Incentives Role in Keeping Motivated Employees - Case Study Example

Part one Jane Smith, Recruiting Associate September 9, 1007 John Fine Human Resource Manager Dear Mr. Fine, I met with Mr. James Richards againlast Friday to discuss details he requested in taking a position at Windy Power Company, as an Electrical Engineer. Mr. Richards has five year experience with Texas Technology Services, where he began working after college. I have prepared a recommended benefits and compensation package that I think should interest Mr. Richards, based on his education, acquired level of experience and current competitive packages in this region, for Electrical Engineers. Based on current salary information provided by Engineering Salary Calculator, I am suggesting $73,250 as a beginning salary with Windy Power Company. This is a bit less than the salaries of our current Electrical Engineers with at least five to six years of tenure. It is also more than his currently salary of $64,000 with Texas Technology Services. Mr. Richards began working with this organization, directly after earning his Bachelor degree in Electrical Engineering at UCLA, with a salary of $58,000. I am recommending twice yearly performance based raises for Mr. Richards, at 5% his current salary for each, depending upon performance. Since he began working at Texas Technology Services, Mr. Richards has earned merit raises and incentive bonuses for meeting, and in his case, exceeding productivity and quality standards. At Texas Technology Services, Mr. Richards receives a basic benefits package, which is fairly generic. He has Major Medical, Routine Medical. Partial dental and partial optometry coverage. This has worked well for Mr. Richards, though he has recently married and has added his wife to his coverage. Mr. Richards pays an additional $95.00 every two weeks for dependant coverage. Other benefits include a 401K plan, though it is not employer matched. What I would like to offer Mr. Richards is our current Family Health Plan, which includes Major Medical, Routine Medical, Tier II dental and optometry, along with our current wellness and fitness programs for him and his family. He seemed interested when I mentioned this benefit during our meeting. I would also like to offer Mr. Richards employer matched 401K benefits, up to 5% of income, beginning at 90 days of full time employment. The Medical and Health benefits will also begin at 90 days. I have attached an in-depth explanation of the package I feel we should offer Mr. Richards. Feel free to call my office or email me regarding this matter. Sincerely Jane Smith Compensation and Benefits Proposal for: Mr. James Richards Position: Electrical Engineer Compensation The current salary range for Electrical Engineers is $55,660 $119,000, depending on Levels of education and experience in specific fields. Fields employing largest numbers of electrical engineers in 2006 were “Computer and peripheral equipment manufacturers, monitoring and control device manufacturers, search and navigational equipment, Electronics components firms, Engineering services, Federal Government(various Capacities) and Telecommunications” (Engineering Salary Calculator). Though we are not a telecommunications Company, job function closely resembles that of telecommunications. Monitoring and Devices are also used in our organization, with engineers frequently required to redesign Current equipment in use, or develop new products. The salary range is $70,000 to $75,000, based on a Bachelor degree and more than three years of experience. Mr. Richards’ offer is at the high end, though he has five years of experience under his belt, along with extremely positive managerial reviews. Salaries for new graduates in 2006 was close to $55,000. Mr. Richards began with Texas Technology at $58,000, which is a bit higher, though he had nearly one year of internship experience with a California sea instrumentation and navigation systems company, designed and testing new systems. Because Mr. Richards began his career with a higher than average salary, I suggest The figure of $73, 250 as an incentive for his experience and performance. Though he has not had performance measured at Windy Power, he will expect incremental increases, no matter how attractive a benefits package we offer. Mr. Richards will still begin his career with our firm with a salary below most of our engineers, as we have not hired new talent for two years. Incentives and Bonus Mr. Richards has earned performance incentive increases at regular intervals with Texas Technology Services. Specifically he has earned 5% increases twice yearly. Our incentive structure works a bit differently, based on quarterly reports and reviews which are combined for six month increases. The incentives we offer range from 2.5 % to 5.0 %, depending on performance. Managerial