Analysis of Compensation Philosophy - Research Paper Example

The policies and underlying philosophy governing the company’s compensation program are designed to accomplish the following objectives: Maintain a compensation program that is equitable in a competitive marketplace. Provide opportunities that integrate pay with the company's annual and long?term performance goals. Maintain an appropriate balance between base salary and short and long-term incentive opportunities. Recognize and reward individual initiative and achievements. Provide a clear focus and measurement on key objectives with a meaningful link to rewards.

Achieve a performance-driven work culture that generates the company’s growth Provide compensation and benefits levels within our company’s financial ability to pay. Encourage competency building by better linking career development, performance management, and rewards. Provide a non-discriminatory merit-based compensation program. At the same time, the compensation program of Excel Consulting Company is designed to attract, motivate and retain talented employees. This is evident through working towards the company’s success, attracting and retaining the highest performers.

According to Martocchio (2011), base pay is set by a formal job hierarchy. The author states that pay rewards should be obtained by merit or seniority, meeting specific goals or completing a specific project or as a result of acquiring new job skills or knowledge. That is why the author states that Excel Consulting strives to provide a competitive base salary that meets the market at the 50th percentile for fully proficient employees who meet expectations. Also, it is evident between the 60th and 75th percentile for employees who consistently perform above expectations and are highly proficient in their roles.

New employees that do not meet expectations will be paid below the 50th percentile target (Martocchio,2011). The competitiveness of employees' base salaries will be reviewed on an annual basis and adjustments made when market conditions and financial performance allows. The size of the adjustment will be based on the employee’s experience, performance, and contribution to Excel Consulting Company’s performance as well as the employee’s salary within the marketplace. Also, Excel Consulting will use both annual incentives and long-term incentives to enhance its ability to achieve its mission and its employee compensation objectives.

In this case, long-term incentives will be performance-based and will provide equity compensation at the 50th percentile when target goals are met with the potential for awards. However, it will be between the 60th and 75th percentile when long-term goals are exceeded. The payment of an incentive award to an employee will be subject to the employee’s achievement of pre-established targets. Excel consulting compensation programs will also ensure internal equity by considering differences among employees in skills, efforts, responsibilities and working conditions.

This implies that visible effective commitment to the Excel consulting Company will also be rewarded. The company will also ensure that its compensation structure is linked to an effective performance management system (Daft et al, 2010).