Home > Free Essays > Business > Management > Compensation Plan Outline
Cite this

Compensation Plan Outline Essay


Compensation structure is a systematically developed plan that reveals an organizations reimbursement philosophy. It gives a structural and credible system or guideline that companies use to pay their employees. Notably, there are two main compensation structures or plans that companies have been using. The compensation structures provide HR officials in various institutions with clear basis of setting remuneration benchmarks that enables them to treat their employees fairly.

The two structures include internal equity method of salary determination and hierarchical structure (Ojimba, 2002). In particular, internal equity method of salary determination has been widely used in most companies. It uses a grid to ensure that salaries of officers at various levels of operation are based on the pay levels of officials who are ranked above and below.

However, hierarchical structure that has been adopted in various institutions including Dell uses the prevailing market rate the determine employees remuneration. The technique is ideal for most companies since it fosters holistic consideration of the existing market rate of remuneration for various officers within the structure.

This is essential since it ensures that payment value of employees’ increases with the level of experience, merit, and responsibility. Ideally, effective payment structure is of great significance since it enables companies to give credible answers pertaining to employees roles and why remuneration value is dissimilar at various levels. It also helps HR personnel in companies to implement formulated payment strategies fairly.

Evaluation of the existing compensation plan

Dell Company has a fair and effective compensation structure that is implemented by its HR department. The company’s compensation philosophy has enabled its HR department to address remuneration issues of its employees amicably through democratic processes. This is evident since the compensation structure provides a fair system that promotes reward of employees based on essential performance parameters.

The parameters include work done, quality of work, seniority, experience, and professional level (Ojimba, 2002). As noted, the company found it necessary to adopt hierarchical reward structure as opposed to equity internal technique that applies grid variances in determining salary scale of employees. The structure has been instrumental in promoting fairness in setting employees remuneration scales in the company.

For instance, it has enabled the HR department to adopt a personal focused-based compensation strategy as opposed to traditional bases. The rationale for adopting the structure was that not all employees are equal in terms of age, experience, knowhow, and professionalism. For instance, employees at the lower levels of the management structure cannot be matched and remunerated the same as top officials.

That is the structure was adopted to provide a systematic and hierarchical basis for remuneration where the basic highlighted parameters are put into consideration (Ojimba, 2002). HR officials at Dell Company hail the structure and they affirm that it remains the best for the organization. They affirm that it has given them a clear policy guideline that enables them to set salary ranges effectively without discrimination.

Firstly, they recommend the structure since it takes into consideration the prevailing market rates and changes in the employment field. This gives them the opportunity to set salary scales and figures distinctively for various positions. Clearly, salary scales or basic emoluments that are given to employees of Dell company under the structure increases systematically with the level of individuals experience and responsibility in the company.

Indeed, the structure is the most appropriate for Dell Company. It has enabled the company to maximize on its resources by ensuring streamlined payments. It has enabled the company to pay its workers proportionately depending on their input levels. That is salary of employees is pegged on their input and output performance levels that has been enabling the company to avoid loses.

It has enabled the HR officials to management the payment system effectively and set remuneration figures fairly. This is because it has given them clear guidelines under which they have set minimum, mid-point, and maximum salary scales (Ojimba, 2002). Further, the compensation plan has helped in establishing who is who in the company, what role each person plays and why salary scales differs at various business levels.

The most beneficial ratio of internally and market consistent payment systems

As a measure to ensure employee retention and satisfaction, companies need to adopt beneficial ratios of internally and market consistent compensation systems. The compensation systems must ensure that internal equity exists when employees are rewarded for their input. The compensation ratio must be consistent and proportional to employees input including professionalism.

The ratios must also take into considerations market rate of payment and environment dynamics that are caused by competition as opposed to traditional considerations (Heneman, 2002). In review of Dell Company’s compensation structure and plan, the most viable ratio and market compensation system that would guarantee consistency on how it handles employees pay issues is market base pay ratio system.

The market base pay ratio system is preferred since it provides requisite remuneration base incentives that promote consistent satisfaction of employees. It gives a consistent and credible procedure on how remuneration ratios of employees at different positions are arrived at or calculated.

The ratio is highly beneficial since it promotes the adoption of incentive based and person-focused compensation strategies of setting remuneration standards (Martocchio, 2013). The strategies are conventionally relevant since they ensure holistic satisfaction of employee’s material needs as compared to traditional bases of remuneration.

Remarkably, the ratio takes into consideration market rate of payment, job group of an employee, Merit, experience, and responsibility of an employee. It provides a baseline payment system where individuals are paid depending on their classification or job group (Heneman, 2002). For instance, individuals who are classified as experienced are paid based on the ratio that is set for experienced individuals.

Indeed, market base pay ratio system would enable Dell Company to pay its employees consistently and in an equitable manner under various job categories as indicated in the schedule below. The schedule gives job groupings and the market base ratios that are used in calculating or determining salary scales.

Evaluation of the current pay structure used by Dell Company and assessment of the recognition of employee contributions

As indicated, Dell Company uses hierarchical compensation structure. The structure has enabled the company to provide personal focused recognition and rewards based on individuals potentials including input. The structure has been instrumental in enabling HR officials to design favorable remuneration ratios under which salary scales are pegged.

It has also enabled the HR officials to consider market rates of payments, merit, and task of employees when developing salary scales. According to Heneman (2002), hierarchical structure is a noble compensation strategy that ensures internal fairness in-terms of reward for work. Firstly, it ensures that each employee receives proportional payment to his work.

