Attracting and retaining the most talented employees is essential for long-term organizational success. An important component to attracting and retaining such employees is the design and implementation of an effective compensation and benefit system.
Assume the role of a highly regarded human resource consultant hired to review, analyze, and revise the compensation and benefit system utilized by your city’s largest employer, Holland Enterprises. The firm employs 3,500 employees, but since 2007 has lost 25% of its staff. Exit interviews indicate the primary reason a majority of these employees have resigned is because of a compensation and benefit system that is perceived to be unfair and uncompetitive in the marketplace.
Present to the management a revised compensation and benefit strategy. Your proposal should include a discussion of:
How an effective compensation and benefit system contributes to organizational effectiveness.
The principle components of your revised compensation and benefit system for a large-scale organization as well as a recommendation for each component.
A convincing argument to the already skeptical top managers of this organization to increase their compensation and benefit expenses.
At a minimum, your compensation and benefit system would include the following components:
Compensation and benefit philosophy
Pay structure architecture (pay grades, pay ranges, and pay width)
Ratio of base pay to incentive (bonus) pay
Emphases on external equity or internal equity
Principle type of benefits to include (example: deferred compensation match, health insurance, vacation and sick leave, etc.)
Compensation and Benefit System
BUS 434-Compensation and Benefits Management
The compensation package consists of monetary pay, and in-kind claims of goods and services. This along with a non-compensation system rewards employees for and profits from leveraging people’s capabilities. Employers must ensure that their employees understand that they will receive the tools they need to be successful in their jobs. They must establish a vision and make realistic expectations. Even more importantly, employers must motivate by modeling the behavior they expect their employees to have. A great way to do this is through acknowledgement. Benefits and compensation are great tools to acknowledge an employee for a job well done.The reason employers want to keep employees motivated and happy is that they are all interdependent of each other in an organization. Success and productivity go hand in hand with motivation. According to Schermerhorn, Hunt, Osborn, &Uhl-Bein, 2010, “the meaning of power in an organization is the ability to get someone to do something you want done, or the ability to make things happen.” The easiest way to gain power is through proper motivation. However, motivation does not just happen because of a few extra dollars in a paycheck. It develops through constant leadership and recognition. The most effective compensation strategy is one that develops a clear link between the work that an employee is expected to perform (typically detailed in the job description), and the work that the employee performed (typically detailed in a performance evaluation). (Henderson 2006) It must articulate common themes behind other organizational plans and strategies, and create a climate that nurtures job satisfaction and motivation.
One of the major components that go into making a compensation and benefit system for an organization is a compensation and benefit philosophy. A compensation and benefit philosophyis a statement from the organization that shows what the company feels is reward worthy, what rewards will be given, and what benefits are going to be given to employees after they pass certain milestones.A company’s approach to equity is as important as the actual pay programs it implements. When designing the compensation and benefits strategy, external surveys, give us the information weneed to find an acceptable pay scale that is advantageous to the organization and the employees. Design the pay scale and pay structure in a way that best fits the organizations goals and ability to pay. A scatter diagram created from information collected through external surveys will show low and high ends of pay.