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Compensation and Benefit Plans
Agenda/OverviewThis week’s Seminar is about what constitutes an adequate compensation
and benefit plan. During the discussion, consider compensation and benefits that you have
received from your employer. Enhanced Audio Seminar FormatCompensationBenefits and IncentivesCost ControlMotivationExecutive CompensationAbuse and LegislationQuestions
CompensationStrategic CompensationPay for Performance StandardIncentive Pay Skill-Based PayExpectancy Theory
Compensation Plans: Pay-for-Performance
Managers tie pay to effort and performance Link pay to performance to maximize productivity Studies prove out increased output
Incentive Plans Focus on specific performance targets Compensation is directly related to Operating Performance Rewards and attracts top performers Most systems are viewed as fair by employees
Sales Professionals Salary, Commission, or Combo
Group Incentives Team, Gainsharing, Profit Sharing
Skill-Based Plans Link to strategy, organizational values, motivation and reward Common in Manufacturing Benefits include increased productivity, a willingness to learn, and,
flexible scheduling
Expectancy Theory Predicts motivation to rewards
IncentivesProfessional Employees
Profit Sharing, Stock Ownership, Hiring bonusSales Professionals
Salary, Commission, ComboGroup Incentive PlansTeam CompensationGainsharingMerit Pay
Hourly PayMeans to reduce managerial levels
Align compensation plans with organizational strategies Reward systems
Compensation Strategies Factors Affecting the Wage Mix: Internal Factors Employer’s Strategy
Employee’s relative worth: Ability and Capability Employer’s ability to pay: Public, Private, Government
External Factors
Conditions of Labor Market: Recession, Economic Growth Area wage rates Cost of living
Union Environment: Collective Bargaining Legal requirement: Federal Minimum wages Law Wage and Salary Surveys: Department of Labor
Job Evaluation TechniquesJob Ranking SystemJob Classification SystemPoint SystemWork Valuation System
Benefits Why Organizations offer Benefits
• To attract and hold capable people. • To keep up with competition. • To foster good morale. • To keep employment channels open by providing opportunities for advancement
and promotion as older workers retire.
Common Benefits
Medical health Insurance
Life Insurance and Short term disability insurance
Disability insurance
Vision and Dental
401K
Vacation and float day
Nurse Hotline
Other Compensation and Benefits
Employee Assistant Program
Membership Benefits
Tuition reimbursement
Cost Control Healthcare costs are a threat to many organizations Employees pay more out of pocket New Law: Every employer has to provide health insurance?
Compensation Issues The issue of Equal Pay for Comparable Worth What is Comparable Worth? The issue of Wage-rate compression What is Wage-Rate Compression? The issue of Low Salary Budgets Pay raise freeze The impact of Globalization
Executive CompensationExecutive: CEO, President, CFO, COO, Board of DirectorBase salary, cash bonus, pension, perks, stock options,
profit sharingHealth, vision, Dental, term life, life insurance, travel
accidental insurance, Short term disabilityPaid spouse travel for meeting, Country club
membership, Health club membership, Airline club membership, Corporate jet, Severance package
Gap between hourly and executive payCEO pay: 364 times (avg $10.8 mil)more than workers
(2007) 525 times recorded in 2000 (2000) http://money.cnn.com/2007/08/28/news/economy/ceo_pay_workers/index.htm
Investors and public Feelings
Executive AbuseBob Nardelli (Home Depot), Jack Welch (GE)Stockholders “Say-on-Pay” http://dealbook.blogs.nytimes.com/2009/02/19/sec-commissioner-backs-say-on-pay/
Outrageous Perks
Outrageous PerksCountry Club Bill, including $200,000 initiation fee
(Countrywide Financial CFO)Upgrade of $365,916 to TXU CEO’s Dallas home$1,000,000 donation in the name of Lockheed
Martin’s CEO Robert Stevens$894,014 cost to sell CFO Tom Horton’s New Jersey
home (AMR)$1,000,000 bonus to reward acquisition of Knight
Ridder (CEO Gary Pruitt)$10,000,000 pay package for J.C. Penny CEO
Catherine West (who only lasted six months)AIG: A $440,000 lavish getaway. Merrill Lynch: A
million-dollar office re-do for its former CEO just before the company got government bailout money
Legislation and trends governing pay and PerksCorporate Boards no longer “Rubber Stamp”
recommendations of managers following Enron Investors are opposing compensation packagesNew Federal mandates require large companies to disclose
executive pay (more straightforward)Companies replacing traditional stock options with rewards
linked to specific targetsSecurities and Exchange Commission (SEC) approved an
overhaul of executive pay disclosure Http://crossbordergroup.typepad.com/say_on_pay_forum/ http://www.swamppolitics.com/news/politics/blog/2009/07/
say_on_pay_house_says_yea.html
Early History of Legislation Enacted to Regulate CompensationDavis-Bacon Act (1931)Walsh-Healy Act (1936)Fair Labor Standards Act (of 1938, as
amended)
QuestionsWhat other questions do you have at this
time?
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