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Compensation Plan Outline - Essay Example

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This paper “Compensation Plan Outline” seeks to evaluate PepsiCo compensation plan and to determine how its can be improved. One of the major strategies that firms are using is improving the productivity of their employees by providing them with adequate skills…
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Compensation Plan Outline
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? Compensation Plan Outline Introduction In the contemporary business arena stiff competitionhas forced majority of companies to emulate various business and marketing strategies in order to put at bay their competitors. One of the major strategies that firms are using is improving the productivity of their employees by providing them with adequate skills that are in line with the objectives of their organisations. Based on the changes that are currently been experienced in the technology industry, companies have adopted various ways of involving their employees in the day to day operations. Being the most valuable assets in any organization, employees must be treated in a humane way that involves adequate compensation, safety in the work place, rewarding them once they attain their goals and involving them in decision making processes among others. Companies that are focused at attaining sustainable development and reduced labour turnover, must adopt effective methods of compensation. This implies that managers must emulate a compensation philosophy that takes into consideration the various compensation components (Armstrong and Baron, 2005). This paper seeks to evaluate PepsiCo compensation plan and to determine how its can be improved. In its compensation plan, PepsiCo just like majority of other firms in the soft drink industry has a base salary. The levels of base salary provided to the executive and other senior managers are based on their accountabilities as well as their responsibilities. In order to ensure that the performance of the senior managers is enhanced, PepsiCo offers competitive salaries. The table below indicates the annual salaries of major senior personnel. Position Base salaries Senior VP Human Resources $415k Senior VP Chief Operations Officer $300k Director Strategy And Business Development $205k Medical And Health Services Manager $195k Audit Director $159k In addition to providing its employees with competitive salaries, the company undertakes regular review of the pay thus ensuring that the workers are equally compensated for their hard work. To ensure that the company gives competitive salaries, it benchmarks the pay against similar positions in the competing companies. Another aspect that makes PepsiCo compensation policy appropriate is the annual incentive compensation. By providing performance-related annual incentive compensation to the executives, their performance is enhanced thus increasing the profitability of the company. The 2004 EIC Plan is a policy that is adopted by PepsiCo in its executive compensation. During the compensation, the company considers financial position of the company, the company strategic position and the extent to which the managers motivate and manage other employees. Additionally, the company uses pre-approved earnings per share target to compensate its executives. Pepsi compensation philosophy entails long-term incentive compensation. According to the management team, the interest of company shareholders and those of the executive can be effectively aligned by providing stock-based incentives as well as stock ownership awards (Heneman, 2002). . With a history of linking stock-performance to the employees pay, PepsiCo has benefited from effective compensation policy that is fair. In the same way, the company offers target grant to the executives once they meet their goals. Based on the stiff compensation in the soft drink industry, offering a target grant to the executives is an essential policy since it result to the attainment of the corporate goals. In this way, the company is able to effectively compete with Coca-Cola Company despite the latter being a market leader. To ensure that all the employees are motivated, it is imperative for employers to come up with appropriate beneficial ratio in their compensation system. Internally, Pepsi should ensure that employees in all the department earns three quarter of what the departmental mangers are earning. Through the ratio of 3:4, workers will feel part and parcel of the company thus improving their performance. In the same way, the company should maintain a salary range of $60,000 to $800,000 in order to attract experienced workers who are looking for job opportunities in the company competitors. Employee’s productivity largely depends on the level of motivation during the performance of their duties. In this regard, firms have initiated various motivation factors such as training and flexible benefits among others (Hack, 2010). Even though pay does is not the only motivating factor, organizations such as Pepsi have not overlooked the issue of providing competitive salaries to their executives and other employees. The current pay structure adopted by Pepsi depicts equality. In this way, the company is able to retrain a productive work force an aspect that has led to its significance performance in the soft drink industry. The company average salary is $92,046 while the median pay is $83,000. Similarly, the company maintains a salary range of between $36,000 and $650,000. During the designing of the pay structure by the human resources manager, the company associated with actual job position. This implies that jobs that are demanding are paid more as compared to less demanding ones. However, the difference between the two salaries is not big. In this way, the employees have the feeling of equal treatment. The company salary structure includes full time yearly starting salary. Employees who work on contract or hourly bases are paid depending on the achievement of their objectives. Pepsi compensation of