reviews rated as average earn the lowest increase, while those with better than average to excellent in all areas earn the top figure. Multiple research studies indicate similar results on incentives. They are the most useful programs in retaining talented and satisfied employees. A research team from Learning & Performance Solutions has identified two common myths surrounding incentives programs. First, is the premise that incentives destroy personal motivation. Second is that incentives only pay for what would have been produced anyway. Research found that incentives lead to prioritization of work and increased interest. Incentives also lead to greater increased self confidence and more loyal employees. Well designed incentive programs can actually “increase performance by an average of 22 percent. Individual-based incentives result in a 27 percent gain” (Stolovitch, Clark & Condly). Our incentive program has been carefully constructed to provide positive reinforcement and allows for performance to improve over time, while still providing opportunity later within the same year, for employees who do improve work performance. It is designed fairly and should provide ample opportunity for Mr. Richards to increase his earnings. Mr. Richards can potentially increase his income to $96, 000 in 18 months, depending on when managerial reviews take place. Benefits Package I am proposing that Mr. Richards receive the comprehensive benefits package that we offer all our engineering staff. Major Medical, Health Maintenance, comprehensive dental and optometry benefits are all included. The contribution for Mr. Richards is $45 per pay period, or two weeks. As Mr. Richards now has a wife, we can also offer dependant coverage for $95 per pay period. If Mr. Richards opts for both coverages, he will pay $280 per month for the family plan, utilizing our current group rates. Should Mr. Richards and his wife decide to start a family, coverage for maternity benefits will also be included. Routine prenatal visits require a mere $15 co-pay each. Our rates are in keeping with service and professional office industry benefit costs, which average .58 per hour worked. While it may appear that we are passing along the total costs of benefits, employees are actually paying cost minus administrative fees. As we are a moderately sized firm, we are able to keep costs controlled relatively easily. “Health benefit costs increased, both in average hourly dollar amount and as a proportion of total compensation, with establishment size” (Bureau of Labor Statistics 2007). We also offer life insurance benefits equal to the employee’s annual salary. In addition to life insurance, we offer the opportunity for employees to choose from additional benefits through AFLAC. Additional life insurance, cancer insurance, accident insurance. All options are very reasonable in price. Life and cancer policies can cost as little as $8 per month, depending on current health and family history. Registration for AFLAC benefits is offered onsite at our quarterly group benefits conferences. Mr. Richards is aware of our additional offerings, though complete offerings are spelled out depth in this proposal. Mr. Richards is also aware that we offer onsite wellness programs in which health professionals periodically offer onsite screenings, consultation and recommendations. He has taken a tour of our fitness room as well. Part two The survey results discussed in Performance Newsletter clearly show that incentives are important in keeping motivated and satisfied employees. However, baseline salary must be competitive for incentive programs to be effective. One of the myths surrounding incentives, the fact that incentives provide extra compensation for work that would have been performed anyway may stem from less than competitive hourly or salary compensation. In this case, incentives that bring employees wages up to, but not above and beyond comparable wages do little to motivate them in performing to the best of their abilities. Most employees want benefits as well. Again, if wages are not competitive employees like James Richards may seek employment with firms that offer better pay, deciding that there are few health concerns, and that benefits are not as important at his age. References Bureau of Labor Statistics 2007. Employer Costs for Employee Compensation Summary. Retrieved September 10 2007 from http: www.bls.gov/news.release/ecec.nr0.htm Engineering Salary Calculator. 2006. Electrical Engineering Salaries. Retrieved September www.bls.gov/news.release/ecec.nr0.htm 8 2007 from http://www.engineersalary.com/Electrical.asp. Stolovitch, H, Clark, R. & Condly, S. 2002. Incentives, Motivation and Workplace Performance. Performance Newsletter. Retrieved September 10 2007 from http://www.hsa-lps.com/Performance_WS_2002.htm. Read More