Compensation Plan – University of Phoenix – HRM Essay
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A good compensation plan must include both aspects, financial and nonfinancial of a rewarding system where financial rewards, or a pay system, “assign a monetary value to each job in the organization (a base rate) and an orderly procedure for increasing the base rate (e.g., based on merit, inflation, or some combination of the two)” (Cascio, 2005, p. 425). Also, “a properly designed Pay for Performance (PFP) Program enables companies to reduce their cost of labor while increasing the average take home pay of their workforce” (Jensen, 2009).
On the other hand we also will offer nonfinancial systems that will cover indirect aspects such as benefits, professional and personal development. We want to give our “sales staff a reason to get out there and sell, sell, sell” (Ward).
“Rewards bridge the gap between organizational objectives and individual expectations and aspirations. To be effective, organizational reward systems should provide four things: (1) a sufficient level of rewards to fulfill basic needs, (2) equity with the external labor market, (3) equity within the organization, and (4) treatment of each member of the organization in terms of his or her individual needs” (Cascio, 2005, p. 419).
New compensation plan”Pay systems are designed to attract, retain, and motivate employees” (Cascio, 2005, p. 419)The new compensation plan will be based in a performance system. “If business takes off, more pay goes to workers. If it doesn’t, the company is not locked into high fixed costs of labor. 417” This system was chosen since meets the company strategy of growth and objectives and “such variable-pay systems almost guarantee cost control. 417 (Cascio, 2005, p. 417)” and a well planed recognition system adds to the compensation plan to offset a higher level of discouragement found in a competitive selling environment and also “can be used to express gratitude, admiration, and to inspire to greater sales and greater sales initiative” (F&B Publications, 2005).
Our new compensation plan will adopt a combination of base salary plus commission and bonus based on the overall performance. “Perhaps the most important objective of any pay system is fairness or equity” (Cascio, 2005, p. 419). To ensure the correctness of our plan, a committee has been created to evaluate each employee performance, keep our compensation plan current and provide support and training at any time needed.
We are also taking in consideration that our payment plan “should include a three-tier approach of immediate recognition for a job well done, short-term rewards for performance over a month or quarter, and long-term rewards for being a loyal employee over the years” (Schoeffler, 2005).
-Salary: a monthly salary will be based on the job description of each position and it has the possibility of be complimented and enhanced depending of the employee performance.
-Commission: a percentage of the profit will be used to increase the monthly employee compensation.
-Bonus: bonuses will be given based on the performance of the sales individual each three months. Percentages will be given according to the goals met, or exceeded, so sales reps will rely on their individual performance.
-Team incentives: “Team incentives provide an opportunity for each team member to receive a bonus based on the output of the team as a whole” (Cascio, 2005, p. 443). Sales personnel will have participation on this incentive to promote a teamwork environment. These events will happen at the end of the year.
-On spot bonus: This is going to be granted for exceptional behavior regarding to teamwork efforts, customer satisfaction or any attitude that can be used as an example to the other workers. We “may reward the worker with a one-time bonus of $50, $100, or $500 shortly after the noteworthy actions” (Cascio, 2005, p. 441).
-Incentives – ” When it comes to performance incentives, the possibilities are endless” (Cascio, 2005, p. 436), and we plan to use nonfinancial reward system that will include “anything an employee values and desires that an employer is able and willing to offer in exchange for employee contributions” (Cascio, 2005, p. 418). Based on the answers compiled from the questionnaire we created, we will develop some entertaining activities such as trips, restaurants, theaters and any other approved selection available in our committee that will be available each three months and also at the end of the year.
In our committee we will also make available the following benefits that our employees can choose to participate on:-Employee stock ownership plans – As the company grows we will offer participation in the stocks of our company and a limited amount of them available to each employee for purchase. It helps “to fulfill a philosophical belief in employee ownership” 447.
“ESOPs do promote an increase in employee willingness to participate in company decisions. Companies that take advantage of that willingness can harness employees’ energy and creativity” (Cascio, 2005, p. 447).
-Recognition – is a non financial reward and helps to “enhance a worker’s sense of self-respect and esteem by others” (Cascio, 2005, p. 418). These recognitions will be done in the yearly meetings where all employees are going to be together and have the opportunity to see their colleague’s performance is rewarded. “Recognition amongst their peers is still the quintessential motivator, whether there’s an incentive program or not” (Shearstone)Recent data indicates that “people are more attached and committed to organizations that offer family-friendly policies, regardless of the extent to which they benefit personally from the policies” (Cascio, 2005, p. 489), therefore our plan also cover other benefits that will be extend to all employees regardless merit or performance.
“Once you have great employees on board, how do you keep them from jumping ship? One way is by offering a good benefits package.” (Entrepreneur Media, Inc, n.d.)•Tuition aid•Auto insurance•Fitness and wellness programs•Counseling Service•Child adoption•Child care Social activities•Elder care Referral awards•Charter flights Family leaves•Flexible work arrangementsWe also developed some benefits options that will “integrate salary and benefits into a package that will encourage the achievement of an organization’s goals” (Cascio, 2005, p. 470). They will be available to all employees and they can choose among them all.
•Life insurance•Disability insurance•Healthy insurance•Other medical coverage•Sick leave•Pension plans•Unemployment insurance•401K”Evidence indicates that the perceived value of benefits rises when employers introduce choice through a flexible benefits package” (Cascio, 2005, p. 466). For that reason we expect that this pay system will bring excitement to our workforce since the opportunities are vary.
This pay system should also increase motivation of our employees and deepens commitment with our customer to bring success to both the individual and the company.
Following are pointed some reason that we expect to succeed with this new plan.
-The final compensation at the end of the month has the opportunity to be largely increased according to the employee performance, but yet, the base salary is high enough to give the employees some breathing in order to meet the essential financial obligations.
-Commissions, bonuses and team incentives.
-Variety of employee services and benefits.
-Friendly and family environmentBefore our pay system is implemented training will be given to all employees to ensure understanding of it. A website will be available to answer most common questions and our committee will also be available for further explanation and training as needed.
Cascio, W. F. (2005). Managing Human Resources (7th ed.). : The McGraw−Hill Companies.
Entrepreneur Media, Inc (n.d.). The Basics of Employee Benefits. Retrieved April 20, 2009, from http://www.entrepreneur.com/F&B Publications (2005). Sale Incentive Ideas – Motivating Your Sales Team. Retrieved April 17, 2009, from http://www.associatedcontent.com/Jensen, M. L. (2009). 9 Key Aspects For Successful Pay For Performance Systems. EzineArticles.com. Retrieved from http://ezinearticles.com/Schoeffler, B. (2005). Employee Incentive Plans: Make Them Worthwhile. Insurance Journal. Retrieved from http://www.insurancejournal.com/Shearstone, P. (). Creating Sales Incentive Programs That Work. About.com, 2. Retrieved from http://sbinfocanada.about.com/Ward, S. (). 6 Sure Ways to Increase Sales. About.com. Retrieved from http://sbinfocanada.about.com/