In this scenario, Team A has agreed to work with a small business, Landslide Limousine. Bradley Stonefield is our client whom we must develop some compensation and benefit recommendations. Landslide Limousine is a small business with approximately 25 employees that is located in Austin, Texas. First, Team A will conduct a market evaluation by researching what companies in the relevant market are providing to employees from a total compensation perspective. Second, recommend a compensation structure. Third, recommend the position in the market. Fourth, create a total compensation and benefits strategy. Fifth, consider the use of performance incentives and merit pay to recognize and engage employees. Lastly, identify laws related to the benefits and pay program.
On account of the tight competition in Austin Texas, it will be challenging as a small business owner starting out to be competing with the larger companies in the market. Luckily, Austin’s average pay for a limousine driver is 6% lower in this city than the national average which will be a benefit to Landslide Limousines. Austin has over 400 different competing companies in the area so having an upper hand on the total compensation of its employees will be highly beneficial. When looking at the area of competitors many do not offer health insurance or offer very little coverage to its employees. Between these companies very few allow the drivers to take all of their tips or compensation for these services.
Along with these lacks of benefits, problems that could also occur in this market is the high turnover rate due to low wages. By offering these additional benefits that other competitors are not, it allows Landslide Limousines the ability to find the best drivers and retain them. Over time, retaining drivers will save the company a significant amount of money not having to train new employees from constant turnover. In addition, being able to retain those that are experts in their fields, the customer satisfaction for the company will continually bring in new business allow the company to expand to 25 employees in the near future.
Recommendation for Compensation Structure
Based on the Bureau of Labor Statistics, the average pay for a limousine driver in Texas is $10.95 a year or $22,770 based on a full time. This standard includes tenured and new drivers. The minimum wage is for Texas is $7.25 or $15,080. After looking at these statistics, it is recommended that you come up with a hiring structure based on experience and duties for the role. Also consider offering a premium pay for peak or late night hours. Keep in mind if it is decided to provide health insurance it is recommended to keep the wage slightly lower than if it were not to be offered. A business needs to keep a financial balance and by offering both a higher wage along with health benefits it could put Landslide Limousines in more than the fifty thousand in debt than expected.
Since the company decided to allow drivers to keep ninety percent of their tips, it is recommended that the starting pay for the driver with 5 years’ experience be slightly below the Texas average given all the additional benefits the driver will receive. By giving drivers the ability to have ninety percent of their compensation pay, it gives them a high incentive to work at their best. It also allows the company the ability to track their best/most profitable drivers. Using this data will be significant when offering annual reviews and raises.
Recommendation for Position in Market
When looking at compensation and benefits one must look at their main competitors. Knowing one’s competition gives a view of whom in their market might sway or temp employees to the said organization. Landslide’s main competition is Big as Texas Limousine service and Austin Black service. These companies are currently operating in the Austin, Texas marketplace and are a large competitor. In addition, the market can easily offer skilled workers and great benefits.
Landslide must offer a benefits package to keep up with their competitor, and if they wish to stay in business, keeping their employees satisfied amongst competition is a must. Team A recommends that Landslide must offer similar or improved benefits to their employees. Further, Landslide should offer a training program to entry level employees so that the service is exceptional and customers will continue to utilize their business.
Compensation and Benefits Strategy
When running an organization, managers and other members of leaders needs to take a look at the compensation and benefit strategy. A strategic plan for employee compensation determines how much you want to pay employees and what type of employees you want to attract. Your compensation plan entails a variety of aspects including pay scales, reward programs, benefits packages and company perks. A successful strategic compensation plan allows your business to compete in the market for the best employees in your industry (“Strategic Plan for Employee Compensation and Benefits”, 2014). Here are a few recommendation I would make to help with the creation of a compensation and benefit strategy plan.
Attracting Quality Employees
Your strategic plan for compensation plays a large role in attracting competent employees. Paying wages at or above the prevailing wage in the market for your company’s industry allows you to demand workers with more experience and positive work histories. Employing more qualified workers leads to better results, including higher productivity and customer service interactions. This can increase your company’s revenue and help your business establish its identity with consumers (“Strategic Plan for Employee Compensation and Benefits”, 2014).
Rewards for Performance
A compensation strategy may also include rewards for employees based on workplace performance. This may include a commission-based system that rewards employees for total amount of sales or for consistent positive feedback from customers. A reward system should be easy for employees to understand and attainable enough at its lower levels to encourage employees to work harder to reach higher goals. A reward system with performance levels too high for employees to reach early on in the process won’t encourage harder work because employees will simply ignore it (“Strategic Plan for Employee Compensation and Benefits”, 2014).
Perks and Benefits
Perks and benefits can make or break your company’s ability to attract the best and brightest in your industry. Offering health insurance benefits to full-time workers should be a goal of your strategic compensation plan. You can combine health insurance with other company perks, including paid holidays and guaranteed paid vacation time, to attract more qualified workers to your business. Your decision to offer these benefits is also contingent on the success of your company. You may choose to add health care coverage and paid time off to your benefits package only after your company is showing profitability or makes it past the first year (“Strategic Plan for Employee Compensation and Benefits”, 2014).
