Hrm/532 Week 2

Each employee will be paid based on their capabilities rather than on the characteristics of their job. This will provide an incentive for employees to develop their skills and move into other roles.

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).

For the most part, a company’s compensation policy aims to ensure that employees are compensated in a fair and competitive manner. However, the compensation objectives employed by different companies can vary widely. This is especially true when taking into account wages vs. skills, competitor salaries, pay-for-performance, and other elements of compensation, like overtime, incentives, etc. (Snell, Morris, & Bohlander, 2015).

The intent of this assignment is to develop a user-friendly tool that may be applied in the workplace to document Compensation processes and to guide a practitioner in completing the critical steps of each process. The purpose of this assignment is to assist in describing each component of a compensation management system, to develop a practitioner's guide for several of the key compensation management tasks covered in HR511 Total Rewards.

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:

Compensation strategies within a company are very important. Companies need to invest in offering compensation benefits to their employees because they enhance an employee’s wiliness to stay long term with the company. They also provide a positive foundation between the employee and employer. If an employee is happy and content with the company they work for then this will benefit the company and the employee. The employee will be motivated to do a good job for the company and in the long run the extra money and work that the employer puts in for the added benefits will pay off. In this report you will see how Paid Time off (PTO) , bonuses and merit pay increases will benefit not only the employee but the business.

Strategic pay plans require the involvement of numerous departments and decision makers, and the process of developing a redesigned compensation plan can take several months to develop. As the Human Resource Director, Holly Turner, benefits from including various team members in advancing a program that drives their desired results. While her department will lead with designing and implementing the plan, establishing corporate goals that meet client needs and expectations involves a variety of departments and executive level management. Human resources assess pay plans to determine if the organization is adequately compensating staff to remain competitive in retaining and recruiting talented individuals. Understanding that the organization

It is believed that compensation plans are a legitimate way to express appreciation in employee’s productivity and efforts and an excellent way to retain employment. Some of the main reasons to institute a compensation plan are (Vivekanand, p.2):

This paper will examine setting the stage for strategic compensation and bases for pay. There are three main goals of compensation departments: internal consistency, market competitiveness, and recognition of individual contributions. Internally consistent compensation systems define the relative value of each job among all jobs within a company. (Martocchio, pg. 22, 2011) With this system companies want employees to be paid more based on their qualifications and responsibilities. They believe someone with less experience should be paid differently. To determine such evaluation companies use job analysis in order to provide job descriptions. The job evaluation is to determine pay according to a particular position. Market-competitive

Reinforce the global market competitive pay and benefits philosophy in compensation packages. Qwerty Instrument pay target goal

In order to construct a new pay structure and benefit system we must first look at the five major components that will factor into our decisions. These components are compensation and benefit philosophy, pay grades, ratio of base pay to incentive pay, external equity and internal equity and other types of benefits such as deferred compensation, health insurance vacation and sick leave. “There are a number of components that need to be addressed when developing your compensation systems to ensure they align with your organizational strategy and objectives. One key to remember is that your compensation strategy must help to create the work culture you want. How you structure your systems and manage the internal and external equity issues, will directly inform the culture of your organization…”A compensation philosophy is developed to guide the design and complexity of your compensation programs; this is done by identifying your goals and

To effectively understand compensation packages, it is critical to understand agency theory. Agency theory represents the differences in goals between management (agent) and the firm’s shareholders (principal). According to Murphy (1998), compensation plans are a solution to the goal incongruence between management and its shareholders and will be explained later in this paper.

This compensation strategy is a good idea only if companies has the right control over their people, and know how to effectively measure the overall performance of their employees.

The competitive business environment determines companies to focus on developing strategies intended to improve their position on the market. This objective is reached with the help of employees and their performance. In other words, it is important to improve employees' performance in order to benefit from an improved position o the market of these companies. The performance improvements are significantly influenced by the motivational strategies developed by these companies.

They are thinking of implement a strategic compensation plan as well as various other options that will allow its organization to focus on its strategic objectives and develop a comprehensive plan, considering base pay, short- and long-term incentives, benefits and growth opportunities. This kind of planning helps ensure that the compensation system will support the organization's long-and short-term objectives without overlap, which would have more than one pay plan driving the same objectives. The ultimate objective of this process is to ensure that the compensation system and other important facets attract and retain the desired employees and that it motivates them to do those things that support the business plan.