Organizations that has the drive to flourish in a market that is very competitive must have a compensation plan that is well designed and inspires its employees, has benefit programs, guarantees equity, and handles compensation costs. These plans should mirror the culture of its employees. Organizations have numerous of options when designing a compensation plan comes into play, and must consider how the options they have chosen will be suitable for their strategy for engaging and keeping their employees. This paper will identify a total compensation plan for an organization, identify the internal and external equity advantages and disadvantages, and provide and explanation on how each plan supports the total compensation objective and the relationship to its financial situation.
Total Compensation Plan Focused in Internal and External Equity
Some organizations decisions are based off of the market. They begin by looking at salary surveys to observe what the other competitors are paying their employees (known as external equity). Soon as they have access to the market data that is needed, the organization have their option to either establish their salaries and wages equal, below or above the market depending on the financial situation of that organization. For instance, an organization may decide to raise the pay for certain employees pertaining to certain positions in order interest and then keep very valuable employees. Let’s say General Motors (GM) has just opened up a new plant in a city where Ford is well known. They are short on senior creative program designer positions who’s salary ranges from 99,000-125,000 a year. What GM would do is access the salary surveys that are on the market to see how much Ford is actually paying them. From there GM would make the decision to either set the wage for that positon the same, lower, or higher than what Ford is offering. If that position is needed and they want the best
References: Cite HR. (2014). Retrieved from http://www.citehr.com/601-compensation-plans-overview-base-pay.html GM. (2014). Retrieved from http://www.gm.com/content/dam/gmcom/COMPANY/Investors/Stockholder_Information/PDFs/2012_GM_Annual_Report.pdf