Compensation Plan Outline for Companies Assignment

Due Week 8 and worth 300 points

Using the same company, you researched in Assignment 1 (Assignment 1 attached), evaluate the company’s compensation plan to determine how it could be improved.

Write a six to eight (6-8) page paper in which you:

Evaluate the existing compensation plan to determine if it is the most appropriate for your company. Explain your rationale.

Determine the most beneficial ratio of internally consistent and market consistent compensation systems for the company you selected.

Evaluate the current pay structure used by your company and assess the recognition of employee contributions.

Make two (2) recommendations for improving the effectiveness of the discretionary benefits provided by the company you selected.

Evaluate the types of employer-sponsored retirement plans and health insurance programs provided by the company you selected and compare them to that company’s major competitors.

Use at least three (3) quality references. Note: Wikipedia and other websites do not qualify as academic resources.

Your assignment must follow these formatting requirements:

• This course requires use of new Strayer Writing Standards (SWS). The format is different than other Strayer University courses. Please take a moment to review the SWS documentation for details.
• Be typed, double spaced, using Times New Roman font (size 12), with one-inch margins on all sides; references must follow SWS or school-specific format. Check with your professor for any additional instructions.
• Include a cover page containing the title of the assignment, the student’s name, the professor’s name, the course title, and the date. The cover page and the reference page are not included in the required page length.

The specific course learning outcomes associated with this assignment are:

• Evaluate the effectiveness of traditional bases for pay (seniority and merit) against incentive-based and person-focused compensation approaches.
• Compare and contrast internally consistent and market-competitive compensation systems.
• Evaluate the role of benefits in strategic compensation.
• Use technology and information resources to research issues in compensation management.
• Write clearly and concisely about compensation management using proper writing mechanics

Compensation Practice

BUS 409: Compensation Management

Brief Company Description (Walmart)

The company researched is Walmart. Walmart is a publicly-traded company that started its operations in the 1960’s. It is a chain of retail stores with its headquarters in the United States but operates globally. The company offers a wide variety of products and services to meet the different needs of the customers in the market (Roberts and Berg, 2012).

As far as revenue is concerned, Walmart is the largest company in the world, and this is attributed to the practical strategies that it puts in place. The company has an extensive product range, which includes electronics, furniture, music, toys, jewellery, grocery, footwear, clothing, and fitness products, among others.

The company understands that the market has a wide variety of needs, and this has enabled it to diversify its range of products to meet and exceed the expectations of customers.

Compensation Strategy

A compensation strategy determines how an organisation provides its employees with payments and other benefits. It is notable that when employees work for an organisation, they dedicate their time and effort to make sure the organisation achieves its goals and objectives.

It is the responsibility of the organisation to compensate for this input. Walmart’s compensation strategy stems from various aspects, such as basic pay. The company’s minimum wage per hour is $7.25, but plans are underway to raise it to $10.00.

The company also offers benefits such as comprehensive health insurance plans and associate discounts. Incentives include recognition of high performers and sponsoring the education of employees.

Best Practices

As far as compensation is concerned, Walmart engages in various best practices to make sure the payment is sufficient for each employee. The company understands that its employees can fall sick at any moment, and this has prompted it to provide them with a medical insurance plan.

This indicates that Walmart is concerned about the health of its employees and is willing to give its support to make sure they receive the medical attention that they deserve. The company also understands that its employees play a significant role in its existence; therefore, it provides them with discounts when they purchase products from its stores.

This is one of the best practices in terms of compensation because it offers employees a particular treatment (Biswas, 2014). Apart from the basic pay that businesses compensate their employees with, it is necessary to engage in additional best practices to show the commitment that an organisation is concerned about the welfare of its employees.

Compensation-Related Challenges

The major challenge related to compensation that Walmart is facing is concerning its minimum wages. The company offers a minimum wage per hour of $7.25, which is below the national average of $9.93. Several stakeholders have complained that Walmart does not compensate its employees enough, even though the company is among the most profitable in the world.

They feel that the minimum wage is too low for a company the size of Walmart. It is perceived as a challenge since it has had a negative impact on the company’s public image. Many think that the company mistreats its employees by offering them very low wages even when it has the potential to do better.

Question 2

Compensation and its Impact on Stakeholders

Compensation is perceived as an expense because a company has to spend in order to compensate its employees. Given the fact that businesses are interested in cutting down costs, they try as much as possible not to use a lot of resources in compensating employees because this will have an impact on the company as well as its stakeholders.

Walmart has a competent human resource management team which is tasked with the responsibility of ensuring employees are compensated in the best way possible and to minimise the impact on the company and its stakeholders.

