Economía y Empresa
HUMAN RESOURCES IN EUROPEAN BANKING
REMUNERATION IN SPANISH BANKING
I N D E X
Motivation of money
Concept of total remuneration
Strategic questions concerning total remuneration
The remuneration system is one of the essential aspects in the strategy of the banks and not only because it is one of the biggest costs of it. In order for the workers and bank to achieve the desired goals, the first ones must receive a fair remuneration from the last ones, in spite of the subjective this can be. If the worker is paid very little he will lose motivation and won't carry out his/her obligations; if he is paid very much, inflation can appear, illness of many enterprises.
Remuneration programs have an enormous impact in the hardness of the competition in a country, as they affect with no doubt the performance of people at work. Therefore the remuneration system must be integrated in the strategy of the management, as it has a direct influence on the individual behaviour and it can help to achieve the main goals of the institution.
Is an ancient problem that matters the individuals, the institution employer, and even the society: besides, each of these parts has their own objectives.
In addition to those affected elements, Government and worker unions must be mentioned because they have a great influence on the receiving salaries. Worker unions try to get higher remuneration and bigger safe in the employment, although it can seem contradictory. The bank must find a balance between these increases in costs, and the growth in productivity, because otherwise the scaring inflation could appear. On the long term, the increase in salaries shouldn't be a decision taken just by the Company, Government or Unions, but it should just depend on the competitive capacity of the companies in the markets.
In this paper I will try to explain what are right know the trends according to the payments of the employees in the spanish banking. First of all, I will begin to explain in some paragraphs what are the main necessities of the employees inside the organisation, as well as outside it, because the bank as the provider of the quality of their lives must consider which are their preferences, and therefore, try to fulfil their requirements.
Afterwards, I will continue by explaining what does the concept of total remuneration mean, and why the concept of the monetary payment as the only way to remunerate the employees is old fashioned. I will try to explain as well which are the normal preferences among the employees of the spanish banking and therefore, what can the managers do to.
I have tried to make a summary of every piece of information I found, so that I would speak about every aspect of the remuneration in Spain. Among the data founded, obviously I had to omit writing it in the report, but I think the most important information is included in it.
Motivation of money.
Although it is said that usually money is the main mechanism to compensate and modify the behaviour at work, it is very little known about the way it works.
People that think that money does not motivate, value the money because of the goods and services that can be purchased with it as well as the personal self-respect. The ones that think it is a motivator make a difference between the goods and services that can be acquired and the self-respect.
Experts say that monetary rewards motivate employees just to a certain point, but furthermore, another kind of motivation is needed. It shouldn't be forgotten that money is an important part of any motivation program, and it can provide the capacity to acquire goods and services with great importance in the quality of life. But the attitude at work depends on other factors, not necessarily monetary.
Several studies say several principles about the decisions that can be taken by employees about their job and their salary and they insist on the possibility to carry them out in most of the cases.
A person with a sufficient rent, receiving little percentage increases, will tend to change his/her work or to work harder, to either improve his/her results or quit working and be a lazy person.
Once passed the previous necessity level, is necessary a monetary incentive allowing to improve the quality of life. With a similar increase, we have seen that they tend to change the bank he/she they are working in, and from then on, they will need more and more to feel motivated.
Banks paying higher salaries recruit much more easily the best employees. To achieve that goal it is enough with annual increases of 2 or 3 percent, if the other conditions remain the same.
It is not true that banks paying highest salaries are the most competitive.
On the other hand it is really true that money is a great motivator when the employee thinks that his remuneration really reflects his efforts and performance at work. Money will have a negative effect if the worker thinks that the salary given is not fair, either if it is higher or smaller than the level of accomplishment carried out by him/her.
There must be an equilibrium between the level of satisfaction of intrinsic and extrinsic necessities; an excess of money wouldn't compensate, for example, the lack of recognition by higher parts of the hierarchy nor even a very unpleasant work.
Money has two main reasons to be a way to remunerate: One is because of the payment of the given services in the past (justice) and the other one has a relation with the stimulation of services to be given in the future (motivation).
Concept of total remuneration.
The total remuneration of an individual is very important for several reasons; it is a large cost, that in some cases can be half of the operational costs, and it is a motivation factor for employees. From the point of view of them, total remuneration determines the level of life and activities that the workers can have outside work.
To achieve motivation of personnel it is necessary that the banks knows ambitions, and desires of individuals, and that these last ones understand the objectives of the company. Total remuneration concept includes every component perceptible by an individual, and it will be the combination of these five:
Annual cash fix retribution: Gross annual amount guaranteed received in cash.
Annual cash variable remuneration: Amount received by the employee like little increases depending on his/her performance.
Incentives on the medium/long term: Remuneration received lately or in a longer period than a year.
Payment in kind.
