The Compensation and Benefits System - Term Paper Example

Compensation and Benefits Management System AFFILIATION: Table of Contents Introduction of Case 3 Importance of Compensation and Benefits 3 Compensation Philosophy 4 Payroll Management 4 Salary and Grade Structure 6 Salary, Benefits, and Allowances 7 Salary and Allowances 7 Benefits 8 Car and Fuel/ CNG Benefit 8 Phone Benefit 9 Insurance Benefit 9 Medical Outpatient Benefit 10 Provident Fund 10 Leaves Fare Assistance (LFA) 10 Annual Leaves 10 Conclusion 11 References 12 Introduction of Case Holland Enterprises is one of the leading and well-reputed organizations available in the market. The company has divided its organization into two sections or structures: Support Centre (SC), which is the head office, and Business Units (BU), which are the distribution outlets. There are about 3,500 numbers of employees working in the firm, and it has been found that the employee turnover has been 25% since year 2007. The exit interviews revealed that the employees left the company, because the compensation package was not properly developed and was not compatible with the rates prevailing in the market. In order to retain the employees, the company will have to design the compensation and benefits system in accordance with the recent job market demands. The employees will be motivated only when they sense that their efforts are valued, and the compensation is a clear indication of the results of their efforts. Importance of Compensation and Benefits According to Ghazanfar, Chuanmin, Khan, and Bashir (2010), compensation in an organization needs to be well-designed and developed – the needs and demands of the employees must be taken in account. In order to increase the productivity of the employees, it is important that, besides the monetary benefits such as salary and wages, fringed benefits are given to the employees in the form of medical and life insurance and the access to recreational facilities (Čiarnienė & Vienažindienė, 2010; Mok & Siddique, 2009). In their study, Dulebohn and Werling (2007) reported that the employees must be hired either as permanent, i.e. full-time employees also known as management staff, or contractual, i.e. part-time employees also known as non-management staff. The non-management staff must have no grade structure and no benefits should be given to them. They are paid for the number of hours worked per shift. The management staff starts from grade 3, and the highest grade is 14. Faujita (2010) stated that the employees must be given yearly increments and bonuses, so that they are motivated and are willing to contribute more to the company’s productivity. Increments are based on the performance of the employees, and this decision is made by the employee’s supervisor. Bonuses are given only when the company performs more than planned. Compensation Philosophy Holland Enterprises compensation philosophy must give full detail on the reason for complying with the aforementioned compensation. The compensation philosophy designed will guide the company, especially the HR department, to attract, retain, and motivate the employees (Glassman, M., Glassman, A., Champagne, & Zugelder, 2010). After thorough analysis of the data gathered, it is evident that the compensation philosophy can be stated as follows: Holland Enterprises seeks to recruit and retain well-qualified and highly motivated employees by endeavoring to develop a compensation plan that is well integrated with the organization’s goals, supportive of the business strategy, competitive with external labor markets, and equitable internally. Jobs will be assigned to salary grades and ranges. The goal of the compensation plan is to establish and maintain a market-based salary program with salary ranges that are competitive in the market and to make special adjustments as needed to attract new talents while also rewarding the employees for their contributions in terms of innovation and continuous improvement. Salary ranges will be revised and updated regularly to reflect the market situation. Payroll Management Compensation and Benefits System of Holland Enterprises will be a separate one and will have a separate system for maintaining the records of employees regarding their pay structures. The system will be known as Human Capital Management Software. Payrolls will be run every month on this software and employees will be given the salaries on the 21st of every month. For company’s appreciation of the workers’ efforts to be known, salaries will be given to the employees after their productivity sheet is reviewed, so that any employee who has shown outstanding performance can be rewarded. Since the company is employing two types of employees, it will make separate details for each of these types, and