It also ensures that payments are done appropriately and in a consistent manner. Further, the structure has been enabling the institutions HR officials to design realistic and acceptable minimum, mid-point, and maximum salary levels. This has been essential in eradicating monetary wastage through a structured system of salary review.

Similarly, it enables proper classification of employees in terms of profession, level of operation, job group, and education level. This helps in establishing or knowing the roles of each employee, why their emoluments differ and who does what.

Conversely, the compensation structure enables HR officials to assess and monitor contributions of each employee in the company. The classification system that the structure facilitates enables managers to establish the performance level of each employee (Martocchio, 2013). For instance, managers would easily know performing employees since their ratings would be high compared to non-performing individuals.

The company managers have been able to achieve this since the remuneration system is pegged on key performance parameters that include experience, merit, and seniority. It has enabled managers to establish the contribution of each employee from the top to the subordinate staff. This is because remuneration and other lucrative incentives are reserved for recognition of exemplary employees.

Probable recommendations that can aid the effectiveness of the discretionary benefits provided by the company

As defined, discretionary benefits are basic incentives that contributes in improving long-term well-being of employees. They are significant in ensuring holistic motivation of employees to perform optimally in their respective areas of operation. Although Dell Company has favorable discretionary benefits structure, it needs to be more competitive in its discretionary benefits.

The company needs to be open to its employees, establish their needs, and adopt amore favorable strategy of satisfying their needs. It should not only focus on the traditional discretionary needs of employees that are no longer motivational in the current competitive world (Martocchio, 2013). Therefore, it is recommended for the company to consider adopting modern reward systems and enhancement of social assistance as key strategies to improve the effectiveness of its discretionary rewards.

Firstly, Dell Company should include more financial and non-financial incentives that provide holistic satisfaction. They should include career development opportunities, financial assistance, and development of proper retirement plans. They should also include recognition of effort, and payment of commissions on performance at regular and consistent intervals.

Social reward programs that the company should consider adopting to improve the effectiveness of discretionary benefits to employees include improvement of working conditions and allocation of social time or sessions. These strategies hold the capacity of enabling the company to curb the high rate of employee turnovers tat has been witnessed in various institutions.

They will also contribute in motivating employees towards recording exemplary performance and high productivity. Assessment of employer-sponsored retirement plans including health insurance programs provided by Dell Company and comparison to the company’s major competitors.

Dell Company provides credible employer-sponsored retirement plans to its employees to enable them retire honorably. The retirement plans that the company has organized for its employees include retirement savings and group healthcare plans. The sponsored plans are to enable the employees to benefit from economical technique of receiving discounted services (Stanton, 2013).

The company has enrolled its employees to the national retirement scheme and it pays monthly remittances on behalf of the employees at low cost. The payments that are remitted to the schemes are part of the discretional benefits that the company offers to its employees.

The company also provides health insurance programs to its employees. The programs that include social security, health insurance, dental, and Medicare insurance are meant to enhance employee’s safety and health status. This is essential in enabling them to be more productive and focused in their duties (Stanton, 2013).

Evidently, Dell Company is credited for adopting the most flexible, credible employer-sponsored retirement schemes, and health insurance programs than its key competitors that include Lenovo, Toshiba among others. The company’s key competitors have not been focusing on providing quality sponsored retirement incentives or enrolling their employees to credible retirement schemes.

This has been hindering their employees from enjoying the benefits that accrues from economical techniques of acquiring discounted services compared to Dells employees. The companies has only been focusing on providing a number of health programs to their employees that include health insurance plans and social security plans. However, the health programs that they provide still remains inferior compared to Dell’s health insurance programs.


Compensation structure is significant since it gives a structural and credible system or guideline that companies use to pay their employees. The structure is important in any business organization that pays workers. Indeed, any business organization that provides payment or salary to workers should have clear forms of payment. The payment structures must be prepared well and kept by the human resource officials who administer employee’s welfare including issues relating to remuneration.

This is vital since it is human resource officials who determine salary ranges for various positions and configure the scale of payment for specific duties that are performed by employees. They are the custodian of the payroll in institutions and their role is imperative in ensuring employee satisfaction.


Heneman, L. (2002). Strategic reward management: Design, implementation, and evaluation. Greenwich, Conn: Information Age Publ.

Martocchio, J. (2013). Strategic Compensation: A Human Resource Management Approach: Boston: Pearson.

Ojimba, E. (2002). . Web.

Stanton, M. (2013). . Web.

This essay on Compensation Plan Outline was written and submitted by your fellow student. You are free to use it for research and reference purposes in order to write your own paper; however, you must cite it accordingly.

Need a custom Essay sample written from scratch by
professional specifically for you?

Writer online avatar
Writer online avatar
Writer online avatar
Writer online avatar
Writer online avatar
Writer online avatar
Writer online avatar
Writer online avatar
Writer online avatar
Writer online avatar
Writer online avatar
Writer online avatar

301 certified writers online

Cite This paper

Select a referencing style:


IvyPanda. (2019, July 9). Compensation Plan Outline. Retrieved from https://ivypanda.com/essays/compensation-plan-outline/

Work Cited

"Compensation Plan Outline." IvyPanda, 9 July 2019, ivypanda.com/essays/compensation-plan-outline/.

1. IvyPanda. "Compensation Plan Outline." July 9, 2019. https://ivypanda.com/essays/compensation-plan-outline/.


IvyPanda. "Compensation Plan Outline." July 9, 2019. https://ivypanda.com/essays/compensation-plan-outline/.


IvyPanda. 2019. "Compensation Plan Outline." July 9, 2019. https://ivypanda.com/essays/compensation-plan-outline/.


IvyPanda. (2019) 'Compensation Plan Outline'. 9 July.

Related papers