Basically, Walmart applies a compensation strategy that is based on the performance of employees or departments. In other words, the better an employee performs, the higher the compensation they receive.

The application of this compensation strategy has a positive impact on the company and its stakeholders in the sense that it increases performance (Biswas, 2014). Employees are motivated to do better so that they can earn more, and this enables the company to be more productive and competitive in the industry.

On the negative side, some employees might feel that their efforts are not recognised as they should be and might complain of discrimination. This is likely to lead to a drop in motivation, which will have a negative impact on performance.

This will lead to a negative effect on the company as well as its stakeholders, especially the shareholders. It is important for organisations to use effective and efficient compensation strategies that have a positive impact on stakeholders. Compensation does not only affect employees; it also affects the company and the stakeholders in general.

The management team needs to understand that the compensation strategy utilised affects virtually all stakeholders in the company (Roberts and Berg, 2012). From a monetary point of view, the compensation should be high enough to effectively motivate employees to work even harder and enable the company to be more productive and competitive in the industry.

This will be an effective strategy in the sense that it will be taking the welfare of the employees into account. At the same time, the management team should know that the company has investors who expect to earn from its operations. Therefore, it should not use all revenue on compensation.

It has to ensure that even the shareholders have something to take home. The compensation strategy must be balanced to address the needs and concerns of all stakeholders should they be employees or shareholders.

Question 3

Laws

Laws have a significant impact on an organisation’s compensation strategies. The law determines how much a company needs to compensate its employees for services provided. This implies that when an organisation sets its compensation strategies, they must be in line with what the law demands.

For example, the minimum wage per hour in the United States is $7.25. This implies that organisations should not pay their employees below this amount. This is also the minimum wage per hour for employees at Walmart. The law affects the compensation that different organisations set.

Organisations must always operate within the law that has been set by the government of the day. Whatever practices they engage in, they have to work within the confines of the law. This ensures that the compensation is legal and approved by the existing legal framework.

In simple terms, the law has a direct impact on an organisation’s compensation practices since it provides the guidelines that should be followed while setting the compensation.

Labor Unions

Labor unions fight for the rights of their members (Martocchio, 2016). It is important for workers to join labour unions so that they can represent them. Through this, better compensation can be negotiated.

In other words, labour unions have an impact on the compensation practices of organisations in the sense that they can negotiate for an increment. They ensure that employees are effectively compensated for the services they offer to their employers. Labor unions are the representatives of employees at different negotiating tables.

When employees need their compensation raised, they go through a labour union so that their grievances are effectively addressed. A competent labour union negotiates for an increment in employee compensation. It ensures employees are well treated from different points of view.

Market Factors

Market factors also affect compensation practices by organisations such as Walmart. It is noted that the compensation packages that different organisations in the market offer the employees can help in attracting and retaining the workforce. With an attractive compensation package, an organisation is likely to be a destination of the best Talent in the market.

This affects compensation in the sense that businesses want to be competitive with respect to how they compensate their employees in order to attract the best.

Question 4

Traditional Bases for Pay

From a traditional point of view, compensation was done at a flat rate. This implies that at the end of the month, all employees were paid an equal amount of money as compensation for the services that they offer to an organization. At some point, Walmart relied on a traditional base for pay, and this created a sense of equality between the employees.

The employees believed that they were being paid based on fairgrounds since each of them took home an equal amount. This is an effective compensation strategy given the fact that some employees are not treated as special to others (Martocchio, 2016).

It also categorised all employees in the same class. Each of the employees understood that their effort was equally important in enabling the organisation to be where it was.

However, with the advancement in the business world as well as the introduction of more professional positions within an organisation, it became necessary for employees to be paid based on different grounds rather than just a uniform pay.

In the modern world, employees want to be paid according to their qualifications as well as the complexity of their work. This makes the traditional base for ineffective since it cannot be effectively applied in a complex working environment. Employees are exposed to different conditions; therefore, they cannot be compensated on the traditional basis of the flat rate.

It is important to consider various factors before determining how an employee should be compensated. This ensures that each employee is explicitly compensated according to their unique factors. It creates a sense of fairness for individuals.

References

Biswas, B. (2014) Employee Benefits Design and Compensation. Upper Saddle River, NJ: FT Press.

Martocchio, J. (2016). Strategic Compensation: A Human Resource Management Approach. London: Pearson Edication.

Roberts, B. & Berg, N. (2012). Walmart: Key Insights and Practical Lessons from the World’s Largest Retailer. London: Kogan Page.

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