Differences in the compensation plans for Parkleigh and Kaufmanns
Basically, the compensation plans for these two firms might significantly differ for various reasons. There are firms that give preferences to paying fixed salary to their employees because of the need to maintain and reimburse the level of their academic qualification and to retain them. Other firms like paying commission in order to urge the employees to make greater sales volumes (Brickley, Smith & Zimmerman, 2007).
Thus, based on the goals and objectives as regards to these two facets, namely increasing sales and retaining employees, it is evident that Parkleigh pays straight hourly wage without commissions on sales mainly to reimburse the workers for the academic qualification, to retain them and to encourage them to make regular product purchase at the firm’s stores. In contrast, Kaufman aims at maintaining its workers by paying low hourly wage but offers 5% sales discount to encourage the employees to make greater sales volumes.
From the case study, it is apparent that Parkleigh might be interested in employing many employees specializing in different areas. Therefore, this firm might not wish to pay sales commission since it requires various individuals who perform divergent tasks, but just a single employee who makes product sales to the clients. Parkleigh for instance, might require just one salesperson that spends extra time in handling customers and providing clients’ services. In contrast, given that Kaufmanns sales personnel have their wages tied to the sales but have the opportunity to increase their compensation through sales. They have relatively high incentive in the short-run for them to warrant that the clients are extremely happy while the sales are processed very quickly (Cavanaugh, Tocci & Wilkes, 2009).
Besides, by offering the employees discounts on the products they purchase from the stores, Parkleigh Pharmacy encourages its employees to make regular products purchase from its stores. The sales concession presented to the workers by Parkleigh might be intended to make them to be acquainted with the merchandises and to continue supporting them.
In fact, Parkleigh intention must be to ensure that its sales personnel are well-informed about the products they tender to the clients as they handle or deal with such people. Conversely, given that Kaufmanns products are more run off the mill, they might necessitate sales people who have similar knowledge. Discount might not help in the case of Kaufmanns. However, by offering discount to the employees, Parkleigh stands a chance of drawing employees who value the kinds of products being sold at Parkleigh. This is valuable in case Parkleigh Pharmacy requires sales employees who prefer similar kinds of products as its clients (Cavanaugh, Tocci & Wilkes, 2009).
It is also worth noting that the discount that Parkleigh offers to the employees is perhaps a tax merit kind of compensation. For instance, an employee is bound to pay only $80 for a product that might have otherwise cost $110. To provide a worker with an after duty cash of thirty dollar, Parkleigh Pharmacy might have to compensate a worker with forty percent private salary tax-rate equal to fifty dollars. The corporation in give-and-take simply relinquishes proceeds totaling to thirty dollars yet it recompenses incremental excise returns of approximately forty percent commercial tax-rate of twelve dollars. Parkleigh and its employees thus avoid remitting $12 in form of taxes, but the employees save $32.
Comparing the hourly wage between Kaufmanns and Parkleigh Pharmacy
Obviously, the answer is based on the employees’ quality at each of these stores. However, it is impossible to tell. If we assume that the class of workers athwart the supplying store is identical, then the hourly remunerations at Kaufmanns stores must be greater. The offered employees discount at Parkleigh would serve as compensation. Thus, workers concession rate plus hourly remuneration amount at Parkleigh may liken Kaufmanns’ hourly remuneration amount. The hourly wage rate at Parkleigh Pharmacy would be lower as compared to Kaufmanns provided Parkleigh employees derive some values from the discount (Brickley, Smith & Zimmerman, 2007).
References
Brickley, J., Smith, C., & Zimmerman, J. (2007). Managerial economics and organizational architecture. New York, NY: McGraw Hill/Irwin.
Cavanaugh, W., Tocci, G. & Wilkes, J. (2009). Architectural acoustics: Principles and practice. New York, NY: John Wiley & Sons.