Compensation systems and practices in organizational contexts

Compensation

I am designing the package for a retailing organization in the Seattle. The BLS website highlights the total compensation costs for the Seattle Metropolitan area. Wages and salaries are the largest component of total compensation costs, and these advanced 1.7%, which mirrors the degree to which total compensation costs advanced nationwide over the same period (BLS.gov, 2014). In the West region, average wage and salary amounts to $22.10 per hour and benefits account for another $9.49 per hour, bringing the total average compensation cost to $31.59 (BLS.gov, 2014). The West region is split between Pacific and Mountain, and the costs are higher in the Pacific region. Wages and salaries in the Pacific region are $22.92, and total benefits $10.00 for a total of $32.92. Only the Northeast has higher costs. Wages in King County are higher still, the highest in the state by a large margin, at $1,376 per week, which amounts to $71,552 per year.

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A comprehensive employee compensation package is the total of wages/salaries plus all benefits. As noted above, benefits are around one-third of total benefits, and are divided among many different categories. Employers can choose whether they want to offer the mean wage and industry standard benefits, or whether they want to offer more or less as part of their package (Heathfield, 2014). Our company has a philosophy of offering a competitive package, but the secretary position is a staff position that does not offer substantial value to shareholders, so this role will be compensated in line with industry norms for such roles.

The first step in determining the compensation plan is to seek external equity. The average wage in King County is $71,552 per year in wages, which would then extrapolate to total compensation of $102, 804 based on the fact that statewide wages account for 69.6% of total compensation. However, the company needs to bear in mind that average wages reflect a talented labor pool, and that secretarial work would normally be in the lower half of earnings levels. The annual mean wage for this position is $40,800, because this is a position that does not require a degree and often it does not require much experience. The job is not technical, so the pay is substantially lower than that mean for the area for all employment.

This department can accept a moderately experienced secretary, and no degree is required. Thus, we can set our wage at the mean, so $40,800. This equates to around $19.62 per hour based on a 40-hour work week, which is higher than the Seattle minimum wage of $15 (Wallace, 2014). There are no plans to index our positions against the increase in the minimum wage. The benefits package is expected to cost the company a further $17,820, for a total compensation cost of $58,620. If the company wishes to lower its total compensation cost, it can reduce some of those benefits, for example by hiring a secretary on contract or with temp work. However, the position itself when held by a full-time employee will need to come with a competitive benefits package.