Compensation Strategies Essay

Executive Summary This report will look at 3 different compensation systems that our company can develop and roll out within our company for our employees and future employees. Compensation is one of the most important and rewarding factors for our employees. Employees rely on their compensation to pay their rent or mortgage, food for their family, vacations, education for their children, and prepare for their retirement life. How compensation is paid can determine the quality of employee you obtain and how long you retain them. This report provides information on different compensation strategies to attract/recruit good talent, improve employee production and retain valued employees. Annual merit increases help companies to continue being competitive in the work force. Research shows employees want to work for employers that are competitive with salaries. By moving to an annual merit increase system employees will continue to increase production and meet business objectives to receive more compensati on. Employees look at merit increases as entitlement and production can remain flat. Our company can increase productivity across the board by tying business goals to merit increases. In order to get the production needed, communication from management will need to take place to set expectations of achieving goals and what the potential merit increase the employee can receive by hitting those goals. Healthcare benefits can be a deciding factor for many people on whether or not they consider working for our company or if they decide to leave our company. Health benefits provided by the employer shows they care  about the employee and it helps get the employee back to work quicker which helps to be more productive. Healthcare is not only a benefit to the employee but also part of their compensation. Communication and training by management should be conducted annually to go over the employees full Comprehensive Compensation Package to show the total monetary amount received by the employee from the employer. The last type of compensation we will consider for the employees as a company is a 401(k) plan. 401(k) plans are growing with the number of employers that are providing options for their employees. As the research shows, the cost of losing an employee in the long run due to not providing a 401(k) plan can create higher turnover and training costs. We want to recruit and keep top employees and based on the research shown, providing a 401(k) plan will do what we need. My recommendation is to implement the annual merit system, health care benefits and a 401(k) plan. For the compensation packages to be a success we will create compensation statements for every employee to review and train all managers with direct reports so they can deliver the great message we have to share. Also, goals and expectations will be implemented as early as possible during the year to establish a strong foundation for performance. Our compensation plan is intended to attract key talent, increase employee engagement, incent and retain high-performing managers who will enhance the profitability of our company and create value for our shareowners. Introduction Compensation is an important element of our company. Employees rely on their compensation to pay their rent or mortgage, food for their family, vacations, education for their children, and prepare for their retirement life. How compensation is paid can determine the quality of employee you obtain and how long you retain them. This report provides information on different compensation strategies to attract/recruit good talent, improve employee production and retain valued employees. Also, with sales volume goals to increase, technology and innovation changing so quickly, and the quality of service customers are expecting, employers have to come up with ways to be better than their competition. The way to be better than your competition is through the people who work for the company. And one the best  ways to attract those employees are to have a better compensation packages for your employees. The goal for this research will show you the positive impacts to the company by offering Annual Merit Increases, Healthcare Benefits, and 401k plans to the employees. These compensation benefits are important to high quality employees our company’s trying recruit, retaining high producing employees, as well as, increasing motivation and production with all other employees. By implementing these actions our company will be able to show our employees our commitment to be the best company to work for and to show how valuable our employees are to the company. Research Findings Merit Pay Increase According to Towers Perrin’s Global workforce study, competitive base pay is the most important factor that attracts UK workers to an employer, with almost six-out-ten (59%) respondents stating that this would influence their decision (â€Å"Competitive base pay,† 2007, p.16). Not only is it important to attract workers but retaining high performing employees and keeping them motivated to increase and maintain productivity to compete in the marketplace is vital. One way to retain and motivate employees is through annual merit increases. If a merit pay system succeeds, it motivates employees to work harder and achieve more (Mack, 2014). In order for the merit pay system to succeed it will need to be tied in with the business strategy of the organization and not viewed as an entitlement. Merit increases can motivate employees to achieve whatever goal the company sets. For example, by finishing projects timely with high quality or rolling out new operational procedures for the company. Employees often fail to see