Benefit and compensation system of Google
Benefit and compensation system of Google
Google Inc. is an American international organization that provides internet related products and services. Cloud computing, advertising technologies, and their search engine are among the most popular services that they offer. Google recently ranked 46th on the 2014 Fortune 500 companies and 1st on Fortune 500’s best places to work for. Google was founded in 1998 by Larry Page and Sergey Brin who met at Stanford University and is based out of Mountain View, California. Google began in a garage sixteen years ago and now has over 48,000 employees and is one of the world’s technology leaders. CNN Money has it ranked as number 1 on list of most popular employers by business and engineering majors. “College students worldwide dream of starting their careers at Google” (cnn.com). A large part of the reason that Google ranks so highly among lists of popular employers is due to their competitive compensation strategy.
Google is known not only for their innovative technology breakthroughs but also their innovative compensation policies. Google Human Resources performed a survey to determine what type of pay is preferred by its employees such as base pay or bonuses. “We’ve heard from your feedback on Googlegeist and other surveys that salary is more important to you than any other component of pay (i.e., bonus and equity). To address that, we’re moving a portion of your bonus into your base salary, so now it’s income you can count on, every time you get your paycheck” (ibtimes.com). Managing Human Resources and compensation strategies effectively is vital to organizations within the modern and fast paced business world. Google had created a strategic compensation that gives them a competitive advantage among their competitors by attracting, retaining, and motivating highly talented employees.
Google’s compensation system has all the benefits you would expect from a Fortune 500 organization such as health insurance programs and retirement plans. Google sets itself apart from the competition by offering services and discretionary benefits that are not standard. These services include perks such as employees are allowed to bring their pets to work and transportation services that pick up and drop off employees at home. Google believes in a fun informal environment because it leads to more engaged, happy, and productive personnel and they have implemented many practices that reflect this ideology. Liane Hornsey, the Google VP of operations, believes that the work life balance is important to their employees and implements policies to ensure that workers keep a healthy balance.
“Liane explains that the company is outcome focused, not detail focused. In other words, they don’t monitor what time employees arrive or keep track of sick days” (centerforworklife.com) Google offers flexible work hours, part time work options, and telecommuting for certain jobs to allow employees freedom to have a social and home life. Google has set a strategy to provide a workplace that people want to work at and have gave substantial effort to achieve this goal. Their HR and compensation practices produce impressive results of the organization’s approach which increases employee productivity.
Core compensation is very important and has a large impact on employee’s attitude and performance. Google focuses on rewarding exceptional performance as well as training in weak areas for underperformers. Performance management is performed quarterly and Google puts extensive focus on this area because they are performance driven. Performance appraisals are important because Google uses pay-for-performance bonuses as a large part of their compensation strategy. Much like most other organizations there is an increase in total compensation in accordance to the levels of responsibilities and leadership. Individual incentives, group incentives, and profit sharing programs are used at Google which gives employees a financial reward when their profit goal is achieved. Payscale.com reports that Google Inc. typically pays their employees 11% above the market pay line. This is 3% higher than their direct competition in the market.
Paid time off is one type of discretionary benefit that Google offers benefits above the standard in the market. They offer unlimited sick leave due to the fact that they are focused on performance and production and rely on performance reviews to determine an employee’s contributions. Google also provides employees with 27 days of paid time off after one year of employment. They also recognize the importance of child birth and offer 18 weeks of maternity leave for an employee that has a child. Google also offers paternity leave to fathers which allow male employees to use up to 7 weeks of leave to spend with their newborn. During this time off employees receive their full annual base pay while they are at home with their child.
Google offers employees health insurance programs that cover employee dependents as well. “Its health care plan is unusually generous and even pays for gender-reassignment surgery including facial feminization for transgender women” (forbes.com). Google also has a physician on site at headquarters in Mountain View, CA. This allows for employees to simply walk across the campus to see a doctor if they are not feeling well. This eliminates employees having to miss work and make a special trip to a physician when they are not feeling well. Some physical therapy services and chiropractic services are offered as well for the convenience of the employee.
Google also offers employer sponsored retirement programs such as 401K and IRA. Google matches employee donations to their defined contribution plans at a rate of up to 50%. This is well above the average as many organizations only match up to 6% of contributions. Google’s HR department sends emails to employees to encourage them to set aggressive savings goals. “If you implore an employee to contribute $8,000 to his retirement rather than, say, $2,000, he’ll tend to save more, even if he can’t afford $8,000” (rd.com). This allows employees to feel secure in their future retirement income as Google helps to ensure that they will have a satisfactory retirement benefit plan.
Protection programs are another form of discretionary benefit that Google offers in innovative and unprecedented ways. In addition to standard life insurance that employees are able to receive, they also receive additional life insurance benefits from directly from Google. If an employee passes away Google has created a policy that the deceased employee’s spouse will receive half of their salary for the next ten years. If the deceased employee had a child then Google will compensate that child in the amount of $1000 per month until the age of 19 or the age of 23 if they are a full time college student.
The type of benefit that Google is most known for are services. This type of discretionary benefit helps companies create a competitive advantage in the market by giving perks to employees which helps attract and retain quality employees. They offer transportation services in the bay area with Wi-Fi enable trollies that pick up employees to take to work and drop them off at their residence after work is completed. Another service they offer are nap pods for the ability to relax and take brief naps at work so they are reenergized for work. Google also provides tuition reimbursement services that encourage employees to continue their education at the expense of their employer. This will continue to improve employee production and continue to increase the value of the worker which benefits the employer and employee. There is also an on-site fitness center that is complete with weights, personal trainers, and yoga instructors so that employees have the time to exercise and relieve stress while at work. The fitness center is also equipped with a full size lap pool and rock climbing wall for alternative exercise methods.
There are also free recreational game rooms where employees can play games such as pool, foosball, Ping-Pong and arcade games. This promotes a social atmosphere and strengthens the team concept while relieving stress and improving morale as well. Google has Segways that are available for employees to use at any time which allows them to travel around the campus atmosphere quicker and in a more entertaining way. They also have beach volleyball games and roller hockey in the parking lot twice a week.
Hair salons with beauticians and barbers are readily available any time an employee would like a haircut at work. One of the most popular services that Google offers is a free cafeteria for all employees. Workers are able to enjoy quality gourmet food for lunch at their convenience and it does not cost them anything. Google is also offers free oil changes, car washes, legal consultation among many more services that are available to any employee. These services are a unique compensation strategy that proves core compensation is not always the most important benefit to an occupation.
Google has a unique vision and has implemented unique compensation strategies that have been met with overwhelming success of attracting and retaining the highest quality employees available in the market. Most employers can learn from the strategy used by Google by making the work environment as fun and friendly as possible because that is an environment that produces highly motivated employees that will want to perform to the best of their abilities. The bottom line is directly affected by employee turnover and employee production and a compensation strategy such as Google Inc.’s has proven to affect those areas in a positive way.
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