The organisation will also as indicated in the

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and this could cost the organisation its competitive advantage. The organisation will also, as indicated in the example, find it difficult to attract talented staff who will help it to sustain its competitive advantage. (3) 3 What should the organisation do to prevent this situation from recurring? In order to prevent the organisation from granting increases for which they have not budgeted, in accordance with a trade union agreement, the following issues need to be considered: - Linking the compensation strategy to the organisational objectives - Formulating compensation goals - Involvement of all interested parties at negotiations - Availability of financial statements and reports - Accurate calculations of the financial implications of any proposed increases in salaries and employee benefits - Participation and joint decision making about demands regarding compensation (5) 4 Which alternative methods of compensation can the organisation consider to retain the services of professional staff while still remaining within the stated budgetary constraints? The compensation of employees consist primarily of cash which is given in the form of a base salary. The base salaries of employees are usually adjusted by means of merit or cost of living increases. compensation, however, could also include performance related incentives. In such a case employees are rewarded in accordance with their performance. Because incentives are linked to performance, it needs to be re-earned continuously. The fact that performance related incentives are not linked to the base salary of employees, means that organisations are beter equipped to control compensation costs and motivate employees to perform. When an organisation experiences a shortage of funds and needs to operate within a limited budget, incentives enable the organisation to retain good performers by means of good rewards.
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MNH306-K/101 11 There are different types of incentives. Incentives can be tied to individual performance, the performance of a team, a business unit or a combination of these. Irrespective which type of incentive plan is used, the incentive plan should support the achievement of organisational objectives. This can only happen if the incentive plan is properly planned and implemented. Incentives enable employees to increase their earnings but it also serves as a motivator. If the incentive plan however fails, it will not only influence the earnings of employees but also their motivation and work behaviour. Incentives may be earned over the short or long term. Short term incentives are usually in the form of performance bonuses. Long term incentives are intended to focus employee efforts on long-term results and are typically in the form of stock options. The organisation may however also make use of non-financial compensation to retain the services of employees. The organisation may, for example, offer professional staff members programmes that will help them to better balance their work and family responsibilities. The creation of study opportunities, access to the Internet and flexible work schedules are other means of retaining the services of employees. Flexible benefits and the opportunity to
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