Question

1. What cost consideration would you take into account when revising this part of your compensation plan?

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2. What other consideration would you take into account when developing a new PTO plan?
3. Propose a new plan and estimate the cost of your plan on an Excel spreadsheet. Be prepared to present to the board of directors.

Answer 1

• A compensation package is an important part of the overall strategic HRM plan, since much of the company budget is for employee compensation.
• A compensation package can include salary, bonuses, health-care plans, and a variety of other types of compensation.
• The goals of compensation are first to attract people to work for your organization. Second, they can be used to retain people who are already working in the organization.
• Compensation is also used to motivate employees to work at their peak performance and improve morale of the organization.
• Employees who are fairly compensated tend to provide better customer service, which can result in organizational growth and development.
• Several types of pay systems can be implemented. A pay grade system sets up specific pay levels for particular jobs, while a going rate system looks at the pay throughout the industry for a certain job title. Management fit gives maximum flexibility for managers to pay what they think someone should earn.
• HR managers can also develop pay systems based on skills and competency and utilize a broadbanding approach, which is similar to pay grades. Another option might include variable pay.
• There are several motivational theories in regard to pay. First, the equity theory says that people will evaluate their own satisfaction with their compensation by comparing it to others’ compensation. The expectancy theory says people will put in only as much work as they expect to receive in rewards. Finally, the reinforcement theory says that if high performance is followed by a reward, high performance is likely to happen in the future.
• Other pay considerations include the size of the organization, whether the company is global, and the level of communication and employee involvement in compensation. HR managers should always be aware of what others are paying in the industry by performing market surveys.
• There are several laws pertaining to pay. Of course, the Equal Employment Opportunity Commission (EEOC) ensures that pay is fair for all and does not discriminate. The Fair Labor Standards Act (FLSA) sets a minimum wage and establishes standards for child labor. The Federal Unemployment Tax Act (FUTA) requires employers to pay unemployment taxes on employees. The Federal Employees Compensation Act (FECA) ensures that federal employees receive certain benefits.
• Besides salary, one of the biggest expenses for compensation is medical benefits. These can include health benefits, vision, dental, and disability benefits.