Incentives and Merit Pay
Subsequently as this is a new limousine service, primarily driven by customer satisfaction. We must consider how to engage staff, by introducing performance incentive plans that support the key business objectives of the Limousine Service; motivating staff into achieving the goals set by management and providing cost-effective rewards for performance. Helm and Holladay (2007) stated, “Effective performance management involves a complete system of goal setting, training, communication, and ongoing feedback from a practice” (p. 4). Considering the current performance management strategic plan for the business, we will have 25 employees to begin the infrastructure. So we can reasonably consider implementing annual, quarterly annual, and end of year special incentives in addition to merit pay for every employee based on the company’s performance rating. Where the individual performance appraisal is described as “an important means to achieve goals set by the company’s top management, not just a way to change wages,” (Robbins & Judges, 2013, p. 254).
The company will outline the quarterly objectives on the 3rd day of the first month of each quarter based on categories such as, leading happy people and driving out risk. Notably each department will have concrete and measurable key performance indicators(KPI)that will align with the Limousine company’s goals; also some defined employee’s will be responsible for multiple areas, and will have specific KPI’s or management by objectives( MBO) unique to their position. The annual portion of the incentive plan will be based on the execution of targets in the following categories; profit before taxes, customer service (gallop score) and service level scores, also marketing our stuff which the total percentage of all groups equaling 100%. Additionally, an individual incentive will be paid to individuals that exceeded expectations in the customer service.
Plus all the regular full-time and part-time employees are eligible, and those working less than 40 hours will receive prorated payments for all plan types. But in order to remain eligible to participate in the incentive scheme, employees must be given a performance rating of ‘fully met expectations’ and nothing less on their annual appraisals under the corporate performance evaluation program. Considerably, the implementation of incentives plans in addition to the performance management plan will create success for the company, and bred a culture of happy people.
Related Laws to Benefits/Pay Program
Team A has put together a few laws that pertain to Landslide Limousines. These laws will assist in the protection of business assets, employees, and customers. Understanding the laws and what one needs to do to stay in compliance is extremely vital in the success of a business. Otherwise, it can become a detriment and soon it will become the ultimate downfall of one’s brand and company. Consolidated Omnibus Budget Reconciliation Act (COBRA) of 1985 If an employee terminate employment or reduce their hours of employment, they will usually have the right to temporarily continue their health and dental coverage through their employer.
This law requires that most employers sponsoring group health plans offer employees and their families the opportunity for a temporary extension of health and dental coverage (called “COBRA coverage”) at group rates in certain qualifying instances where coverage under the plan would otherwise end. If you are an employee of CWRU and are covered by one of the group health and dental plans, you have a right to choose COBRA coverage if you lose your group health coverage because of a reduction in your hours of employment or the termination of your employment (for reasons other than gross misconduct on your part) (“Laws Affecting Benefits”, 2011).
HIPAA Privacy Rule
The Office for Civil Rights enforces the HIPAA Privacy Rule, which protects the privacy of individually identifiable health information; the HIPAA Security Rule, which sets national standards for the security of electronic protected health information; the HIPAA Breach Notification Rule, which
requires covered entities and business associates to provide notification following a breach of unsecured protected health information; and the confidentiality provisions of the Patient Safety Rule, which protect identifiable information being used to analyze patient safety events and improve patient safety (“Health Information Privacy”, n.d).
Women’s Health and Cancer Rights Act of 1998
Also known as “Janet’s Law,” the WHCRA requires health care benefit plans to provide certain coverage following a mastectomy. The law also requires annual notification to all plan participants and their covered beneficiaries (“Laws Affecting Benefits”, 2011).
Fair Labor Standards Act (FLSA)
The Fair Labor Standards Act (FLSA) prescribes standards for wages and overtime pay, which affect most private and public employment. The act is administered by the Wage and Hour Division. It requires employers to pay covered employees who are not otherwise exempt at least the federal minimum wage and overtime pay of one-and-one-half-times the regular rate of pay. For nonagricultural operations, it restricts the hours that children under age 16 can work and forbids the employment of children under age 18 in certain jobs deemed too dangerous. For agricultural operations, it prohibits the employment of children under age 16 during school hours and in certain jobs deemed too dangerous (“Summary of the Major Laws of the Department of Labor”, n.d).
In closing, Team A’s recommendations for Landslide Limousines will assist in the success of the company as Bradley Stonefield strives to become the top competitor in the market. Team A has put together a market evaluation. In addition, Team A has provided recommendation for compensation structure and position in market. Further, an outline of compensation and benefits strategy and a merit pay structure for employees. Lastly, laws that pertain to Landslide Limousines that can ultimately protect small businesses, their employees, and customers.
Bureau of Labor Statistics. (2013, May). Retrieved from Occupational
Employment Statistics: http://www.bls.gov/oes/current/oes533041.htm Cascio, W. F. (2013). Managing Human resources (9th ed.), New York, NY the McGraw-Hill Companies, Inc.
Experienced Limo Driver Salary in Austin, Tx. (2014, December 6). Retrieved from Indeed: http://www.indeed.com/salary/q-Experienced-Limo-Driver-l-Austin,-TX.html
Health Information Privacy. (n.d). Retrieved from http://www.hhs.gov/ocr/privacy/ Laws Affecting Benefits. (2011). Retrieved from http://www.case.edu/finadmin/humres/benefits/laws.html#hippa Strategic Plan for Employee Compensation and Benefits. (2014). Retrieved from http://smallbusiness.chron.com/strategic-plan-employee-compensation-benefits-15613.html Summary of the Major Laws of the Department of Labor. (n.d). Retrieved from http://www.dol.gov/opa/aboutdol/lawsprog.htm