Callahan Auto Parts Compensation Philosophy

I have been asked to review the compensation system practices for Henderson Printing with a view to establishing a common set of principles and practices that are understood by both management and employees of the organization. In addition, it is both logical and desirable to ensure that Henderson Printing is motivating and rewarding a common set of skills and behaviours to all employees consistently in the organization in order for Henderson Printing to be the most viable organization as possible.

The objective of any compensation system is to attract, motivate and retain good employees. The most common bases for pay used in most companies are; Seniority or Longevity Pay and Merit Pay. Seniority and Longevity reward employees with periodic additions to base pay according to employee’s length of service in performing their jobs. There are differences between these two pay systems. For example, seniority rewards employees’ for the amount of time working with the company. In contrast, longevity pay rewards employees who have reached pay grade and who are not likely to move up in the company. Merit pay rewards employees with incentive increases according to their job performance. Rewarding employees for their job performance will motivate them to keep performing at high level and will help employers retain its best employees to a successful company. Campbell soup uses both pay systems. Campbell Soup strives to keep their employee’s; they reward them according to their contributions and job performance giving to the company. For example, employees were rewarded for helping build Soupy Park made of recycled materials. Being a large manufacturer Campbell Soup has several components to its compensation program. These components are as follow; Base salary, performance- based annual incentive compensation, long term equity incentive compensation, pension and

Although research generally confirms that pay-for-performance plans can influence greater outcomes, it is unclear how effective different pay plans are relative to each other (Park, 2012). Like most things in business, compensation is something that requires evaluation, study, assessment, strategy, modeling and integration.  Achieving a pay for performance culture does not happen without paying attention to the behaviors, activities, rewards and motivations that have to be linked and reinforced through a well engineered and successfully executed process.  Actually if that process does not tie rewards to shareholder financial objectives, employ the proper mix of compensation elements, result in meaningful dollars, embrace performance that employees can impact and are effectively communicated and reinforced, then the results it produces will likely fall short (Vision Link Advisory Group, 2013).

Compensation systems can take on many forms, all of which have positives and negatives related to it. However, certain components are noted to be determinants of solid compensation plans. One agreement of a solid compensation system is the use of incentives. “Clearly a successful companies set objectives that will provide incentives to increase profitability” (Needles & Powers, 2011). Incentive bonuses should be measures that the company finds important to long-term growth. According to Needles & Powers (2011) the most successful companies long term focused on profitability measures. For large for-profit firms, compensation programs should offer stock options. The interweaving between the market value of a company’s stock and company’s performance both motivate and increase compensation to employees As the market value of the stock goes up, the difference between the option price and the market price grows, which increases the amount of compensation” (Needles & Powers, 2011). Conclusively, a compensation plan should serve all stakeholders, be simple, group employees properly, reflect company culture and values, and be flexible (Davis & Hardy, 1999; The Basics of a Compensation Program).

Individual incentive pay plans reward employees for meeting one or a combination of performance standards (e.g. productivity, safety, or attendance) set by the employer (Martocchio. 2013). Piece- rate pay is one of four individual incentive plans offered in the employment industry. Employers have two options to select from when choosing this incentive plan. The first option is compensating the employee hourly for each piece over the given production number. The second option is compensating employees based on established subjective (quality) and objective (quantity) performance standards. In both options the employee is, essentially, being compensated for the work he or she does and not what could have been completed (Gibbons. 1987).  Motivation,

This report examines 3 different compensation systems that our company can develop and enforce within our company for our employees. Compensation is the most important and rewarding factor for employees, so a thorough and thoughtful approach should be taken as we think about changing the way in which this company rewards it's employees for the work they do for us each and every day.

The right compensation program will depend on the organization’s business strategy and goals. To achieve these, an organization must recruit and select the best possible employees. To attract such employees, there must be an attractive compensation plan. Competitors will be offering different payment options, this may be based on pay rate or special perks, and a company’s stock options. Organizations must be aggressive yet reasonable to compete with competitors. Retaining and encouraging employees to perform at their best may be achieved through an immediate incentive award

One of the important aspects of business management is having a proper compensation system. Compensation ensures that the staff of the company obtains the results of their efforts. Compensation is a cost to the enterprise and, therefore, a proper remuneration model must demonstrate its ability to produce returns. Also, since compensation is what the employees get in exchange for their services, the type used must be one that will motivate the employees (Belcourt & McBey, 2015). Henderson printing company is a mid-level company. Therefore, it requires a very critical remuneration system that will help it to survive. This memo explores the compensation models that Henderson printing operates as well as suggests the necessary changes.

