Article 4 - Ethical Compensation & Benefits: Rewarding Fairness and Building Trust
Ethical compensation and benefits are more than just numbers on a payslip, it's a reflection of an organisation's values, fairness, respect, and care for employees. Good pay results in motivation, commitment, and engagement, and benefits such as medical cover, parental leave, and pension schemes provide security and enhance the quality of life. Ethical pay is not just an ethical obligation, but it's a strategic advantage for companies with equitable, Fair and transparent compensation. This experience reduced turnover, increased productivity, and positive reputation (Aurora Training Advantage, 2023).
Principles of Ethical Compensation
The main principles of Ethical compensation and benefits are depending on fairness, equity, and transparency. Fairness means employees are paid based on contribution, performance, skills and not on favouritism or bias (Aurora Training Advantage,2023). Equity ensures pay reflects the value of work, and it should match the market standards regardless of gender, promoting equal opportunity for everyone (Kittner and Smith, 2023). Transparency gives a clear communication about the pay structure and benefits. This helps employees understand how compensation decisions are made (Mercer, 2024). If an organisation provides benefits like health insurance, parental leave, and training helps improve employee wellbeing and shows the organisation’s commitment to ethical responsibility.
International Perspectives and Examples
Companies all over the world are embracing global ethical pay practices. Patagonia pays a living wage throughout the supply chain that is in excess of the legislative rate to reflect actual living costs (Fair Labour Association, 2017). Unilever operates a Living Wage Program for employees and suppliers that shows how paying an ethical wage can be systematic rather than policy (Unilever, 2023). The International Labour Organisation (ILO) also issues guidance, how to avoid discriminatory pay and promote equality in every workplace (ILO, 2013). All these examples illustrate that ethical compensation is a worldwide standard and a significant component in the sustainability of a business.
Sri Lankan Perspectives and Examples
In Sri Lanka, companies are now moving towards embracing ethical remuneration as a component of HR practice. Hayleys PLC connects remuneration with performance review, competence, qualification, and ad hoc bonuses paid once annually, alongside medical cover and long-service rewards, to wellbeing activity and work-life balance (Hayleys PLC, 2021). Hemas Holdings PLC provides statutory contributions, medical cover, loans to employees, transport allowances, and performance bonuses, a reward and employee care strategy (Hemas Holdings PLC, 2024). From the given examples, it is evident that ethical compensation in Sri Lanka is feasible and beneficial, as it improves the job satisfaction of employees and also the company's reputation.
Challenges In Ethical Compensation & Benefits
Regardless of best intentions, there can be challenges in the actual implementation of ethical compensation. Most small and medium-scale enterprises face financial limitations that block them from offering competitive pay (Turyakira, 2018). Compensation transparency and consistency in a wide variety of jobs or through their supply chains may be hard to maintain, and equity in compensation may be hard to balance, considering various industries or regions(Mercer, 2024). In Sri Lanka, smaller-scale companies might have a problem offering good benefits because of economic conditions. To overcome these challenges, organisations require good leadership commitment, benchmarking, stronger governance, and regular policy reviews to ensure fairness and sustainability in compensation practices.
Conclusion
Ethical compensation and benefits are important in an organisation for building a sustainable, trustworthy, and productive workplace. Organisations can reinforce employees' commitment, loyalty, and corporate reputation by linking compensation to pay for performance, competencies, and market pay, and compensating high benefits. Equity Theory shows that employees feel treated fairly when their efforts are rewarded equally compared to others. When this happens, employees become more motivated and committed to their work (Adams, 1965). As per Human Capital Theory, investing in fair compensation and benefits enhances employee skills, productivity, and long-term organisational value (Becker, 1993). Sri Lankan and international practices confirm that ethical remuneration not only exists but is also worth it. In the end, ethical remuneration is not only an ethical imperative but a long-term building and social change plan.
