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Topic:

Designing a Compensation and Benefit System Analysis

Essay Instructions:

Final Paper

Attracting and retaining the most talented employees is essential for long-term organizational success. An important component to attracting and retaining such employees is the design and implementation of an effective compensation and benefit system.



Assume the role of a highly regarded human resource consultant hired to review, analyze, and revise the compensation and benefit system utilized by your city’s largest employer, Holland Enterprises. The firm employs 3,500 employees, but since 2010 has lost 25% of its staff. Exit interviews indicate the primary reason a majority of these employees have resigned is because of a compensation and benefit system that is perceived to be unfair and uncompetitive in the marketplace.

Present to the management a revised compensation and benefit strategy. Your proposal should include:



Description of how an effective compensation and benefit system contributes to organizational effectiveness.

Explanation of the principle components of your revised compensation and benefit system for a large-scale organization as well as a recommendation for each component.

Provision of a clear and convincing argument to the already skeptical top managers of this organization to increase their compensation and benefit expenses.

At a minimum, your compensation and benefit system would include the following components:



Compensation and benefit philosophy

Pay structure architecture (pay grades, pay ranges, and pay width)

Ratio of base pay to incentive (bonus) pay

Emphases on external equity or internal equity

Principle type of benefits to include (example: deferred compensation match, health insurance, vacation and sick leave, etc.)

Guidelines for Writing the Final Paper



Paper must be 2500-3500 words in length, exclusive of Title Page, References Page, Appendix, References, Exhibits, etc .

Formatted according to APA style as outlined in the approved APA style guide (including title page and reference list).

Must address the topic of the paper with critical thought.

Must include an introductory paragraph with a succinct thesis statement.

Must conclude with a restatement of the thesis and a conclusion paragraph.

Must utilize a minimum of eight scholarly references in addition to the course text.



Carefully review the Grading Rubric (Links to an external site.) for the criteria that will be used to evaluate your assignment.

Essay Sample Content Preview:

