Running Head: Compensation and Benefits Strategy
A revised compensation and benefits strategy for Holland Enterprises. Introduction:
Holland Enterprises Inc is a large firm with about 3,500 employees. However, the company is facing a huge problem in terms of its human resources as records show that the company has lost over 25% of its workforce since 2007. Exit interviews of leaving staff members show that most of the employees have resigned because of their perception that the compensation and benefit system at Holland Enterprises is very unfair and uncompetitive in the marketplace. I hereby present an analysis of the concept of the compensation and benefits and a revised strategy for the same for Holland Enterprises as a HR consultant. Compensation refers to the monetary aspects of a pay package and includes bonuses, merit increases, variable pay, and long-term incentive compensation. The term “benefits” refers to everything else such as healthcare, pension plans, stock options and legal services. It must be understood that compensation and benefits package offered by an organization is very important for motivating, recognizing good performance and rewarding of an employee (Arthur, 2001). It also gives the company a fair employer status in society. It is understandable that exit interviews at Holland Enterprises show that 25% of its employees are leaving for better prospects. According to Aon Consulting survey of 1800 U.S. employees, “25% employees have said that they would quit their present jobs for 10@ more and more than 55% would leave for less than or equal to 20%” (Arthur, 2001, p. 61). Thesis: To help in the retention of its employees, it is recommended that the Holland Enterprises Inc fixes a competitive and fair base salary for its employees, have a variable pay component that would be associated with performance and ensure that the employees have a wide range of benefits such as healthcare insurance, pension plans, training and education, vacations, stock options etc. Compensation:
Compensation and benefits makes up for a large part of the total expenditure for a company and hence it has to be closely aligned with the accounting section (Biswas, 2012). A total compensation structure would involve “base, cash incentives or bonuses, equity compensation; cash based long-term incentives, executive compensation, sales compensation, risk benefits, retirement benefits and other benefits” (Biswas, 2012, p. 1). Base or base salary refers to the fixed amount that has to be paid to the employee. It is the largest portion of the total pay package. Jobs of similar value from both - the external market and the internal perspective- are grouped together and most salary structures have a minimum point, a mid point and a maximum point. The minimum refers to the least base pay that can used for entry level employees and the maximum refers to high pay rates for employees who perform very well and have lots of experience. It is best to have employees in the minimum and mid-point levels so that can be salary increases in the future (Arthur, 2001). Bonuses are another element of compensation. Bonuses may be as little as fifty dollars for lower job levels and maybe even $25000 for top level managers (Arthur, 2001). Merit salary increases are periodic increases to base pay after an annual performance evaluation. It’s generally greater for those employees closer to the minimum point in a range. They are not sufficient to motivate or reward performances, but necessary as employees feel entitled to it. Performance-based variable pay refers to a percentage of base pay that is awarded to an employee based on his individual contribution or performance. They are often paid in cash on an annual, biannual or quarterly basis (Arthur, 2001). There is also the Skill- and Competency-Based Pay that rewards employees who acquire new skills that would add value to their services. This is particularly useful when the...
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