References
Kittner, E.P. & Smith, L., 2023. Do Your Values Align With Pay Transparency? Insight Magazine, Summer 2023. Available at: https://www.icpas.org/information/copy-desk/insight/article/summer-2023/do-your-values-align-with-pay-transparency
Aurora Training Advantage (2023). The Ethics of Employee Compensation: Ensuring Fairness and Transparency in Pay Practices. [online] Available at: https://auroratrainingadvantage.com/articles/employee-compensation-ethics/Mercer (2024) Giving pay transparency the right foundation. Mercer Insights. Available at: https://www.mercer.com/en-ie/insights/talent-and-transformation/skill-based-talent-management/giving-pay-transparency-the-right-foundation/
Fair Labor Association (2017) Patagonia Reaccreditation Assessment. Available at:https://www.fairlabor.org/wp-content/uploads/2021/10/patagonia_reaccreditation_assessment_october_2017_0.pdf
International Labour Organization (2013) Equal Pay: An Introductory Guide. Geneva: ILO. Available at: https://www.ilo.org/sites/default/files/wcmsp5/groups/public/%40dgreports/%40dcomm/%40publ/documents/publication/wcms_216695.pdf
Hayleys PLC (2021) Annual Report 2020/21. Available at: https://cdn.cse.lk/cmt/upload_report_file/505_1623033244547.pdf
Hemas Holdings PLC (2024) Annual Report 2023/24. Available at: https://hemas.com/assets/downloads/financial-reports/annual-report-2023-2024.pdf
Unilever (2024) Living Wage Commitment. Available at: Living wage: five lessons from a decade of progress | Unilever
Turyakira, P.K. (2018) ‘Ethical practices of small and medium-sized enterprises in developing countries: Literature analysis’, South African Journal of Economic and Management Sciences, 21(1), a1756. Available at: https://doi.org/10.4102/sajems.v21i1.1756
Mercer (2024) ‘Three hidden pitfalls in pay equity data—and how to avoid them’, Mercer Insights. Available at: https://www.mercer.com/en-be/insights/talent-and-transformation/diversity-equity-and-inclusion/three-hidden-pitfalls-in-pay-equity-data-and-how-to-avoid-them/
Adams, J.S. (1965) ‘Inequity in social exchange’, in Berkowitz, L. (ed.) Advances in Experimental Social Psychology, Vol. 2. New York: Academic Press, pp. 267–299. Available at: https://psycnet.apa.org/record/1965-09738-001
Becker, G.S. (1993) Human capital: A theoretical and empirical analysis, with special reference to education. 3rd edn. Chicago: University of Chicago Press. Available at: https://www.nber.org/books-and-chapters/human-capital-theoretical-and-empirical-analysis-special-reference-education-third-edition
Excellent analysis, Viraj! The discussion on ethical reward practices was timely and well-articulated. I like especially the point that transparency in reward systems not only engenders trust but also reinforces organizational justice- strongly supported by Armstrong & Taylor, 2020. Your integration of Sri Lankan labor dynamics adds local context to a global conversation. Eagerly await more work from you!
ReplyDeleteDilrukshi, I appreciate the encouraging feedback. I’m really glad you found the discussion on ethical compensations and benefits very interesting and helpful. You have analysed the article very well and have identified that transparency in compensation is important. It shows a clear understanding of the pay. It builds trust and fairness in organisations. It’s great to hear that the examples of Sri Lankan labour dynamics added useful context to the discussion.
DeleteIn this you are clearly highlights the importance of ethical compensation & benefits in fostering trust, sustainability & long-term organizational success. The mention of both Sri Lankan & international practices adds credibility & local relevance. it is a long-term strategic investment that supports organizational growth& positive social change.
ReplyDeleteAsanka, thank you for the thoughtful comment. I agree with your observation that my article about the ethical compensation and benefits is useful. You are correct that fair and transparent reward practices are a long-term investment. This helps to build trust, support growth, and create positive change in organisations and society.
DeleteThis is an excellent article. You have discussed about principles of ethical compensation and how it shapes the organization. And also, you have discussed about international perspectives and examples with some literature to establish your position. Furthermore, you have discussed Sri Lankan perspectives and examples with case studies from Hayleys and Hemas, the article successfully demonstrates that ethical pay is both a global standard and an adaptable local practice.
ReplyDeleteDilrangi, thank you for your feedback. I appreciate that you have noted the principles of ethical compensation. I am glad that the international perspectives, examples, and supporting literature helped establish a clear position. Your recognition of the Sri Lankan perspectives and the case studies from Hayleys and Hemas reinforces the idea that ethical pay is both a global standard and an adaptable local practice. Thank you again for your supportive comment and for recognising the relevance of this discussion.