These data is referred to Spain, because for instance in the US organisations invest between a 30 and 40 percent of their budget to the compensation of complementary benefits. In a 74% of the cases, american workers say that these benefits determine the choice of the job. If the enterprise offers just one possibility of benefit, 64% of the employees prefers medical assistance. Pension funds, either in Spain or US are usually based on time or lack of absence of the employee in the company.
With the proper planning of the strategy of total remuneration, making the medium/long goals of the company match with the objectives of the employees, it is possible to make the remuneration be the strategic axis of the motivation of the individuals, and of the chance of success in the organisation.
Recent studies on retribution allow determining trends on the medium term in Spain in three different stages:
In the first one, the incentive will have a bigger relative weight on the short term related to the results.
In the second stage, non-salary benefits get a bigger importance, until they achieve an optimal level.
In the last one the deterministic factor will be the incentive on the medium/long term, that involves the individual in the results that the company wishes to obtain in a continuous way.
Currently in Spain the fix salary is more than 70% of the total remuneration. It is important in the studies seen the almost total lack of incentives on the medium/long term.
Strategic questions concerning total remuneration
Many banks have a clear philosophy of remuneration, which can provide them with high stability at the time of setting the payment.
In the creation of this philosophy, it is important to establish whether remuneration will be regarding these criteria, or combining them.
Remuneration based on the place in the hierarchy.
Remuneration based on skills
Remuneration based on performance
The first one regard the plans made to regulate the way to deliver the increases in salary to those employees that deserve it.
They are based on the belief that involve the worker in the decision on how to be given not his salary, but his benefits, is a method able to increase his/her productivity, lengthen his permanency in the bank and enhance his loyalty to it, reducing absenteeism, delays ...
In addition of the ideological background, they have an economic one, and it is that when delivering the employee the percentage of the increase in the salary, the difference between what the employee received and receives is not that notable. Thus the employee does not perceive an improvement in the quality of his life, not even the gratefulness of the bank for the services given.
Global benefits consist of giving the worker the total amount of the increase in his salary in just one time and in advance, as long as the employee agrees with it and perceives it as an improvement in this way.
That is, the main characteristic of this global system, is that the employee can decide how does he want to receive the salary increase, and this election doesn't mean that he will have to repeat his choice in next years.
In Spanish banks, most employees prefer to receive the money in just one time and in advance, so that they can plan their inversions in a more realistic way.
As a conclusion, there are several systems to administrate the total remuneration of an individual. Everyone of them try to make the worker feel attracted by the bank, so that he will try to stay for a long time in it.
To establish a remunerating policy based on the place in the hierarchy in such a way that is accepted by everyone in the organisation can be done after obtaining information through the places valuation system, that at the same time can be done just after having described them as well.
The places valuation system, creates a scale that gives a punctuation to all the tasks in an organisation. It is a simple system, in which each level of the hierarchy has a different scale.
In the remuneration based on skills the company must examine its skills, abilities knowledge, which has two very good advantages for the individual:
The person able to acquire new efficient skills, can have a significant increase in his salary
The remuneration is set by the value the person has in the organisation, not because the place in the hierarchy.
An example of implementation of a system like this could be this one:
Initial valuation of the skills of the person just incorporated to the organisation.
Each task learned, the employee ascends a stair in the salary ranking
The tasks can be learned in whatever sequence.
Once the tasks have been learned, there is a turnover in the places or in the tasks. The opportunity to still have salary increases has to be after specialising.
The remuneration based on performance is an objective instrument to measure the contributions of the individuals to the organisation. It supplies important information about the potential of an employee and his current performance, qualitatively and quantitatively.
With this kind of remuneration it is possible to potentate the involvement within the bank, when it relates the increase in salary with his contribution to the achievement of the goals of the company. It makes easier to make the individuals feel as part of the organisation. Through this criteria the bank can accomplish, therefore define, an intern, extern, individual, and company equality.
Fix salary is the oldest option from the ones examined, and arises because of the necessity to guarantee to the company the loyalty of its employees. It is based on the belief that it contributes to the improvement in the quality of life of the people involved in the organisation.
Non-salary compensations have many other ways to call it but all of them mean the same, i.e., non-monetary premium perceived in goods and services for the personal work.
At the first time very much creativity, experimentation and development is needed in the area of salary administration, because it is probable that if this is not done remuneration systems will not adapt to the organisations in which they must operate, and therefore, its efficiency in costs will diminish.
Motivation is vulnerable to the remuneration systems, i.e.; it stays as a motivation factor potentially effective in a society in which work and organisational effectiveness are losing importance for many individuals.
In general, the aspects that will contribute to the motivation of the employees are the flexible benefits, the participation in benefits, the remuneration based on capacities, participation design, global increases, agreements and working timetables.
In summary, to the logical changes in the organisations and in the environments, logical consequences will follow, which will mean new salary systems more flexible and adapted to the environment.
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