New Compensation Plan Paper

New Compensation Plan

Ceasar Hendricks/HRM 531

Dr. Alex Kadrie

December 15, 2009

New Compensation Plan 1

New Compensation Plan

Employers that intend to succeed in this competitive environment must have a well-designed compensation plan that motivates employees, control compensation costs and ensures equity. The best compensation plans mirror the culture of the employer. Therefore, employers should establish a compensation philosophy. In the design process employers must consider how the plan will fit into their overall strategy for recruiting and retaining employees. Next, employers may control compensations costs by setting their wages and salaries at some point above, below or equal the market value. In addition, employers should consider both internal and external equity by establishing an effective compensation plan that reflects they value positions within the organization.

There are various compensation plans which range from the basic rate schemes, incentive schemes and productivity or efficiency gains. For this particular assignment the compensation plan that would best fit the writer’s organization is the incentive schemes. Incentive schemes can either be short or long term and are also based upon individual performance, weekly or monthly bonuses or commissions on sales. Profit sharing and share option schemes may not provide as much incentives to individual workers as schemes based on personal performance.

This particular pay system will work in the organization because other job-related factors besides pay will be considered (i.e. additional payments, non-cash benefits, etc.) will all play a major...