Holland Enterprises are a firm that employs 3,500 employees. On the other hand, since 2010, the firm has lost 25% of its staff. As a highly regarded human resource consultant hired to review, analyze, and revise the compensation and benefit system utilized by the city’s largest employer. The exit interviews indicate in which the primary reason a majority of these employees have resigned is given that the compensation and benefit system that is said to be unfair and uncompetitive in the marketplace. “The goals of a compensation package are to ensure internal and external consistency, attract high-quality talent, motivate and retain current talent, and to meet the company’s legal requirements”, according to Compensation and Benefits: Aligning Rewards With Strategy (2016). In this paper, I will give a description of how an effective compensation and benefit system contributes to organizational effectiveness. Next, an explanation of the principal components of my revised compensation and benefit system for a large-scale organization as well as a recommendation for each component. Lastly, my provision of a clear and convincing argument to the already skeptical top managers of this organization to increase their compensation and benefits expenses. In essence, an effective compensation and benefit system designed and implemented in light of attracting and retaining the most talented employees for the company long-term success.
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A compensation and benefits philosophy will create a framework for consistency for Holland Enterprises employees. This formal statement will contribute to Holland Enterprises effectiveness in view of attracting, retaining and motivating employees. In order to develop an effective compensation and benefits philosophy is typically by my human resource consulting in collaboration with Holland Enterprises’ executive team. According to What is a compensation philosophy? What should be included in a compensation philosophy?, “The philosophy is based on many factors, including the company’s financial position, the size of the organization, the industry, business objectives, market salary information, the level of difficulty in finding qualified talent, and the unique circumstances of the business” (SHRM, 2019). Holland Enterprises’ financial position shows strong growth but needs to improve its profitability. The size of Holland Enterprises 750 to 3750 employees, since 2010, the company had lost 25% of its staff. Holland Enterprises is part of the advertising and marketing industry. Within mind, business objective to engage with potential/existing customers and succeeding in advertising, publishing, technology, data and Web products and services they provide. Holland Enterprises’ market salary information shows it is on target for now and maintain its position. The level of difficulty in Holland Enterprises finding qualified talent with Baby Boomer retiring and Millennials now making up the majority of the workforce. Lastly, the unique circumstances of Holland Enterprises that the company have is the high employee turnover rate that slowly lowering their productivity in the company. Must be remembered that compensation philosophy should be reviewed periodically and updated based on current factors affecting the Holland Enterprises business. Altogether, compensation philosophy will prevent wage inequality, boost employee retention, increase productivity and loyalty to serve as an extension of Holland Enterprises’ value.
The principal components of my revised compensation and benefit system for a large-scale organization are using a pay philosophy. “A consistent pay philosophy gives [Holland Enterprises] and [the employees] a frame of reference when discussing salary in a negotiation” (Salary, 2018). This written document will outline and contribute to Holland Enterprises effectiveness in view of attracting, retaining and motivating employees. In order to develop an effective compensation and benefit system by my human resource consulting with conducting research internally. The three main components of compensation and benefits system are the following: base pay (i.e. salary), incentives pay and benefits. Creating a pay structure architecture (pay grades, pay ranges, and pay width) will ensure employee base pay is competitive with other organizations. Pay grades define the amount of pay an employee will receive general by the level of responsibilities performed with a job. Particularly by the job description of the position, the authority exercised by the position and the length of time an employee has performed the job in an organization. Pay range is “[defines] the range of pay established by employers to pay employees performing a particular job or function”, according to How Does a Salary Range Work? (2019). Generally minimum pay rate, maximum pay rate and series of mid-range opportunities for pay increases for an employee performing a particular job or function. Pay width is affected by market pay rate research conducted internally by HR or utilizing sites like salary.com or payscale.com. These additional demographic and market factors determine “the number of [candidates available to perform a specific job the employer’s region, competition for employees with the needed skills and education and the availability” (Heathfield, M.S., 2018).
