Compensation Plan
Assignment 2 – Compensation Plan Outline
Ginger Renee Wigglesworth
Dr. Anthony Jacob
Compensation Management
December 2, 2012
Evaluation of Coca Cola 's Compensation Plan
Introduction
Coca Cola uses a market-based compensation plan in which employees receive compensation that is comparable to the market rate. The market-based system is used for hourly employees and for entry level managers that receive a salary. The company also uses a merit pay system for increases, with employees able to earn a rate of compensation above the market rate based on their performance as evaluated in standardized reviews (Coca Cola, 2012). Managers holding positions above a specified level as well as employees in certain critical areas are salaried. Some of these managers also receive stock options as a part of their compensation based on performance, which is intended to align the interests of senior managers with the interests of the shareholders.
Appropriateness of Compensation Plan The existing compensation plan is appropriate for Coca Cola because it balances the financial goals of the firm with the expectations of employees. With a market-based compensation system the employee theoretically exchanges job security and control over the labor process in exchange for a salary that is comparable to the amount they could receive in other organizations performing similar tasks (Bamberger & Meshoulam, 2000, p. 43). This approach is suitable for compensation plans for hourly employees performing routine tasks that are unskilled or semi-skilled in nature. It is also suitable for organizations that are not heavily unionized. Coca Cola vigorously opposes unionization and uses its wage and benefits package as one of the strategies to prevent unionization, which has been successful in many of the firm 's domestic facilities. The approach also provides the firm with flexibility to adjust wages to local market conditions, paying employees more or less based on the
Ginger Renee Wigglesworth
Dr. Anthony Jacob
Compensation Management
December 2, 2012
Evaluation of Coca Cola 's Compensation Plan
Introduction
Coca Cola uses a market-based compensation plan in which employees receive compensation that is comparable to the market rate. The market-based system is used for hourly employees and for entry level managers that receive a salary. The company also uses a merit pay system for increases, with employees able to earn a rate of compensation above the market rate based on their performance as evaluated in standardized reviews (Coca Cola, 2012). Managers holding positions above a specified level as well as employees in certain critical areas are salaried. Some of these managers also receive stock options as a part of their compensation based on performance, which is intended to align the interests of senior managers with the interests of the shareholders.
Appropriateness of Compensation Plan The existing compensation plan is appropriate for Coca Cola because it balances the financial goals of the firm with the expectations of employees. With a market-based compensation system the employee theoretically exchanges job security and control over the labor process in exchange for a salary that is comparable to the amount they could receive in other organizations performing similar tasks (Bamberger & Meshoulam, 2000, p. 43). This approach is suitable for compensation plans for hourly employees performing routine tasks that are unskilled or semi-skilled in nature. It is also suitable for organizations that are not heavily unionized. Coca Cola vigorously opposes unionization and uses its wage and benefits package as one of the strategies to prevent unionization, which has been successful in many of the firm 's domestic facilities. The approach also provides the firm with flexibility to adjust wages to local market conditions, paying employees more or less based on the
References: Bamberger, P., & Meshoulam, I. (2000). Human resource strategy. Thousand Oaks CA: Sage Publications. Coca Cola. (2012). U.S. employee benefits. Available at: http://www.thecoca-colacompany.com/careers/employee_benefits.html. Gerhart, B., Minkoff, H., & Olson, R. (1995). Employee compensation: Theory, practice, and evidence. Cornell University Center for Advanced Human Resources Studies, CAHRS Working Paper 95-04. Ingram v. Coca Cola. (2005). Available at: www.thecoca-colacompany.com/ourcompany/task_force_report_2005.pdf. PepsiCo. (2012). Careers: Benefits. Available at: http://www.pepsico.com/careers/why-work-at-pepsico/benefits.html. Secord, H. (2003). Implementing best practices in human resources management. Toronto: CCH Canada.