Toyota's compensation and benefits strategy for employee motivation

Toyota Company is the world's largest automobile manufacturing company in the world. Similar to what their vision states about being the most respected and successful car manufacturer in the world, the company has achieved that objective. With its headquarters in Japan, the Toyota Company has several branches around the globe. It is not surprising that the company employs hundreds of thousands of employees because of its huge size. The fact that the company employs such a high number of employees also means that it equally has a responsibility to take care of that many employees to guarantee high performance. One of the most important responsibilities of any organization is to fairly remunerate its staff, if they are to ensure better results. Once an organization creates employment opportunities, it then becomes its responsibility to make sure that all the talent and work put in is adequately compensated (McHugh & Nickels, 2008). Studies have proven that proper staff motivation accounts for a significant proportion of an organization's growth and success. The Toyota Company has heavily taken advantage of the findings of this study. The company has continuously and fairly rewarded its employees through monetary compensation and various benefits. As a result of being properly motivated, the employees of Toyota Company have worked tirelessly to make the company the world's most successful automobile manufacturing company. Not only has the hard work benefitted the company, but also the returns they have earned the company, have enabled it to give them training opportunities and other benefits that have contributed to their personal growth. This paper discusses the benefits of an organisation properly rewarding its employees at various levels of the organization.

Compensation

According to the Human Resource Guide (2015), (Shilling, 2015) compensation refers to a systematic approach to offering monetary rewards to staff in return for work done. Therefore, compensation is basically a reward for a certain job done by an employee. It can also be a reward for a job or a task done voluntarily. In our case study, the organization chosen, i.e. the Toyota Company, defines compensation as monetary reward for staff in various levels of the company hierarchy, either for job satisfaction or performance, or both. Since compensation can be utilized as a tool to motivate employees so as to encourage better performance, it can be tailored so as to be a driving force to meet an organization's goals. (Maslow, 1943)

Benefits

According to the Business Dictionary (Business Dictionary, 2015), a benefit is a financial compensation, a right, a privilege or an advantage given to one by another. The Toyota Company gives its employees numerous benefits for the sole purpose of motivating them. Some of the benefits provided by the Toyota automobile company include: travel allowances, pension schemes, motor vehicle purchase discount, life insurance, and medical insurance, among many more. Although these benefits differ in amount, depending on the workstation of the employee in the organization, they are a very effective strategy of motivating employees to work well, which in turn increases a company's performance.

General Compensation Structures

So as to effectively reward its employees, Toyota's human resource department has been utilizing several predefined structures with the aim of calculating what is adequate for each category of employees. These predefined elements include all the benefit and compensation packages, such as retirement plans, paid time-off leave, health plan, salaries and allowances. To arrive at the general compensation structures one has to take the following three key steps:

Step 1 (Define)

Toyota first has to describe all the compensation elements. This entails: defining both valid and null compensation; which employee category receives certain compensation packages and which doesn't; and by what means are rewards shared or a certain benefit given to all employees. Will monetary compensation be by cash or through bank cheques? (U.S. office of Personnel Management: 2011 Salary Tables and Related Information) These compensation elements need to be in line with the federal and state laws on employee remunerations. After defining all these elements, the next step is to administer.

Step 2 (Administer)

After defining every compensation element, the Toyota Company has to administer or give the rewards or packages. In other words, this step entails making benefits and monetary compensation entries on every staff's file. The information that is to be captured in the file also include: the time clocked, the deductions to be made and the net income. This step is best done via proper record keeping practices through the use of software and backing up data in separate locations. Maintenance of the integrity of such files should be a priority.

Step 3 (Process)

This step entails calculating the earnings and the deductions on a payroll. As a top-tier company, Toyota accountants have access to the latest most effective computer software that help in producing accurate payrolls. Thus, the company can easily dispatch net earnings to each employee's bank account after meeting these three steps.

Informal Procedure and Action

Company laws are largely responsible for the utilization of informal procedures to deal with indiscipline cases or other issues of minor misconduct (Huitt, 2007). The Toyota Company behaves this way. The line manager is the one who is responsible for taking action, since he or she is in constant direct contact with the employees, most of the time. Without any fear or favour, the manager should monitor the employees to check for any cases of indiscipline among his or her employees, such as constant absenteeism without notice, use of foul language, carelessness when handling company property, fighting, etc. After identifying the cases, the line manager should then inform the employee of the misconduct he or she has been found to have engaged in. This is done in complete confidentiality. The manager should also inform the employee of what specific action of theirs constitutes misconduct and what is expected of them according to the organization's rules and regulations, and the employee's employment contract. The fact that this conversation is held away from other employees in absolute privacy enables the line manager to get feedback from the employee. After notifying the employee, the manager will then conduct investigations. This step is a must, and the Toyota Company takes it very seriously. After investigations, the outcome helps determine whether any punitive actions will be taken or the case should be dropped. If the investigations prove that the employee has violated a company regulation, then plans are made for a hearing. During the hearing, the employee is allowed to be accompanied by a fellow employee or a trade union representative. The Toyota Company strives to always adhere to this process of solving disputes as it maintains utmost professionalism. After a hearing, mild punitive measures are often given, if the employee is found to have been culpable.