DeleteThis is an insightful and timely discussion on the growing importance of ethical compensation as both a moral and strategic pillar of modern HR practice. The article clearly connects fairness, equity, and transparency in pay to organizational outcomes such as trust, engagement, and retention emphasizing that compensation ethics go far beyond compliance.
ReplyDeleteMahesh, thank you for the valuable comment. I am happy to see that you found the importance of ethical compensation, and it is a strategic advantage for companies in modern HR practice. As you have noticed, ethics in compensation go beyond compliance. You are absolutely correct, fairness, equity, and transparency in ethical pay promote organisational outcomes such as trust, engagement and retention.
DeleteThe significance of ethical pay and benefits in fostering engagement, trust, and long-term organizational sustainability is discussed in this well-organized and perceptive piece. I like how the material has significant practical application because it includes instances from both Sri Lanka and other countries. While the emphasis on tying remuneration to performance and values highlights the strategic significance of ethical pay, the focus on fairness, equity, transparency, and the difficulties encountered by SMEs adds depth.
ReplyDeleteIndika, thank you for your thoughtful feedback. I appreciate your recognition of the significance of ethical pay and benefits in fostering engagement, trust, and long-term organisational sustainability. Your comment highlights the value of including examples from both Sri Lanka and other countries, which strengthens the discussion. I also value your point that linking pay to performance and values shows its strategic importance, and that focusing on fairness, equity, transparency, and SME challenges adds useful depth to the analysis.
DeleteThis is a clear and well explained overview of ethical compensation and benefits. It highlights how fair pay and thoughtful benefits not only reflect an organization’s values but also boost motivation, engagement, and reputation. The examples from global and Sri Lankan companies show practical applications, while the discussion of challenges emphasizes the need for strong leadership and transparent policies. Overall, it underscores that ethical compensation is both a moral and strategic advantage for organizations.
ReplyDeleteLuckmee, thank you for your supportive comment. I appreciate that you found this to be a clear and well explained overview of ethical compensation and benefits. You are correct that fair pay and thoughtful benefits reflect an organisation’s values and strongly support motivation, engagement, and reputation. I am glad that you found the examples from global and Sri Lankan companies to be very helpful. Your point about the challenges requiring strong leadership and transparent policies is important, and I agree that ethical compensation is both a moral and strategic advantage for organisations.
DeleteThis article clearly describes how moral benefits and compensation transcend remuneration and represent equity, dignity, and organizational integrity. It describes how equitable and open compensation practices increase motivation, decrease attrition, and foster trust. Living wages and ethical pay practices can improve employee welfare and business sustainability, as shown by the global examples of Unilever and Patagonia. Examples from Sri Lanka, like Hayleys PLC and Hemas Holdings, demonstrate that pay equity is also attainable locally. All things considered, the paper reaffirms that ethical compensation is not only a good idea, but also a cornerstone of sustained organizational success, loyalty, and trust.
ReplyDeleteDanushka, thank you for your comment. I appreciate your recognition that moral benefits and compensation depend on fairness, equity, and transparency. I am glad the focus on equitable and open compensation practices and their role in increasing motivation and fostering trust was clear. I appreciate your observation that the examples from Unilever and Patagonia illustrate the global nature of ethical pay. Your comment on the Sri Lankan cases from Hayleys PLC and Hemas Holdings shows that these practices are important in the local context too. I agree that ethical compensation is a cornerstone of sustained organisational success, loyalty, and trust.
DeleteWhat I find most insightful in this article is the idea that ethical pay isn’t just a compliance measure it’s a mirror of an organisation’s moral compass. The link between fairness and long term trust really resonates with me, especially in the Sri Lankan context where the cost value balance can be complex.
ReplyDeleteIt also made me think could the future of ethical compensation go beyond wages and benefits to include how companies value time, flexibility, and employee well-being as part of the pay equation? That’s where I feel the next evolution of fairness might begin.
Shashi, thank you for your comment. I agree with your comment that ethical pay is not just a compliance measure but reflects an organisation’s moral compass. Thank you for your identification importance of the link between fairness and long-term trust, especially in the Sri Lankan context, where the cost and value balance is complex. Your point is correct that the future of ethical compensation can go beyond wages and benefits, and implementing flexible work policies and well-being programs as part of total compensation.