a link between merit pay and the accomplishment of business goals because no link is being made (Heneman, 2002, p.382). In a Supervisory role is important direct reports understand how their individual goals align to organizational priorities and how merit increases are earned based on exceeding their given goals. Planning and Goal Setting is the foundation for performance management and execution of our strategies. It focuses on ensuring employees have a clear understanding of annual organizational  priorities, and defining individual employee goals aligned to their job role and those priorities. Finally, it is important that effective communication exists between employees and management and that managers have the requisite tools for administering rewards (Leritz Ph.D., 2012, p.1). Analysis: Research shows employees want to work for employers that are competitive with salaries. By moving to an annual merit increase system employees will continue to increase production and meet business objectives to receive more compensation. Employees look at merit increases as entitlement and production can remain flat. Our company can increase productivity across the board by tying business goals to merit increases. In order to get the production needed, communication from management will need to take place to set expectations of achieving goals and what the potential merit increase the employee can receive by hitting those goals. Healthcare Benefits According to â€Å"Competitive base pay most important for recruitment† (2007), â€Å"almost two thirds (59%) of staff would consider leaving their job if their employer failed to address health and wellbeing in the workplace. Business in the Community’s Business action on health campaign shows that 83% of staff considers the way that an employer looks after the health and wellbeing of staff is important when choosing a job† (p.16). Effective communication from employers about the compensation plans has a major influence on the turnover rate of the top performing employees. Because one companies benefits are better than the other doesn’t mean employees will stay. Based on the surveys conducted, companies with better communication strategies and lesser benefits had only 12% turnover compared to 17% turnover with companies that offered better benefits. Companies with excellent benefits and effective communications had only an 8% turnover of top-performing em ployees. Also, when employees were surveyed on how satisfied they were with their benefits, only 22% were satisfied with the better benefits from employers with poor communications. On the other hand, 76% of employees with lesser benefits and effective communication from the employers were satisfied with their benefits (â€Å"Better benefits  communications,† 2005, p.9). Companies must show the employees that healthcare benefits are a part of total compensation because companies that don’t effectively communicate the value have higher turnover rates for top performers. According to Kathryn Yates, global director of communication consulting at Watson Wyatt, â€Å"Employers can spend huge sums of money on benefits, but if their employees aren’t aware of the cost or don’t appreciate the value of the benefits, they aren’t going to see a return on their investment.† (â€Å"Better benefits communications,† 2005, p.9). Analysis: Research shows the importance of health benefits to employees and what it takes to retain those employees. Health benefits provided by the employer shows they care about the employee as well as it helps get the employee back to work quicker which helps to be more productive. Healthcare is not only a benefit to the employee but also part of their compensation. Communication and training by management should be conducted annually to go over the employees full Comprehensive Compensation Package to show the total monetary amount received by the employee from the employer. This communication and training on healthcare benefits are vital to keeping our top performers. 401(k) Plan The increase of matching contribution for 401(k) plans through employers has risen from 68 percent to 73 percent over the last couple of years (Plenda, 2013, p.31). In a recent survey, if another employer offered a similar job with a 401(k) plan, 40 percent of employees said they would pursue other opportunities with the new employer. It was also determined when a 401(k) plan is presented most employees work harder and stay on the job longer (Lamont, 2014, p.10). People who save money are good workers because they place greater value on future outcomes. These types of employees work more and are more conscientious of how they treat employer assets because they understand their reputations will be hurt by careless actions they take. Not only do employees stay on the job longer but companies can use 401(k) plans to attract workers that are more conscientious and productive on the job (Munnell & Sunden, 2004 pp. 3-20). Research by Bank of America Merrill  Lynch shows higher turnover rates, increase in training costs, and lower productivity and sales as a potential consequence for not offering a competitive benefits package to its employees. Employers should look at benefits as one of the most important investments they can make. These investments will attract top talent and show they are invested in their employee’s professional growth, as well as, their financial well-being to give them a competitive advantage over other employers (Brooks, 2012). Analysis: 401(k) plans are growing with the number of employers that are providing options for their employees. As the research shows, company’s not providing a 401(k) plan can lose employees’ to competitors, lose productivity and sales. We