the payroll management will be divided into the following two categories: 1. Part-timers 2. Full-timers. Part-timers also known as non-management staff will be comprised of all the team members employed at Holland Enterprise’s business units. The designations of the employees classified as part-timers will be: 1. Team Member; 2. Team Member 1 star; 3. Team Member 2 star; 4. Team Member All star. Full-timers will include all the employees employed at the Support Centre and the employees at the front-end of the Business Units. The designations of the full-timers are: Support Centre Business Units Support Staff Shift Supervisor/Customer Relationship Officer Associate Relations Officer Assistant Restaurant Manager Guest Relations Officer Restaurant Manager Executive Associate Relations Officer Restaurant General Manager Executive Territory Manager Business Analyst Area Manager Senior Executive Operations Manager Assistant Manager Senior Operations Manager Manager – (Region) Assistant General Operations Manager Senior Manager – (Region) General Operations Manager Senior Manager – Corporate Office Regional Manager Assistant General Manager General Manager Salary and Grade Structure Salary and grade structure is important to provide a proper framework of managing the pay. It also helps understand the career progression of the employees. The structure that will be applied at Holland Enterprises will be narrow-graded structure, and the reason for it is that it is easy to manage and comprehend. The structure will be easily implemented in all other areas of business activities which ensure compliance with all other business entities. The support staff at the Support Centre will consist of all the employees hired for performing janitorial services, and they will be placed in grade 3. Similarly, employees performing the janitorial work at their Business Units will be given titles as Team Member/Team Member 1 star/ Team Member 2 stars to increase their morale level. Following is the salary and grade structure of the employees at Holland Enterprises: Min. Range Max. Range Groups Restaurant Support Centre Titles Operations Titles – Business Unites 3 Support Staff Team Member/1Star/2 star 3,500 9,000 4 Associate / Guest Relations Officer All Star 5,000 12,000 5 Executive Associate / Guest Relations Officer Shift Supervisor/Customer Relationship Officer 7,000 15,000 6 Executive Assistant Restaurant Manager 12,000 20,000 7 Senior Executive / Business Analyst Restaurant Manager 18,000 25,000 8 Assistant Manager Restaurant General Manager 21,000 35,000 9 Manager – (Region) Restaurant General Manager / Territory Manager 27,000 40,000 10 Senior Manager – (Region) Territory Manager / Area Manager 30,000 50,000 11 Senior Manager – Corporate Office Area Manager 40,000 70,000 12 Senior Manager/ Regional Manager Operations Manager 50,000 100,000 13 Assistant General Manager / Regional Manager Senior Operations Manager / Assistant General Manager Operations 60,000 150,000 14 General Manager/CEO General Manager Operations 100,000 175,000 Job evaluations are done by conducting surveys. For this purpose, the company hired one of the external companies like A.C. Nielson Research Agency, and the results about market data obtained from the survey were reviewed and then the compensation packages for each grade were decided accordingly. Any changes in the salaries, compensation packages, or job requirements will be made to meet the demands of the market and to enhance the satisfaction level of the employees. The main purpose of these surveys is to ensure that right compensation packages are offered to employees, so that they are satisfied with the work benefits in terms of monetary and non-monetary rewards. Salary, Benefits, and Allowances Salary and Allowances The salary structures at most of the companies are same, as the international standards are same for all the Multinational Corporations. The gross salary at Holland Enterprises is composed of the following four components: 1. Basic Salary 2. House Allowance – 45% of basic salary 3. Utilities Allowance – 10% of basic salary 4. Conveyance Allowance – 10% of basis salary If an employee is given a bike or a car, that employee is not given the conveyance allowance. Conveyance allowance will be mainly given to the employees falling in grade 3 and 4. Benefits Though the non-management staff will be given no benefits at all, the management staff is given a good set of the following benefits: 1. Medical facilities is the most important benefit that employees want and it consists of: a. Health insurance b. O.P.D. reimbursements (for family along with father and mother). 