Analyzing the Strategic Compensation

Strategic Compensation List and explain the five different stakeholders of a company's compensation system Government Both federal and state governments have their own regulations, laws and directives that have an influence on compensation schedules. For instance, the federal government has set minimum wage levels and also has legislation on payroll issues. The federal government also has a lot of influence on economic matters. Governments also draft policies that can help them to increase the ease of doing business.

While many governments have free-market and non-interference policies, they also have set rules and regulations, with regards to the treatment of workers, occupational safety, social security contributions and hiring practices (Fred-Adegbulugbe, 2010). Executives / Managers/Owners or Founders Company executives and managers ought to actively know the link between their employees and their performance, and reward and budget management. The main objective of compensation systems is to enhance employee productivity so as to increase profitability.

If the company is public, increased profitability could mean more dividends for shareholders, while if it is private, the increased profitability could mean more money for its founders. In the same way an effective compensation system brings wealth to the shareholders or founders of a company, an ineffective system would have a negative impact on profitability (Lazear, 2000). iii. Employees' Unions The relationship between company managers and union leaders can either be one of cooperation or one which is filled with animosity.

The relationship between these two parties has a huge impact on the effectiveness or productivity of almost every company. Cooperation between unions and organizations can result in a scenario in which there is mutual benefit for all parties. For instance, organizations could agree to increase allowances in exchange for a workers' union to convince their employees to attend training classes. This does not only increase productivity in the organization, but also makes the workers more satisfied with their jobs (Pink, 2009). iv.

Local Communities Local communities also have an influence on the remuneration systems of companies. This is owing to the fact that organizations have to adjust for the cost of living before setting their remuneration system. The cost of living is in turn determined by the economic conditions, housing and the location of the company. Thus, the compensation systems of companies are significantly influenced by the local communities (Pink, 2009; Lazear, 2000). v. Special Interest Groups (SIGs) and the General Public Citizens also have a say on the remuneration systems of organizations.

For instance, protests have been held and lawsuits filed by members of the public to get higher wages, flexible working hours or even to call on governments to reduce certain taxes. All these have an effect on the amount of money that employees will be paid. Certain interest groups also have a lot of influence on legislators with regards to who gets paid what, at what time and what should be held back as taxes or social security benefits (Pink, 2009; McNamara, 2008). 2.

List and describe the seven types of monetary compensation i. Salary This type of monetary compensation is a set amount of money paid regularly after set periods of time. Salaries are usually paid in dollar amounts every twelve months and they are the most used tool to pay licensed or professional workers. In general, a salary implies that the employee is committed to working in the organization for a longer period of time (Markel, 2010). ii.

Hourly/Wages This is a set dollar amount that is paid per hour of work done. This type of monetary compensation is mostly used to pay skilled and unskilled laborers. A worker who is receiving wages understands that during times when work is slow he or she may not be called upon to provide services. Thus, wages imply that the worker is not a long-term employee (Martocchio, 2008; Markel, 2010). iii.

Overtime Wage For any organization that allows it, employees who work for a certain period of time after their regular shift ends, are entitled to overtime wage. Overtime wage is often greater than regular wage. The minimum overtime wage per hour is set by law and as of 2010 it was one and half time the amount of regular wage paid (Markel, 2010). iv. Variable Pay or Commission Commission pay is a set amount of money paid to employees. It is paid based on the results or performance achieved.

There are different types of commission systems, namely, sales incentives, bonus programs and overtime pay. For instance, all employees could be promised a commission of 10% of every sale they make below 1000 dollars and if they make sales above this revenue level the commission could be increased to 12% (Murphy, 2009). v. Bonuses This type of monetary compensation is often aimed at increasing employee performance. Bonuses are mostly used on salaried workers with the intention of motivating them to achieve a set deliverable.

All bonuses are paid upon the assessment of whether the set deliverables were achieved or not (Pink, 2009). vi. Benefits Work disability insurance, dental insurance, general medical insurance, pension plans, company-paid holidays and paid time offs are some of the benefits that one could get. Though not all of them are in cash, some such as paid-time off and pension contributions are "real" monies that could later be cashed for other uses (Martocchio, 2008). vii. Equity-Based compensation This is a compensation system that uses the owner's shares.

Instead of salaries, overtime pay or wages, one could be given stock options, stock appreciation rights or restricted stock units. The main objective of these compensation plans is to retain employees or align their interests with those of the shareholders (Murphy, 2009). 3. Discretionary vs. legally required (mandated) benefits and why companies need to provide both to employees Discretionary benefits are those not mandated by law, instead they are given by employers voluntarily to their employees. Despite not being mandated by law, there are legislations that regulate them (Martocchio, 2008).

Examples of discretionary benefits include: retirement plans, vocational training, transportation, healthcare insurance, and paid time off. Eligibility for such benefits is set by employers. Employers are also responsible for authorizing payments (Martocchio, 2008; Markel, 2010). Mandatory payments are, on the other hand, those that are required by either federal or state legislations. They include: medical leave, unemployment insurance, worker's compensation; and social security (Markel, 2010). If executives want their companies to succeed, they will have to provide both mandatory and a mix of discretionary benefits so as to satisfy their workers.

A satisfied worker means more productivity for the company (Martocchio, 2008). 4. Three laws that impact strategic compensation plans The Davis-Bacon.