want to recruit and keep top employees and based on the research shown, providing a 401(k) plan will do what we need to help increase our advantage of attracting and keeping top talent over our competitors. Recommendations Our company’s compensation plan is intended to attract key talent, increase employee engagement, incent and retain high-performing employees who will enhance the profitability of our company and create value for our shareowners. Below are the recommendations to begin implementing merit increases, healthcare plans, and 401(k) plans to our employees. These actions will align specific goals to our organization’s priorities and enables us to execute its strategies to deliver exceptional compensation packages to our employees. Recommendation: It is recommended to establish goals and expectations every year to ensure employees have a clear understanding of annual organizational priorities and their defined individual employee goals are aligned to their job role and those priorities. Managers will meet with each of their respective employees to communicate their goals and expectations and have the employees sign and approve understanding. On February 15th, annually, managers will meet with each employee to discuss results and give feedback on achievements, strengths, areas of opportunities, and merit increase the  employee will be receiving on their March 1st paycheck. By implementing a merit increase we will increase employee engagement, incent and retain high-performing employees who will enhance the profitability of our company and create value for our shareowners. Recommendation: My recommendation is to set up health care benefits with United Health Care and contribute $500 per month towards employee’s costs. Additionally, implement a Comprehensive Compensation Package to be presented and reviewed by the manager to the employees at their annual merit increase to show them the rich compensation they have with the company. The Comprehensive Compensation package will give a personalized overview of all components of the employee’s compensation and cash value of the benefits available. By communicating with the employee’s, we will see an increase in retention and satisfaction that will decrease our company costs and increase profitability. Recommendation: My final recommendation is to set up Fidelity to manage the employee’s 401(k) accounts. In addition, the company will match 3% of the employee’s contributions and will schedule yearly financial seminars with Fidelity for financial guidance and retirement advice. During yearly reviews, managers will be present the Comprehensive Compensation Package to give an overview of all components of the employee’s compensation and cash value of the company matching. By providing a 401(k) plan and financial guidance we will attract top recruits, as well as, retain top employees. Conclusion My goal for this research is to show you the positive impacts to the company by offering annual merit increases, healthcare benefits, and 401k plans to the employees. These compensation benefits are important to recruit high quality employees, retain high producing employees, and increasing motivation and production with all other employees. By creating annual merit increases, employees are more productive and try to reach the highest increase they can get to add to their salary. Adding the company’s business objectives to the merit increases for the employees to reach will add  increased productivity to the company. Adding healthcare coverage for employees and communicating with them the value added to their compensation is important to retaining employees. Employees with healthcare also go to the doctor more often and come back to work quicker which means less down time and higher production. Lastly, introducing a 401(k) plan to the employees creates long lasting and loyal employees that are vested in the company’s success. The findings show the importance of pay to employees and the importance of attracting employees to a company. Also, employees work harder which will make the company more profitable. Planning, goal setting, communication. The importance of the findings for healthcare is employees are will to leave their company if employers don’t provide healthcare benefits. Shows communication is very important in making sure employees understand the benefits to make sure they don’t leave. Shows increase in businesses providing 401k plans and attracting hard workers.shows how important benefits are in keeping and attracting employees. Work harder and stay on the job longer How important it is to show benefits are part of compensation to show the value and keep top performers. Communication is going to be the fundamental key to getting the buy in and positive reactions to implementing these compensation benefits. The best merit increase plan, healthcare plan, and 401(k) plan can generate positive employee reactions or a negative employee reaction. The actual effect depends on whether these plans are understood and accepted and whether employees’ perceptions of the facts are positive. Finally, it is important to make sure we keep pace and understand what other organizations benefits are to their employees and we stay competitive to them, we also remember the employees must understand the benefits and buy in to them to be successful. References Better benefits communications can help to improve retention. (2005, April). Managing Benefits Plans, 5(4), 9. Retrieved from http://eds.b.ebscohost.com/ehost/pdfviewer/pdfviewer?vid=5&sid=09c97eff-2de5-4526-9558-66dcdfc85554%40sessionmgr114&hid=110 Brooks, C. (2012). Monetary benefits play increasing role in luring workers. BusinessNewsDaily, Retrieved from