2. Life insurance (provided by EFU Insurance Company) is given to every employee; the company also has the following policy in case of death: a. Accidental death - $200,000 b. Natural death - $150,000 3. Leave Fare Assistance (maximum 4 days of paid leave are allowed) 4. Annual leaves which consist of: a. 20 days annual leave for management level and 14 days annual leave for non-management level. b. Casual leave of 10 days. c. Maternity leave of 90 days. 5. Employees’ Old age Benefits Institution (EOBI). 6. Provident Fund. 7. Pick and drop facility for females only. Car and Fuel/ CNG Benefit Since the price of fuels and car maintenance expenses is increasing, employees will definitely benefit from this reduction in their expenses. Groups Car/Bikes Fuel Petrol CNG 3 - 4 5 70/100 Cc 6 70/100 Cc 7 70/100 Cc 8 1000cc Alto 30 115 9 1000cc Alto 30 135 10 1000cc Cultus 30 115 11 1300cc City 200 12 1300cc Corolla 250 13 1800cc 300 14 2400cc Accord 300 Phone Benefit Phone benefit is given to employees on the basis of job requirements. There will be no fixed policy about it. It will help the employees save their expenses related to telephone. Insurance Benefit The insurance premium is high; therefore, the management should consider giving this benefit to top level employees. It will assist the companies in boosting the motivation level of the employees. Groups Insurance Life Health 3 300,000 215,000 4 300,000 215,000 5 300,000 245,000 6 300,000 245,000 7 550,000 245,000 8 550,000 275,000 9 750,000 275,000 10 750,000 335,000 11 1,200,000 335,000 12 1,200,000 375,000 13 1,350,000 375,000 14 1,950,000 425,000 Medical Outpatient Benefit Groups Medical Outpatient Benefit 3 9,000 4 9,000 5 15,000 6 22,500 7 22,500 8 30,000 9 30,000 10 37,500 11 37,500 12 45,000 13 45,000 14 45,000 Provident Fund Every employee at each grade is given Provident Fund as a benefit which is 10% of the basic salary of each employee. Leaves Fare Assistance (LFA) LFA is given to every employee and it is one gross salary per annum. Annual Leaves Groups Annual Leaves (in days) 3 14 4 14 5 14 6 20 7 20 8 20 9 20 10 20 11 20 12 20 13 20 14 20 Conclusion To boost the performance of the employees, it is important for the management to realize the significance of the proper design of the compensation and benefits package. Since compensation is a basic medium of exchange between the employees and employers, it is important that the management ensures that the compensation is appropriately designed. The compensation should help the employees increase their confidence level. In addition to the monetary benefits, the companies should give additional ones. Hence, the management must offer the compensation packages in accordance with the job market’s standards so that the employees are motivated and satisfied. To perform the demands of the management, the employees must be motivated. To check the effectiveness of the employees’ performance, the company needs to implement the effective performance review mechanisms so that the performance of the employees can be reviewed after the implementation of the compensation plans. The management should fulfill the promises as regards incentives, as it definitely helps enhance the relationship between employers and employees. The compensation packages should be designed in accordance with the requirements of the employees. In order to reduce the turnover in the company, the management will have to revise the compensation and benefits package to prevent the employees from leaving the company. It is also recommended that the company changes its payroll management and ensures that the compensation is designed in accordance with the latest trends. References Čiarnienė, R. & Vienažindienė, M. (2010). Critical Issues for compensation and incentives management: Theoretical Approach. Management theory and studies for rural business and infrastructure development, 5(24). Retrieved June 1, 2012 from http://www.ijbssnet.com/journals/Vol._2_No._1;_January_2011/11.pdf Dulebohn, J. H. & Werling, S.E. (2007). Compensation research past, present and future. Human Resource Management Review, 17(07), 191-207. Fujita, S. (2010). Economic Effects of the Unemployment Insurance Benefit. Business Review. Retrieved June 1, 2012 from http://baitas.lzuu.lt/~mazylis/julram/24/15.pdf Ghazanfar, F., Chuanmin, S., Khan, M.M., & Bashir, S. (2010). A Study of Relationship between Satisfaction with Compensation and Work Motivation. International Journal of Business and Social Science, 2(1), 120-131. Glassman, M., Glassman, A., Champagne, P. J., & Zugelder, M. T. (2010). Evaluating Pay-for-Performance Systems: Critical Issues for Implementation. Compensation & Benefits Review, 42. Retrieved 1 June 2012 from http://www.sagepublications.com. Mok, W. & Siddique, Z. (September 2009). Racial Differences in Fringe Benefits and Compensation. IZA. Retrieved June 1, 2012 from http://ftp.iza.org/dp4435.pdf Read More