre-assigned quotas which result in an incentive

is a structured incentive (Gupta & Shaw, 2014). Casual incentives are typically given to
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recognize a one-time outstanding performance whereas structured incentives are usually done on

a regular basis. A structured incentive is considered an extrinsic benefit.

Core legal requirements affecting employee benefits

Fundamental legal requirements relative to employee benefits emphasize the health,

safety and welfare of employees (Cascio, 2018). This means the health, safety and welfare of

employees is the responsibility of the employer. They are required to both consult and inform

employees about pertinent health and safety issues (Cascio, 2018). If the employees have a

selected/elected a safety representative, they must be contacted as soon as possible upon the

discovery of a health and/or safety issue (Cascio, 2018).

Federally mandated employee benefits

The federal government mandates certain employee benefits. According to the U.S.

Bureau of Labor organizations have several legal obligations relative to employee benefits

(Cascio, 2018). These mandated obligations include Social Security, Unemployment Insurance,

Worker’s Compensation, and overtime pay benefits. All businesses must meet these mandatory

requirements.

Social Security. Employee earn Social Security credits for hours worked (Cascio, 2018).

These credits are applied toward future retirement benefits. All employers are required take out

Social Security withholdings on behalf of employees.

Unemployment Insurance. While unemployment insurance benefits are required by

federal law they differ by state. Regardless, employees who have lost their job due to economic

hardship are entitled to unemployment payments (Cascio, 2018). Employees fired for cause are

not eligible for unemployment compensation (Cascio, 2018).

Workers' Compensation. Employees injured during the course of work are entitled to
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workers' compensation coverage. Worker’s Compensation coverage pays for an employee’s

medical costs, and lost wages (Cascio, 2018). Workers' compensation like unemployment

insurance varies by state.

Minimum Wage. Federal law mandates a minimum wage rate (per hour). States may

elect to raise their minimum wage rate but they cannot lower the federal wage rate The federal

minimum wage rate can only be modified through an act of Congress.

Overtime Pay. Employees who work more than 40 hours in a one-week period are

entitled to overtime pay. Overtime pay varies by employee. Overtime pay is equal to one and a

half the employees normal wage rate (Cascio, 2018).

Additional benefits organization should provide to its employees

Additional benefits are employee benefits that go beyond federally-mandated

requirements. These benefits include production-based bonuses, paid time-off/paid holidays, and

meaningful retirement benefits. It is important to note, employers are not required by law to offer

employees additional benefits.

Paid time-off/paid holidays. Paid time-off/paid holidays are opportunities for time-off

with pay. This is an effective employee benefit. Instead of only offering paid time off for sick

days or unexpected emergencies, Paid time-off/paid holidays allow employees to earn additional

time off for outstanding performance.

Production-based bonuses. Production-based bonuses is based on production targets.

Production-based bonuses are issued when employees meet or exceed specified production

levels.

Meaningful retirement savings benefits. Meaningful retirement savings benefits offer

greater value than federally mandated retirement options. Meaningful retirement savings benefits
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include 401K retirement savings plans, profit-sharing programs and employee stock ownership.

Each of these options offer employee’s long-term financial security.

Concepts to consider when designing benefit plans.

Two concepts to consider when designing a benefit plan are making employee enrollment

in benefit plans easy and conscientious efforts to support employee development.

Making employee enrollment in benefit plans easy. When designing the benefit plan

effort should be made to take the guesswork out of participation. Automatic enrollment and

plan escalation features should be implemented. In addition, periodic reviews should be

conducted to identify and encourage eligible employees to also participate.

Support employee development. Employee development in the form of tuition

reimbursement, leadership programs, and sponsorship for conferences and/or workshop

trainings. This concept encourages employee retention, career growth, and professional

development. Integrating employee development when designing benefit plans allows employees

to develop skills, do meaningful work, to build meaningful professional connections.

The efficiency of communicating compensation and benefit plans to employees

The use of a Total Compensation statement is an efficient method of communicating

compensation and benefits plans to employees. Total Compensation statements are formal

documents developed specifically to communicate benefits to employees (Cascio, 2018). They

provide employees with a comprehensive summary of every organizational benefits from health

insurance benefits to every performance bonus offered by the organization (Cascio, 2018).. Total

Compensation statements can be designed to meet the needs of the employees and its

comprehensive format makes its an effective and useful method by which organizations can

deliver compensation and benefits plan information to its employees.

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Ethical risks of making incentive pay a large portion of employees’ total compensation.

