Compensation Case
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Introduction
Compensation is one of the most important functions within an organization today. For many firms, employee compensation is the leading single cost of doing business. Pay and benefit expenses according to case studies are the biggest single operating costs for many service organizations and generally the third highest expense category in manufacturing. Deciding on the types of compensation plans to adopt, as well as how to administer and communicate them has become a major challenge for many companies. How an employer structures their compensation is essential to entice, involve, and retain important employees. A successful compensation strategy can assist in implementing an organizations culture, support key principles and empower the accomplishment of its planned business objectives.
The newer pay plans include the innovative types and the most common plans, i.e. pay for performance, gain sharing, and non-monetary rewards. These plans change the focus to the value of the individual. The value is now determined by what the individual can do, not on whether or not he or she actually produces on a daily basis. Strategic planning and effective communication can support the advancement of any kind of compensation strategy. Developing a compensation plan to be consistent for the long term is essential to its success.
The correct mix of compensation can be an influential instrument to compete with the market and promote individual commitment. To determine the exact mix of compensation, a company must ask itself a few questions. For instance, who are their competitors, what are the features of their business that make it different to and/or similar to other companies? Understanding the answers to these questions is the initial step to appreciating the dynamics that persuade pay practices in the market. As soon as a company has developed a compensation strategy that arranges its pay practices competitively, it can move on to collect and understand the market information in order to establish the most suitable pay levels for their organization.
Gathering this information has become less time-consuming with the development of interactive computerized compensation databases.
This business research paper will evaluate different compensation strategies that are obtainable for implementation within a manufacturing company with over 100 employees. The purpose will be to assess and distinguish specific plans and then to determine recommendations for how these particular compensation strategies may be adopted within the organization. From a comprehensive investigation using various relevant and credible sources; three compensation strategies were identified to be considered.