The dedicated importance given to compensation management by HR managers for recruiting and selecting intellectual capitals of the organization, yields higher prospective benefits of captivating good workforce. So, same is the situation confronted with this particular given case, in which human resource manager is required to hire Shannon Albright, who is having strong educational, professional and experienced background in finance department.
In order to hire her as a financial accountant, manager has prepared a descent proposal in regard of compensation package by considering internal and external equities, which are matched accordingly with organization’s requirement and resources. Compensation Management Employees are no longer bounded with the concept of labor who works only for pay. Now, they are considered as the intellectual capital of the organization. The more, organization is willing to invest for the work done by its employees, the more it earns the profit.
It does require well management of compensating employees against their services, abilities, skills, etc. endered to the organization through salary packages, incentive plans, and other benefits. In order to compensate the employees, organization generally follows a philosophy. This compensation philosophy not only deals with the single factor of just pay only. But in fact it defines the fixed pay of an employee which is in accordance with the labor market, it defines the variable pay which depends on the employee’ performance and other overall benefits, which include medical care, life and accident insurance, and retirement pay plan that the employee will get after recruitment in the organization.
The organization whose compensation management is fine tuned with respect to company’s budget, internal and external equities of base pay structure are well balanced can have a competitive edge over its competitors in the market because it results in low employee turnover ratio and the human resource of the organization will work with boosted motivation of being secured in their current position. It also helps to grab efficient workforce from the market who are considered as good market player.
Hence, if the given case is concerned, the HR manager needs to hire an employee named as Shannon Albright as a financial accountant for its organization, for whom he thinks as a best choice for this position. So, before recruiting her, he has to plan a descent salary package, incentive plan and other benefits that will be offered to her in order to make her accept this proposal.
Compensation Package The compensation package for her would be in accordance with the salary survey research of Boston, MA. Hence according to the salary survey research, the financial accountant is getting base pay of $79,090, $5,140 as bonus and $12,021 other benefits, that makes the overall compensation package of $96,251 annually on average (Salary expert, website). Based on this salary data, the HR manager has to offer some attractive offer so that Shannon’s demands regarding her compensation package are fulfilled.
Hence, considering the external equity, manager needs to ponder on the internal equity as well because if it is not concerned it will demoralize the other employees of the organization if the new employee is getting more than its job’s worth as per the organization and it can effect negatively on the new employee when he/she is getting less as per pay structure of the organization which is paying more to other employee but paying less to newer ones.
If this case is taken under consideration, than for Shannon, HR manager should offer her little bit more than the average salary of the Boston’s business market, and that is about $100,000 total annual salary, which consist of $75,000 as base salary, $12,000 as performance based incentive bonus and $13,000 as overall benefits given to her by the company. The total salary is also in accordance with company’s budget because of their growing business operations, an efficient financial accountant was necessary to induct.
Due to the absence of this post in the organization, there were many delays in their operations with respect to finance, which were resulting in considerable loss to organization on behalf of finance department; therefore, this loss will be covered by recruiting her into the organization. As far as internal equity is concerned, organization’s most of the salary packages are in accordance with market salary packages. Hence, in this way Shannon’s salary is in accordance with external as well as internal equity.
Incentive Plan When the organization targets for specific position and post and there is less number of specialists for that position than organization needs to develop an incentive plan which helps to retain existing employees, and attract new employees to the organization. The incentive plan is generally developed to recruit such employees whose supply is less but demand is more and it also helps to boost the morale of existing employee to perform better because incentives are directly proportional to the performance appraisal of the employees.
In this case, HR manager has to develop an incentive plan to recruit Shannon into the organization. The incentive plan consists of incentive options. Although, more than above average of the bonus salary is sanctioned to Shannon according to salary data, therefore theses options will make her achieve that bonus. These options include sign on bonus, project based incentive, compensatory leave, and annual leave (HRM manual, 2000). Sign on bonus consists of $5000 written agreement between organization and Shannon, that by accepting this offer, organization will give her this much amount at the end of the year of her joining.
Later on, this payment will be included in project based incentive, which will be given to her on completion of successful project at the end of fiscal year, but for the first year of her joining that amount is not more than $7000. Similarly, she will be given compensatory leaves for doing extra work and that leaves will be given to her whenever she desires. In a year, she will be having one month leaves and that will be her annual leave incentive option. Benefits Plan
As per existing policy of the company she will be offered other benefits as well which are mainly focused on health and welfare of an employee. The specific portion of the total salary consists of benefits plan, which is aligned to give above mentioned benefits to her. The welfare and health benefit plan include retirement plan, saving plan, medical insurance, dental insurance, etc. (ConocoPhillips, website). A specific portion of funds will be allocated to above mentioned benefits plan. This is the investment that will be done by the company itself for Shannon.
Conclusion In a gist, an efficient compensation management by HR manager produces a unique competitive advantage over its competitors because if organization is not doing well on its part with respect to development of its human resource, it won’t be able to collect good intellectuals in its organization. An organization with strong and efficient workforce can achieve remarkable goals even with limited resources and capabilities. In this regard, the management must accelerate their generosity in giving good compensation packages.