Monetary Compensations and Benefits for Employees of the Toyota Company

The Toyota Company categorizes its employees into three classes. Benefit and compensation packages vary depending on the categories. Each staff is individually assessed using the criteria mentioned earlier so as to find out to which employee category one belongs to. Some of the factors that the Toyota Company takes into account to classify an employee include: track record, educational background, and work experience. Each of the following tables are simulations from U.S. office of Personnel Management:2011 Salary Tables and Related Information

The 3 categories include:

1. Entry Level Employees

This is the lowest category of employees. The employees in this category are those with the least experience and credentials. The tasks carried out by entry level employees are menial or involve utilization of physical energy and therefore, such employees have a lower level of compensation relative to other Toyota employees. Entry level employees play an important role in the Toyota Company, and their job responsibilities include: assembling car parts and cleaning of vehicles. Below is a brief overview of Toyota Company entry level employees' benefits and compensation package.

MONETARY COMPENSATION Amount

Salary $47,000.00

Commission $4,331.00

Bonus $873.00

Annual salary for 2014 $55,000.00

Total $107,204

Benefits Plan E. Contribution C. Contribution

Medical Insurance Kaiser Hmo $2,476.76 $11.307.64

Life Insurance Cigna $0.00 $121.20

Retirement plan $1,000.00 $500.00

Vision Insurance VSP $163.02 $40.74

Dental Insurance Delta Dental $1,145.56 $286.40

Short-term disability Cigna $0.00 $161.55

Long-term disability Cigna $0.00 $99.96

Unemployment Insurance $0.00 $56.00

Employee assistance (EAP) $0.00 $36.00

Total $4,784.02 $16,641.71

BENEFITS PACKAGE

The Toyota Company also offers its entry level employees a PTO (paid time off) of 14 days and one paid eight-day holiday per year.

PTO 14 days $2,884.62

Holidays 8 days $1, 538.46

Total: $4,423.08

Other benefits not included above include the following: referral programs, maternity leave, holiday parties, motor vehicle discounts, and credit union memberships, among others.

2. Middle Management

Basically, all aspects of production are under middle management. Middle management employees are those to whom entry level employees report. Employees in this category are more learned and are in-charge of all aspects of automobile production in the Toyota Company. Their compensation package is higher than that of entry level employees.

MONETARY COMPENSATION Amount

Salary $67,000.00

Commission $5,886.00

Bonus $1,000.00

Annual salary for 2014 $78,000.00

Total $151,886

Benefits Plan E. Contribution C. Contribution

Medical Insurance Kaiser Hmo $3,357.81 $12,564.06

Life Insurance Cigna $40.00 $201.00

Retirement plan $1,240.00 $731.00

Vision Insurance VSP $223.04 $55.77

Dental Insurance Delta Dental $1,436.00 $350.00

Short-term disability Cigna $72.00 $261.55

Long-term disability Cigna $33.00 $114.00

Unemployment Insurance $0.00 $56.00

Employee assistance (EAP) $0.00 $45.00

Total $6,401.85 $14,408.38

BENEFITS PACKAGE

Unlike entry level employees, employees in middle management enjoy longer PTO's of 21 days and holidays adding up to 14 days per year.

PTO 21 days $35,673.00

Holidays 14 days $2,900.70

Total: $38,573.70

2. Senior Management

The executives of the Toyota Company belong to this class of employees. The staffs in this class include the chief executive officers in-charge of different branches of the Toyota Company. The members of senior management are the policy and decision makers. They represent various aspects of the company and are thus highly compensated.

MONETARY COMPENSATION Amount

Salary $97,000.00

Commission $7,893.00

Bonus $3,000.00

Annual salary for 2014 $102,000.00

Total $209,893.00

Benefits Plan E. Contribution C. Contribution

Medical Insurance Kaiser Hmo $4,765.90 $1,398.00

Life Insurance Cigna $65.00 $317.10

Retirement plan $1,657.00 $992.00

Vision Insurance VSP $433.09 $63.86

Dental Insurance Delta Dental $1,301.00 $413.00

Short-term disability Cigna $85.00 $261.55

Long-term disability Cigna $47.00 $217.00

Unemployment Insurance $0.00 $70.00

Employee assistance (EAP) $0.00 $57.00

Total $8,353.99 $3,789.51

BENEFITS PACKAGE

Senior management staff are always busy and on trips around the globe, trying to do deals for the company. For this reason, they are often given much more compensation than the other two lower categories of employment.

PTO 30 days $47,890.00

Holidays 30 days $3,300.70

Total: $51,190.70

In conclusion, Toyota could have never become the successful multinational it now is, if it didn't adequately compensate its employees to carry out various aspects of production. All employees are important to the performance of the company. Moreover, the value of compensation in helping employees ought to be considered by all employers, regardless of the sector of the economy they are in.