A well-articulated compensation philosophy drives organizational success by aligning pay and other rewards with business strategy. It provides the foundation for plan design and administration and anchors current and future plans to the company's culture and values (Kaplan, 2006, p.32). Recognizing and rewarding achievement is the cornerstone of the company A’s compensation philosophy. The mission of the company is to attract, select, place and promote all individuals based on their qualifications. The company believes that performance-based compensation helps attract, develop and retain talented professionals. In addition to base pay which based upon local market conditions and targeted to be above market, the company provides the following types of potential compensation to reward performance:

In today’s competitive workforce, compensation and benefit packages plays a crucial role on recruitment and retention for both the organization and the employee. Bumpbie finds itself in a situation where it could positively affect its employee’s morale, turnover rate and longevity; by making a strategic decision to implement compensation and benefit packages that will encourage current workers to stay and entice new applicants. Money is not always the inherent reason businesses experience high turnover rate, the constant shifting in the job market will always be a contributing factor as well as employee’s moral. Mayhew, R. (2016), explains that an “employee compensation plan” refers to all the components offered as well as the way in which they are paid, and the reason behind the employees getting the compensation case bonuses, salary increases and incentives. The fact that there are voluntary and mandatory benefits that organization provides to their employees give employees the freedom of choice, as well as the option to make the whether to stay with or leave an organization based on the benefits it provides. Variable Pay is also an option that some employers offer their employee which is performance based or results oriented. Whether it is profit sharing, merit based programs or incentive bonuses; it all comes down to which organization can provide employees with the compensation or benefits packages that best satisfy their needs.

Traditionally, most employers compensated their employees based on a set hourly wage or annual salary (Martocchio, 2013). Today, there are many companies that utilize incentive pay programs to replace part or all of the base pay to manage payroll expenses and to connect pay to performance. Incentive pay, also referred to as pay-for-performance or variable pay, rewards individuals for partly or completely achieving a predetermined goal (Martocchio, 2013). Basically, incentive pay is compensation, outside of the employee’s regular wages, which can vary depending on whether or not the employee achieves predetermined goals (Martocchio, 2013).

Incentive based compensation plans are one of the most conversed topics organizations that have been dealing with for quite some time. There have been several philosophies, formulas, and plans used but in the end, each type of plan has created unfavorable and optimistic results. The questions have always been whether the positive that comes from incentives plans are worth the challenges they create. In examining some of the plans that offer individuals, team based, and long-term incentives, they all vary in different ways that they are applicable, administered and designed, and beneficial to the organization’s objectives.

All organizations must remunerate their employees for their time, effort, and contributions to that organization. How an organization chooses to structure their compensation system is a complex process, which requires a significantly more methodical decision-making process than simply picking an arbitrary hourly wage. There are a number of pay models that organizations can utilize to accomplish this objective, ranging from a simple salary and benefits package based on the job content of the position (Milkovich, Newman, & Gerhart, 2016, p. 142) to a more complex structure that bases wages on the knowledge and skills an employee brings to a particular position (Milkovich, et al., p. 174). One of the more complex compensation plans is that of pay-for-performance. This paper sets out to define what a pay-for-performance compensation policy is and then will identify how the unique business strategies of an organization will affect how that policy is implemented.

The following is a case study analysis of Duckworth Industries, in particular the company?s incentive compensation programs:

An incentive pay program can reward employees who continue to produce superior work or encourage employees who already produce good work to best. Sometimes, use an incentive system when employees are lack of enthusiasm of getting down to work and improving things. If everyone in the same job classification gets the same pay, there is no real incentive to do an outstanding job (French, 1990). Various incentive plans used to motivate all employees such as production staff, sales staff, administrative staff and managerial and professional staff on an individual basis. To be improved employee work performance, the incentive pay programs need to be fairly matched with the employees’ expectation. Properly designed and maintained incentive pay program has the potential to increase employees’ productivity and work performance.