workers is based on the job location, benefits, experience and bonus among other factors. The table below indicates the range of salaries given to some of the company employees in various locations. Position Salaries Location Food Scientists & Technologists 81,800-81,800 Valhalla, NY Senior Financial Analyst 69,200-69,200 Somers, NY Food Scientist 64,800-64,800 Valhalla, NY Associate Manager, Strategy 105,000-105,000 Purchase, NY Asset Research Beverage Packaging 82,600-82,600 Valhalla, NY Bi/data Management Associate Specialist 97,600-100,300 Plano, TX Based on the enhanced performance of the Pepsi Company employees, the company highly recognizes its employee’s contribution. For example, the company offers impressive benefits package not only to the existing employees but also for newly recruited workers. Some of the benefits include tickets to the venues such as baseball games, hockey among others that are sponsored by Pepsi. Similarly, the company provides health care to its employees as well as regular training. The company is focused at developing their employees by training them on leadership skills as well as on customer care. As a result of the recognition of the employee’s contribution, the company has adopted a culture of creating a strong employee-employer relationship thus lowering the rate of turnover. Training of employees is one of the major benefits provided by Pepsi Company to its employees. It is essential to note that due to the stiff competition in all the industries, companies should equip their workers with adequate skills. One of the major ways that Pepsi should emulate in order to have a more skilled work force is to train them on the use of technology in marketing as well as communication skills. Companies that are focused at expanding their market share globally have now turned into e-marketing. This implies that in its training, Pepsi should ensure that its sales executives are conversant with social media marketing. Social media marketing can be one of the core units that the company should offer not only to the sales people but also to the designers as well as workers in the production department. Taking into consideration the impact of social media marketing especially in the soft drink industry, Pepsi employees will be at an upper hand in getting effective strategies of advertising and promoting the company brands. Health care is another notable benefit that is provided by Pepsi. Employee’s health is an essential aspect that companies cannot overlook. It is worth to note that regardless of their experience and skills, sick employees are costs towards a company. This implies that the company should regularly undertake regular health check of all its workers. In this way, it will be easy to note in advance any symptom that may cause an illness. Pepsi Company offers two major retirement plans. These include Employees Retirement Plan and Pension Equalization Plan (PEP). Salaried plan offers benefits to all employees are given salaries by the company. On the other hand, PEP provides benefits to the retired workers who may not benefit from salaried plan as a result limitation from the Internal Revenue code. Being payable at the age of 65, the two retirement plans adopt same formula while computing the benefits to be given to the employees. As a result of creation of the retirement plans, employees have a feeling of security thus becoming more productive in their duties. Provision of health programs is a notable benefit that creates a strong employer-employee positive relationship. Besides 24/24 accident insurance and health insurance, the company offers various health insurance programs that include Dental Care, Inpatient and Surgical Insurance, Burial Financial Assistance, Inpatient Support and Outpatient Treatment among others. In this way, the company has effectively met the health needs of its employees thus reducing the rate of absenteeism caused by illnesses. Coca-Cola Company is the major competitors of Pepsi in the soft drink industry. One of the major retirement plans that the company maintains include Coca-Cola Enterprises Bargaining Employees Pension Plan. Having been established in 1994, the plan benefits majority of the employees once they retire. Additionally, the company has initiated Coca-Cola Company Thrift & Investment Plan. The plan allows the employee to share a portion of profits with the company during the time of their retirement. As compared to Pepsi Company, Coca-Cola has wide range of health insurance programs that caters for the health requirements of its employees globally. Some of the major health insurance programs include Accidental Death & Dismemberment, Travel Accident Insurance, Group Life Insurance, Long-Term Disability, Survivor's Benefits Program, Dependent Life Insurance and Dental Care among others (Heneman, 2002). As a result of the company is able to retain a health work force an aspect that has significantly contributed to its competitive position in the international market. Conclusion Putting in place the appropriate compensation system is essential not only for local firms but also for organisations that are focused at facing off competitors in the international market. While is the responsibility of the human resources manager and directors to come up with a compensation plan, employees should also be involved in the process. By use of a feedback system, managers are able to identify benefits and retirement plans that suite the requirements of their employees. It is vital to note that apart from pay, workers are motivated when they are recognized in the form of promotion, rewards, being involved in decision making process, training and health insurance among other benefits. References Armstrong, M and Baron, A. (2005). Managing Performance: Performance Management in Action. London: CIPD. Hack, G. (2010). Pepsi to pull sugar-sweetened drinks from schools. The Kansas City Star. Retrieved May 11, 2012. Heneman, L. (2002). Strategic Reward Management: Design, Implementation and Evaluation. USA: Information Age Publishing. Read More
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