Question

In: Operations Management

total compensation plans for two organization. The organizations must be in different industries, have different employee...

total compensation plans for two organization. The organizations must be in different industries, have different employee groups, and utilize different pay strategies.

Assess direct and indirect reward plans available to two types of employee positions. The total reward plans that are offered The similarities and differences that exist among the plans How well each organization's reward plan supports expectations

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Answer:

Compensation is the remuneration given by an employer to their employee for the work done by the employee and to encourage them for higher productivity. Compensation can be direct and indirect - direct compensation includes cash payments (Basic pay, HRA, DA, etc.,) and indirect payments constitute the incentives and fringe benefits provided to employees (retirement benefits, flexible timings, medical benefits)

Total compensation includes all forms of monetary payments and non-monetary rewards to an employee. Monetary payments include both direct and indirect namely- Basic pay and incentives and non-monetary rewards include recognition for a good job, higher responsibilities, Quality of work life and satisfaction at work.

Wage differentials occur in the country among different industries, as well as Inter-firm Differentials exists due to the size of the firm, financial performance, skill requirements, strain at work, as well as the quality of the decisions taken by the management.

Let’s take 2 industries- Financials   & IT Services provide an approximate average weekly wage of approximately $5000, while Utility industries provide an approximate average weekly wage of approximately $1200

Position

Industry

Approximate monthly earning

Components

CEO

Financial sector   & IT

$3000000- $250000

Salary, Stock options, Non-Equity Incentive Plan Compensation, Other compensation components

Utilities

$1303589

Salary, Stock options, Non-Equity Incentive Plan Compensation, Deferred compensation earnings, Other compensation components

IT Specialists

Financial Sector & IT

$14,000

Salary, Bonus, social security, healthcare, pension

Utilities

$6000

Salary, Bonus, social security, healthcare, pension

The total compensation varies with industries - IT and Financial and core product manufacturing companies provide high average weekly wage while utility industries pay a much lesser average weekly wage, this is due to the overall financial performance and net worth of the companies in the industry. IT and Financial and core product manufacturing companies pay a high average weekly wage as their financial performance is comparatively higher than the utility industry.

While assessing the employee positions, it is seen that the components included in the total compensation are similar based on designation, however, the approximate monthly earning varies with industry and the financial performance of the company. CEO has a different compensation structure when compared with IT specialists who have a different compensation component.

How well each organization's reward plan supports expectations

The CEO of the organization is responsible for decision making, for the growth of the organization, hence stock options are the best component in their compensation package, which motivates them to focus their energies towards the growth of the organization, whereas, for the IT Specialists jobs, the organization needs to ensure employee wellbeing as it triggers for better performance, hence the compensation package of IT specialist accommodates social security, healthcare, pension components in their compensation.

Hence the average salary is based on the financials of the company, while the components in the total compensation are specific to the job. The components have to be selected based on the nature of the job and their ability to make employee contributions to the overall objectives of the organization.


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