Developing a Consistent Compensation Plan
A compensation plan is a vital component of all business organizations. The compensation plan may be written or unwritten, formal or informal. A compensation plan helps in attracting and motivating employees. Therefore, it is vital for an organization to have a consistent compensation plan. Developing a consistent compensation plan is a five-step process. It involves job analysis, job documentation, development of a job hierarchy, collection of market data on pay structures, and establishment of a pay package (Berger & Berger, 2008).
Job analysis involves the collection and evaluation of relevant data on various jobs within the company. The data focuses on the type of work, level of work within the organization, level of skill or knowledge required to perform the job efficiently, and the responsibility necessary to perform the job effectively. Some methods of data collection for job analysis include interviews, questionnaires, and direct observation (Berger & Berger, 2008).
The next step in the development of a compensation plan is job documentation. Job documentation is a formalized method of documenting the job content. A job description is the most common method of documenting the job content. Job documentation evaluates job content, classifies jobs according to content, and provides efficient criteria for making pay comparisons (Berger & Berger, 2008).
Development of a job worth hierarchy is another important step in the development of a compensation plan. A job worth hierarchy helps in comparing the importance of various jobs to the organization. An organization may use qualitative or quantitative methods to do job comparisons. Some methods of job comparison include ranking, classification, and point factor (Berger & Berger, 2008).
Companies do not operate in isolation. Therefore, they should compare the compensation plan of other companies in the industry before developing a compensation plan. However, before collecting data on the labor market, it is vital for a company to determine its relevant labor market. Collection of data on the labor market helps in determining the pay package of other organizations that compete for employees with the company. The specialty of a job determines the number of companies that compete for employees. For high-level employees, the company competes with virtually all companies in the market regardless of their industry (Berger & Berger, 2008).
Finally, the organization should establish pay ranges or rates of its employees according to the job hierarchy. In setting the pay rates or ranges, an organization should determine whether it would like to offer pay ranges that are similar to the external market or whether it wants to pay its employees to pay packages that are higher than the pay package of the external market.
Usually, companies that are market leaders in their respective industries offer their employees pay packages that are significantly higher than those of the external market. However, the pay package of the company should not contravene the compensation philosophy of the company (Berger & Berger, 2008).
Batelco’s Compensation Plan
Bahrain Telecommunications Company (Batelco) is the principal telecommunications provider in Bahrain. Batelco and its subsidiaries provide telecommunications services in the Middle East, South Asia, and Africa. The major shareholders of Batelco are the government, commercial and financial institutions, and private investors. The company is listed on the Bahrain Stock Exchange.
Batelco is one of the major employers in the Bahrain economy. It has thousands of employees. Therefore, it is vital for the company to have a proper compensation management policy. Mechanical and software engineers are some of the most valuable employees of telecommunications companies. Therefore, Batelco ensures that it offers a suitable pay package to these employees.
The compensation package that these employees receive is dependent on their skills, experience, rank, and responsibility. Batelco offers software engineers and programmers a salary that is slightly higher than that of mechanical engineers. Software engineers and programmers receive a salary that ranges from 12,000 and 17,000 Bahraini Dinars (BHD). On the other hand, the salaries of mechanical engineers range from BHD 10,000 to 15,000. This pay package is one of the highest in the industry.
Every company must have good financial management practices. Therefore, the finance department is one of the most powerful departments in most organizations. It provides and manages funds that are necessary in implementing various projects within the company. Batelco offers employees of the finance department salaries that range from BHD 6,000 to BHD 20,000. Senior employees in the department – the finance managers – receive a salary of approximately BHD 24,000. On the other hand, junior employees of the department – accounting clerks – receive a salary of approximately BHD 6,000.
Case Questions
Acme Manufacturing’s compensation policy has several discrepancies. Most of the salaried employees are women. In addition, the company does not have an efficient compensation policy. This necessitates Joe Black, the president of the company, to undertake drastic changes to correct the problem. One of the issues that Black should tackle immediately is the salaries of female employees. It is evident that female employees receive lower salaries than those of their male counterparts.
Black has three options. He may choose to do nothing. Black may choose this option since the three female supervisors have not raised any complaints with the management with regard to their salaries. However, this is not a favorable option as the female employees may realize the discrepancies in the compensation plan of the company in the future.
This may make them lodge complaints with the local EEOC. This may have dire consequences for the company. Black may also choose to harmonize the salaries of female employees through gradual increments. However, this may not go well with their male colleagues. It may create tension in the workplace, which will affect the productivity of the employees.
Black may also increase the salaries of the women employees immediately. However, this may make the women employees comprehend sex discrimination and claim back pay. This would have huge financial implications for the company. Therefore, Black should employ none of the above options. The best option that Black should employ is inviting the women into his office and discussing the situation with them.
Holding a meeting with the salaried women employees would enable Black to understand the salary expectations of the women. This would help him devise a suitable strategy that would help in harmonizing the salaries of the women employees. In addition, the meeting would help in ironing out any differences between the management and the female employees. This would reduce the probability of the female employees lodging their complaints with the local EEOC office. Incorporating the views of women may provide a foundation for increased cooperation in the future.
Acme is a family-owned company. Ownership of the company is the main factor that contributed to its current position. During the early stages of the company, the management of the company may have offered job opportunities to employees after referral by another employee. The influence of the employee and relation with the president is the main factor that contributed to the pay package that the company offered the employee.
The company may have used the same reasons to give salaries to certain employees and offer hourly pay to other employees. Women employees may have endeared themselves to the management of the company. This may be the main reason why women account for the largest percentage of salaried employees.
Reference
Berger, L. & Berger, D. (2008). The compensation handbook. New York: McGraw Hill Professional.