An incentive is a plan monetary (i.e. cash) or non-monetary (i.e. gifts or travel) awards are tied to the achievement of specific objectives that have been communicated to the employees and pre-determined by the organization. Those monetary and non-monetary incentives influence employees’ behaviors to reach specific objectives to work towards. A bonus is not expected pay usually in cash or sometimes in cash equivalent (i.e. equity). So, it is generally decided after the fact to one, a group or all employees based on criteria by management to reward past achievements. Mostly to “reaching a specific profit or some important milestones for the organization or in a totally discretionary manner” (Bardot, S., 2012). A form of payment an organization can offer employees to partake in ownership of an organization is called equity compensation. Stock options, performance shares, and restricted stock are different forms in which available as equity pay. Equity pay is based on two factors which are internal and external. Internal equity is the comparison of positions within a business to ensure fair pay. Holland Enterprises employees felt unvalued and left due to finding out how much other employees earn through the internet or word of mouth. Employees must perceive that he or she are paid fairly compared to their other coworkers. Equity pay is the comparison with other competitive pay structure. Holland Enterprises ought to operate in a highly competitive environment in order to retain their employees and to decrease their high employee turnover rates. The goal of the use of benefit packages is to be competitive with other organizations. It has to meet regulatory a fiduciary requirement with the legal, labor and financial advisor in making plans for the improved benefits package. Holland Enterprises must understand health insurance, dental and vision insurance, retirement plans, life insurance, tuition reimbursement, and other perks are determining factor for job candidates. Whether to accept a position with an organization or a current employee who is considering leaving. Overall, Holland Enterprises compensation and benefits systems ought to make sure base pay (i.e. salary), incentives pay, and benefits are met with the employee’s needs on the condition that it also addresses the constraints of the organization’s budget.
Holland Enterprises’ must consider increasing their compensation and benefits package expenses in regard to having a high employee turnover issue. Limiting the resources and investment in employees have already affected your business bottom line. By losing good short-term and long-term employees of not being appreciated and recognized for their work. The unequal and substandard wages, of course, motivate some employees quit, but to have an ineffective compensation and benefit system in place will cause further legal problems. Cost to replace the vacant position with recruiting and training new employees due to high turnover will be expensive. The state unemployment tax will also increase due to high employee turnover too. Ultimately, committing to spending more on leadership development, innovative training solutions and better training programs with economic changes will decrease employee turnover.
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By all means, implanting a compensation philosophy and pay philosophy will explain the “why” behind employee pay and create a framework for Holland Enterprises. It will contribute to Holland Enterprises to attract, retain and motivate employees for long-term success. An effective compensation and benefit system contribute to organizational effectiveness overall. A large-scale organization such as Holland Enterprises is recommended to have me to review, analyze, and revise the compensation and benefit system following three components (i.e. base pay (i.e. salary), incentives pay and benefits). Together with a clear and convincing argument to the already skeptical top managers of this organization to increase their compensation and benefits expenses to reduce their high employee turnover rate. All in all, an effective compensation and benefit system ought to replace in effect, of attracting and retaining the most talented employees for long-term success.Bottom of Form
References
- Bardot, S. (2012). What is the difference between a bonus and an incentive? Compensation Insider. Retrieved from http://compensationinsider.com/what-is-the-difference-between-a-bonus-and-an-incentive/
- Heathfield, M. S. (25 February 2019). How a Pay Grade Work?. The Balance Careers. Retrieved from https://www.thebalancecareers.com/how-does-a-pay-grade-work-1918221
- Heathfield, M. S. (26 May 2019). How Does a Salary Range Work? The Balance Careers. Retrieved from https://www.thebalancecareers.com/how-does-a-salary-range-work-1918256
- Salary (1 May 2018). The Importance of Pay Philosophy. Retrieved from https://www.salary.com/blog/the-importance-of-pay-philosophies/
- SHRM (2019). What is a compensation philosophy? What should be included in a compensation philosophy? Retrieved from https://www.shrm.org/resourcesandtools/tools-and-samples/hr-qa/pages/compensationphilosophy.aspx
- Weathington, B. L. & Weathington, J. G. (2016). Compensation and benefits: Aligning rewards with strategy [Electronic version]. Retrieved from https://content.ashford.edu/
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