Professor Kristin Horton
April 9, 2013
Five key elements should be considered when preparing a compensation plan for an organization. They five key elements include the forms of compensation that will be or can be offered, workforce demographics, the business cycle, the compensation philosophy, and legal and regulatory compliance. The forms of compensation has two forms that can be offered direct and indirect compensation. Direct compensation is all tangible rewards of the working relationship, that is, the sum of base pay plus variable pay (Locke, Jones, & Graham, 2010). Pay received in the form of services and benefits is called indirect compensation (Locke, Jones, & Graham, 2010). The product the organization offers the marketplace is the workforce of any service organization. In the business cycle it is critical for top management and HR professionals to match the compensation practices with what the organization is trying to accomplish (Locke, Jones, & Graham, 2010). the compensation philosophy is considered because organization want to pay to wages like their competitor's but this might not be possible, therefore three approaches for compensation can be taken into consideration which are market-based pay, competency-based pay, and team-based pay (Locke, Jones, & graham, 2010). When managing compensation systems organizations must follow federal, state, and local regulations and reporting requirements. Some of these important regulations are minimum wage standards and hours worked (Locke, Jones, & Graham, 2010).
A compensation plan is a payment plan used by organization which includes things like wages, insurance, and benefits (ChaCha, 2008). My compensation plan would include wages, a set amount per hour which is equivalent to the competitors, social security, unemployment compensation when out of work, workers compensation, and medical leave if...