When incentive pay is a huge percentage of employees’ compensation package,

employees sometimes cross ethical restrictions to receive them. Research has concluded

employees will convince themselves that the ends justify the means (Kaptein, 2015). Human

nature dictates when a person places a high value on a compensation-related incentive, the

person will often choose the shortest, easiest, and quickest path to attaining it, therefore causing

an ethical dilemma (Kaptein, 2015). Researchers have concluded this tendency to rationalize

unethical behavior is pervasive among both sexes, all ages and regardless of culture (Kaptein,

2015).

In addition, incentives can lead to income inequality among employees. This ethical risk

poses a serious systemic risk which can hinder rather than enhance organizational performance.

Ethical risks associated with incentive pay are potentially very damaging both in the short-and-

long term.

Ways the company might mitigate or reduce these risks

Organizations ca mitigate the risk of unethical behavior by its employees by balancing

intrinsic incentives with extrinsic incentives. An intrinsic incentive is internal-based reward

(Kaptein, 2015). An intrinsic incentive provides the employee with a sense of personal

fulfillment. Conversely, an extrinsic incentive is an external-based reward (Kaptein, 2015). An

extrinsic incentive provides the employee with a tangible reward, usually monetary. As today’s

employees do not stay with an organization for wages and benefits alone, organizations that offer

their employees the opportunity for personal satisfaction outweighs will mitigate ethical risks.

Conclusion

Employee recognition defines a company’s effort to recognize the efforts of high

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performing employees (Ali & Ahmed, 2009). Employee recognition emphasizes wanted

behaviors and intensifies employee engagement. The effect of acknowledging employee efforts

has a positive effect that permeates the entire organization.

Incentives are a common employee recognition tool (Gupta & Shaw, 2014). Two

methods to determine incentive pay are casual incentives and structured incentives. Casual

incentives are based on outstanding job performance. Structured incentives. are based on

reaching of pre-assigned quotas.

There are several core legal requirements that impact employee benefits. These

requirements emphasize the health, safety and welfare of employees (Cascio, 2018). These

requirements mandate the health, safety and welfare of employees is the responsibility of

employers. They are also required to both consult and inform both employees and their safety

representative about relevant health and safety issues.

The federal government mandated four employee protections (Cascio, 2018). They

include Social Security, Unemployment Insurance, Worker’s Compensation, and overtime pay

benefits (Cascio, 2018). All businesses must meet these mandatory requirements.

Additional employee benefits are that go beyond federally-mandated requirements. These

types of benefits include production-based bonuses, paid time-off/paid holidays, and meaningful

retirement benefits. Employers are not required by law to offer employees these additional

employee benefits.

Two concepts HR managers should consider when designing benefit plans are making

employee enrollment in benefit plans easy and making conscientious efforts to support employee

development. Automatic enrollment and plan escalation features should be implemented.

Employee development should include tuition reimbursement, leadership programs, and

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conferences and/or workshop trainings sponsorships. These types of benefits encourage

employee retention, career growth, and professional development.

When incentive pay is a large portion of employees’ total compensation, there is the

potential for trouble. Many employees will cross ethical boundaries to earn them. In addition,

incentives can lead to income inequality among employees which poses another set of potential

risk which can negatively impact organizational performance.

Lastly, the efficiency of communicating compensation and benefit plans to employees is

satisfactory when organizations use Total Compensation statements as these are an extremely

effectual method of communicating compensation and benefits plans to employees. Total

compensation statements are formal documents created specifically to communicate benefits to

employees (Cascio, 2018). These statements provide employees with an overview of all

organizational benefits from health, life and supplemental insurance to every performance bonus

offered by the organization.

In final analysis, it is imperative organizations make the time to recognize employee

contributions. The positive effect of recognizing employee contributions influences all

employees. It is through employee recognition that organizations build high-performing cultures

that not only attract but also retain the best talent.
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References

Ali, R., & Ahmed, M. S. (2009). The impact of reward and recognition programs on employee’s

motivation and satisfaction: an empirical study. International review of business research

papers, 5(4), 270-279.

Cascio, W. (2018). Managing human resources. McGraw-Hill Education.

Gupta, N., & Shaw, J. D. (2014). Employee compensation: The neglected area of HRM

research. Human Resource Management Review, 24(1), 1-4.

Kaptein, M. (2015). The effectiveness of ethics programs: The role of scope, composition, and

sequence. Journal of business ethics, 132(2), 415-431.