Question

TanTinTun & Associates is a medium-size marketing organization specializing in professional
promotion and publicity services. The firm's top management believes that it provides quality
service as evidenced by the high level of customer satisfaction. The organization consists of
three departments: print media, audio media, and visual media, each of which has a senior
director in charge. The company employs 80 clerical staff who are paid on an hourly basis and
30 professional staff who are salaried. A large majority of the employees have an excellent
rating in their job skills, and all employees demonstrate above average performance in their job
responsibilities. The employees take pride in their achievements, and morale is very good.
Salary ranges are established for different job classifications within the clerical staff (i.e.,
clerk, clerk typist, secretary, and administrative assistant) and the professional staff (i.e.,
analyst, manager, and director). A fixed-rate structure is used for all salaries. The company
offers no commissions because it does not want its professional staff applying undue sales
pressure on its customers. Company management is proud that it does not have to resort to a
salary plus commission structure for its professionals to generate sales.
Employees are recognized for superior performances through salary increases and
promotions. Management believes that salary increases should be based on merit, and open
positions are filled from within whenever possible. Top management contends that highly skilled
and motivated employees will improve productivity it they are rewarded with annual merit pay
raises and if promotions are based on performance.
Top management announced in November that the amount available for pay increases
would be 10 percent of the actual total salary expenditures for 2019. All salary increases would
be effective January 1, 2020.
The print media department consists of 20 clerical and eight professional employees on
January 1, 2019. Six clerical employees were added during the year at the rate of about one
every two months. Two professionals were added, one on March 1 and one on August 1. Three employees were promoted during the year: two secretaries to administrative assistants and one
manager to director. The total actual salary expense for the department without regard for
employee benefits and employer tax contributions was RM548,000. Therefore, the total amount
allocated for wage increases for the print media department in 2020 is designated to be
RM54,800.
Shortly after the merit pay program was announced, the print media department
employees received their year-end evaluation conducted by the employee's supervisor. The
senior director met with each supervisor and received all performance reports and then
announced the merit pay increase for each employee.
Upon completion of this entire process, several employees complained individually about
the inequities of the merit pay program. The senior director was concerned about the employee
discontent because the people complaining were some of the highest achievers on the staff.
They tended to be at the lower classification levels and were relatively new employees, having
been with the company form one to two years. The individuals showed potential and were highly
motivated, often working extra hours and assuming additional responsibilities.
The new employees' behavior differed slightly from the employees who had been with
the department for a longer period of time. Although highly skilled and competent in their jobs,
the veteran employees tended to be reluctant to accept additional responsibility or to work extra
hours on a regular basis.
Required
1) Review TanTinTun and Associates' wage and compensation plan.
a. Identify and discuss its general strengths
b. Identify and explain the shortcomings in the administration of the merit pay increases
that are to become effective in 2020, and discuss what effect these shortcomings
could have on the group of discontented employees in the print media
department.
2) Explain how this compensation program should be revised, if at all.

Answer 1

1 (a) The Plan has following stengths-

i. Performance is rewarded- performance is assessed and rewarded uniformally creating an ecosystem which promotes productivity and competitiveness.

ii. No undue sales pressure- When there is oppourtunity of greed, there is bad behaviours. The Company has not provided an environment where such situation arises.

iii. Achievement is praised and recognised leading to high moral among employees

(b) Following are shortcomings of the program-

i. No seggregation of above average employees or program to recognise the best among the lot

ii. Additional job responsibility is not rewarded

iii Additional hours spent by staff not paid or recognised in the merit staff.

Following could be impact on staff-

i. Resentment and creation of political group as old timer versus new timer

ii. Motivation level decrease

iii. Performance may decrease and affect overall environment

2. Following should be done as revision-

a. Different level of salary raise e.g. 8%-10%-12% for differentiting among good-better-best

b. Variable pay should be incorporated

c. Recognition and certification program should be incorporated