DeleteThis article makes a strong case for the importance of ethically grounded compensation and benefits in motivating and sustaining employee commitment. Also, it recognizes the additional strategic advantages of such ethically oriented business practices. The integration of global and local case studies is especially helpful in contextualizing the application of such business practices beyond borders, including Sri Lanka, where smaller enterprises face difficulties. This article, however, could go a step further in identifying possible solutions regarding the moral price of compensation for small and medium-sized enterprises (SMEs) within their limited resources, and perhaps the promise of ethical compensation could be supported within government subsidies, cross-sector alliances, or collaborations within an industry. This is an advocate piece on the enduring benefits of ethical compensation, not only for the employees but also for the long-term business viability, and corporate culture, which must be an inspiration for other businesses.
ReplyDeleteDishan, thank you for your comment. I agree with your comment that ethical compensation and benefits are important for motivating and sustaining employee commitment. I am glad you have noticed that global and local examples clearly show the strategic advantages of ethical pay. These practices confirm that ethical remuneration not only exists but is also worth it. To address your point on SMEs, Ethical pay can be supported through government funding, partnerships across different sectors, or working together with other companies. This helps smaller businesses afford fair wages even when they have limited money. As you mention, these ethical practices ensure long-term employee engagement, business sustainability, and a positive corporate culture.
DeleteThis article offers a concise and useful summary of ethical benefits and compensation as a moral and strategic necessity for businesses. It illustrates how ethical pay improves employee motivation, engagement, and organizational reputation by putting a strong emphasis on fairness, equity, and transparency (Aurora Training Advantage, 2023; Kittner and Smith, 2023). The viability and advantages of ethical compensation in a variety of situations are well demonstrated by the examination of both global examples, such as Patagonia and Unilever, and Sri Lankan examples, such as Hayleys PLC and Hemas Holdings. Although issues like consistency and financial limitations are recognized, the paper could go deeper into practical ways for SMEs to get past these obstacles and assess how ethical compensation affects worker outcomes and company performance (Mercer, 2024). Excellent work!
ReplyDeleteSashini, thank you for your valuable comment. I appreciate that you have identified that ethical benefits and compensation are both a moral and strategic necessity. Thank you for your recognition regarding global and Sri Lankan examples, and it clearly demonstrates how fairness, equity, and transparency improve motivation, engagement, and reputation. Your point about small and medium businesses is valid. Practical solutions like step-by-step implementation, working with other companies, and government support can help overcome money problems and consistency issues. Also, it is important to measure how fair pay affects employees and company performance. These approaches ensure that ethical pay remains viable, effective, and strategically beneficial even for smaller enterprises.
DeleteExcellent integration of fairness, equity, and transparency principles with practical examples. Your discussion of Patagonia's living wage and Sri Lankan cases like Hayleys and Hemas effectively demonstrates how ethical compensation builds trust while supporting both employee wellbeing and organizational sustainability.
ReplyDeleteLivan, thank you for your comment. I appreciate your recognition of how principles of Ethical compensation and benefits depend on fairness, equity, and transparency, not on bias. It reflects the value of work. Your observation on the examples such as Patagonia, Hayleys, and Hemas is absolutely correct. It shows how paying an ethical wage can be systematic rather than policy. Your comment clearly shows that ethical compensation strengthens trust and supports both employee well-being and long-term organisational stability.
DeleteExcellent analysis, Viraj! Your discussion on ethical reward practices is both timely and clearly articulated. I particularly appreciate your point that transparency in reward systems not only builds trust but also strengthens organisational justice, well supported by Armstrong & Taylor (2020). The integration of Sri Lankan labour dynamics adds meaningful local depth to a global conversation. A strong and thoughtful contribution.
ReplyDeleteMadushani, thank you for your feedback. I appreciate your recognition that transparency in reward systems is important for building trust and reinforcing organisational justice. Transparency gives a clear communication about the pay structure and benefits
DeleteThank you for highlighting how ethical reward practices impact employee motivation and fairness. I also appreciate your recognition of the Sri Lankan context, which adds practical relevance to the discussion. Sri Lankan and international practices confirm that ethical remuneration not only exists but is also worth it. In the end, ethical remuneration is not only an ethical imperative but a long-term building and social change plan. Your feedback encourages further exploration in this area.