Designing a Compensation and Benefit System
Student’s Name
Institution
Designing a Compensation and Benefit System
Human resources are a fundamental part of any organization. They offer their skills, knowledge, and time to an organization and are compensated for their services. Organizations, thus, need to have an effective compensation and benefit system to ensure that employees are well compensated. As revealed by Weathington and Weathington (2020), a compensation and benefits system is a structured way of rewarding employees for their services to an organization. This paper aims to propose a more effective compensation and benefit system for Holland Enterprises, which has been facing challenges in retaining its human resources due to what employees perceive as low pay and unfair compensation and benefits. Designing and implementing an effective compensation and benefit system is instrumental in attracting and retaining the best employees, thereby promoting organizational success.
Role of a Compensation and Benefit System in Organizational Effectiveness
An effective compensation and benefits system must consider both the needs of employees and the organization. According to Weathington and Weathington (2020), companies must consider what they stand to gain by hiring and retaining an employee and what they might lose if the employee was working for a rival company. There are many benefits associated with having an effective compensation and benefits system. One, an organization attracts and retains the best talent (Weathington & Weathington, 2020). Employees are interested in working for organizations that value their input and compensate that input fairly. When job-hunting, individuals look for companies that have the most competitive compensation. This includes both monetary compensation, such as salaries and wages, as well as non-monetary compensation, such as flexible working hours. As Dagogo and Ogechi (2020) indicate, attracting and retaining the best talent ensures that an organization has the right human resources who can use their skills and competencies to achieve the organization’s goals.
Two, an effective compensation and benefits system meets the needs of employees (Suri, 2016). When the needs of employees are met, be it through paid time-offs or competitive bonuses, employees become more willing to meet the needs of the organization in return. They become highly motivated to achieve the organization’s goals because they are encouraged by what they are getting in exchange for their services to the organization. This is especially important among the millennial and Generation-Z workforce who according to Schroth (2019), have different needs that should be met for them to be effective in the workplace.
Three, it improves employee satisfaction. According to Suri (2016), most employees want to be paid what they are worth and when this happens, their job satisfaction levels increase considerably. There are many positive outcomes associated with job satisfaction, all of which can be linked to increased organizational effectiveness. For instance, high job satisfaction levels reduce employee absenteeism, which then increases organizational effectiveness because every employee is showing up for work and meeting their goals on time (Onyebuchi, Lucky, & Okechukwu, 2019). Also, high job satisfaction reduces turnover rates because employees are happy with the terms of their employment, which allows them to focus on their roles and responsibilities.
Four, effective compensation influences the perception of employees, which has an impact on overall effectiveness and productivity (Khalid & Nawab, 2018) For instance, the current compensation and benefit system at Holland Entreprises is viewed as unfair. As a result, employees do not stay long with the company. Yet, when employees stay long with a company, they become more efficient with their work. When employees perceive the compensation as fair and competitive, they are motivated to work and produce the best results for the company. This improves the overall organizational productivity.
Finally, an effective compensation and benefits system gives an organization a competitive advantage (Suri, 2016). When companies can hire and retain the best talent, they stay ahead of their competition. The best talent not only works in exchange for benefits but also contributes to organizational effectiveness through innovation and creativity. They also offer their competencies that separate the services and products of the organization from those of competitors. In most cases, talents cannot be duplicated because some human assets possess qualities and competencies that would take years to reproduce. Thus, having such talents in an organization becomes a source of competitive advantage and organizational effectiveness.
Based on the above benefits associated with an effective compensation system, organizational leaders must increase the expenses on compensation and benefits. The cost of employee turnover is very high and in the long run, it can exceed the expenses of compensation and benefits. According to Sequeira (2018), the cost of turnover accounts for about 25% of the average salary of an employee. Also, retaining employees is more cost-effective than hiring new ones. As such, increased compensation and benefits expenses are a small price to pay given the benefits of employee retention.
Principal Components of a Compensation and Benefit System
Organizations usually pay for the work done by employees and as such, compensation and benefits are determined based on the job. Thus, as Weathington and Weathington (2020) indicate, developing an effective compensation and benefits system requires a company to conduct a successful job analysis and evaluation. Holland Enterprises already has developed a compensation and benefit system. However, it has been deemed ineffective since employees’ turnover is quite high because employees think the system is not competitive enough. The following is a discussion of the principal components of a compensation and benefits system and a recommendation of how each component can be changed to create a more effective system.
Compensation and benefit philosophy
Weathington and Weathington (2020) posit that a compensation and benefits philosophy is a fundamental component of compensation and benefit systems because it influences how a company motivates and retains its employees. A compensation philosophy is a formal statement that establishes an organization’s compensation program. It is based on the goals that the company wants to achieve with its compensation program and how those goals will be met (Weathington & Weathington, 2020). Some of the factors that should be considered when developing a compensation and benefits philosophy include the size of the company, the industry, the financial position of the company, market salary data, business objectives, and the level of difficulty the company faces when finding the best talents. Holland Enterprises has over 3,000 employees and as such, it is a large-sized company. Currently, Holland has written its compensation and benefits policy by listing a range of how its drivers will be compensated for work done, including a breakdown of the compensation package. In a way, Holland's compensation philosophy indicates that Holland is willing to offer a total package in terms of financial and non-financial benefits. Below is a brief breakdown of Holland’s current compensation and benefits philosophy (Holland Enterprises,n.d.):
* Financial Compensation: Holland indicates that on average, drivers are paid $72,000 annually. This can increase up to $89,000. Also, the company pays bonuses based on how long a person has worked for the company. During the first year of employment, the company pays 1 cent per mile as the yearly bonus and 2 cents per mile yearly bonus for consecutive years.
* Non-Financial Compensation: The company pays medical insurance, 401k benefits, flexible benefits, paid vacations, and safe driving awards, paid detention, among others.
Holland’s compensation and benefits philosophy directly show interested candidates what the compensation package includes. As such, it increases the company’s potential of attracting qualified individuals who may otherwise not know that companies offer such a compensation package. However, it also provides employees with a negotiation tool. When the company’s fail to actualize its compensation philosophy, distrust between the company and its employees can arise. One of the challenges that Holland is facing with its current compensation and benefits philosophy is that it does not translate to what is occurring to its employees. Weathington and Weathington (2020) reveals that assessing existing gaps between the compensation philosophy and what is happening on the ground is a great step in improving the system because it establishes concerns that need to be addressed. This can be done by examining what employees are saying. One of the gaps that exist between Holland’s compensation philosophy and what is happening to employees relates to the paid detention benefits. The company’s compensation philosophy communicates that drivers will receive paid detention as part of the benefits for work done. However, employee reviews indicate that paid detention is one of the issues of concern among employees. Two of the first five reviews of Holland’s pay and benefits on Indeed (n.d.) indicate that employees experience great difficulties in receiving their paid detention. A 40% negative review on this specific issue indicates that the current compensation philosophy is not being fully actualized. One of the reviewers indicates that paid detention has to be requested by the employee and takes long to be approved, if at all.
The recommendation for Holland is that it highlights the conditions under which employees receive paid detention. Ad...
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