Compensation

Assignment 1-5: Base Pay Compensation Design Concepts

Missy Ortman

Feb 5, 2022

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1. Give an example of how one internal and one external environmental factor can influence an organization’s total rewards program. Identify the environmental factor you are discussing, and provide an example of how it can impact total rewards.

INTERNAL ENVIRONMENTAL FACTOR:

Strategy - I always think of Wells Fargo on internal factors that influence business strategy. They offered rewards to incentivize new accounts to drive business. The strategy backfired when some employees began opening fake accounts to earn higher bonuses. This not only affected the strategy and culture of the business, it gave a warning to other companies on the difficulty of using rewards this way.

EXTERNAL ENVIRONMENTAL FACTOR:

Labor Market – The current labor market can heavily impact our compensation in many way. Supply and demand of the workforce can require higher/lower wages depending on where the labor levels are. Currently, the labor market is flooded with jobs and not enough workers. To attract good help, businesses are offering much higher wages, sign on bonuses, and benefits like telecommuting.

2. Identify and briefly describe the five elements of the World at Work Total Rewards Model.

Element of Total Rewards Model & Brief Explanation

• Compensation: Actual pay provided by company. Can include wages, bonus, commissions, ect.

• Well-being: The environment / company culture promotes an employee’s well-being. This can include supporting the employee in and out of work, sponsoring programs that align with the strategy or company goals. Could be staff weight rooms, calm breakrooms, activities, and more.

• Benefits: Making sure the whole person/family is taken care of including health, financial wellness, and disaster coverage.

• Recognition: How the company recognizes the efforts, accomplishments, growth of employees. This can be formal and non-formal recognition, private or public. It can help reinforce company culture.

• Development: This is the rewards that encourage growth of the individual including skills, competencies.

3. Discuss entitlement and performance culture - what is meant by each term, and how are they different?

Entitlement is an across the board raises or wage increases for everyone. It can be based on years of service or simply that you have been with the company for another year and deserve a raise (sometimes called cost of living raises).

Performance culture bases wage increases are based on achievement or performance goals. Higher increases go to higher performers, smaller or no increases to underperformance.

4. Explain why Job Analysis is an important component of Compensation Design.

It results in a job description and job spec. It ensures that compensation is accurate and increases the likelihood of external equity.

5. Describe what is meant by internal equity and external equity in compensation, and discuss why each should be considered.

INTERNAL EQUITY:

Define/Discuss:

Why Important to Consider:

Equity between the current employees of same job duties and responsibility roles. Same pay for same duties.

Increases:

job satisfaction

Motivation

Morale

EXTERNAL EQUITY:

Define/Discuss:

Why Important to Consider:

How the compensation is compared to similar jobs in the market.

Reduces:

Turnover, people are leaving for higher paying jobs.

Increases chances of a bigger applicant pool

6. What is a job grade and how does it differ from a salary range? Be sure to define both terms in your response.

Job grades are groups of individuals/positions that have the same/ similar job types and are then pool together for their salary ranges. Salary ranges are assigned to a job grade, often with a min, max, and middle range.

In my current job, we have several job grades including Kitchen MGR I, Kitchen MGR II, Kitchen MGR III, Department Head, Nutrition services I, and Nutrition services II. Each position has its own salary range. Our salary range is a 14-step scale. Years of service, continuing education, and degrees received can move you up the scale.