Compensation Plan Outline Essay

Excerpt from Essay :

Compensation Plan Outline

Ford Motor Company is the largest manufacturer of heavy commercial vehicles and second largest producer of automobiles in the world. Their range of vehicles comprises 70 different types that include Jaguar, Lincoln, Volvo, Mercury, Aston Martin, and Ford with presence in over 30 countries worldwide. Ford employs over 300,000 employees across the globe. In the United States itself, Ford has an employee strength nearing 100,000 employees and sales exceeding three million units (Joesph, 2003).

Compensation Plan of Ford Motor Company

Association with Ford Motor Company is a fulfilling experience for the workforce. The company offers motivation for exemplary work ethics, opportunities for individual and collective growth that translates into challenges to be met and overcome. The vast range of vehicles produced in the company provides the stimulus for development of the personnel at all levels, as does the cultural and regional diversity of the workforce itself. Ford takes pride in empowering its employees by incorporating pay -for-performance policy. It has a consistent sustainable compensation policy that acts as recognition of the meritorious inputs that the staff puts in. The contributions made by the personnel to achieve our company's motto of customer satisfaction, quality and efficiency, growth and teamwork are the benchmark that qualifies for recognition and incentives. We strive to meet the industry standards and set the benchmarks for best pay compensation strategies. We lay emphasis on the fact that the workers are the backbone of our company and need to be accorded the best treatment to help attain company goals and aims. (Ford Motor Company, 2011).

Ford recognizes the fact that sound payment practices (enumerated as under) are crucial to overall development and administration towards smooth functioning.

An unbiased, expert advisor to Compensation Committee;

A substantial, meaningful stake for the executives in the company holding and •

A well designed and thought out policy of surrender of an undeserved benefit received by the executive if and when such occurrences manifest (Ford Motor Company, 2014).

A vigilant appraisal of the industry standards is carried out continuously by studying the trends in business and its anticipation of emerging situation, the levels of expertise available and the relevance to the goals and objectives of Ford. The main aim of these perspectives is to align:

-Monthly Salary & Perks

-Rewards and bonuses

- Long-Term packages and additional benefits (Ford Motor Company, 2014)

The compensation plan philosophy of company covers the following:

Employee Evaluations

Ford has set into its work ethos feedback mechanisms that measures performance by:

measuring the accomplishments of employee bi-annually against the objectives and goals set for him an year-end measurement of performance, proficiency, and training and counseling on the evolution in performing task assigned (Ford Motor Company, 2011).

Merit Program

The parameters of meritorious performance is evaluated against peer standards, pay package availed, and intra-departmental proficiencies. The compensation for meritorious recognition is made by allocating basic pay percentage points. The pay for merit is based on the prevailing financial situation of the company and is reviewed on an yearly basis. (Ford Motor Company, 2011).

Annual Incentive Compensation Plan (AICP)

All the employees are entitled to avail the benefits of the Annual Incentive Compensation Plan (AICP). AICP endowments are based on global and regional standards and parameters calculated by the Compensation Committee. The annual incentive endowments are appropriated for the number of months of Company employment during the year hired (Ford Motor Company, 2011).

Base Salary

Base salary is fortnightly or monthly pay actuated competitively and due recognition accorded to achievements and conformance, expectations from the employee and responsibility, and designation in the department. The parameters of basic wage are skill-set, experience, and prevailing industry standards and norms (Ford Motor Company, 2011).

The Compensation Committee considers the following factors when a wage rise is to be implemented:

• The personnel's work profile, achievements, and conformance;

• Equivalent responsibility status within the Company (maintaining balance of status);

• Duration in the job, duration since last rise in pay, importance of the measure for retention and importance of critical skills that the employee brings to the company; and • Industry standards for the group under consideration. (Ford Motor Company, 2014).


Employees need to allow at least a couple of weeks' time after hire/rehire to receive their first pay. Employees are generally paid on a "current" basis (Ford Motor Company, 2011).

Beneficial ratio of internally consistent and market consistent compensations systems

Two major factors that influence the compensation policy are internal balance and compliance and the prevailing industry standards. Each company has to design its pay structures to avoid conflicts arising out of imbalances between both these considerations. A sustainable payment structure demands an equitable appreciation of the prevalent industry norms as well as intra-departmental parity (within the company) with due regards to skills, position, responsibilities, and contribution. That also calls for a proper measurement program that assesses all such parameters. In addition to above concerns, the company has to evaluate critically the impact of each job and job family exclusively with respect to its position and aims and objectives. Internal equity goes a long way to achieve its expectations of the industry standards. (Romanoff, Boehm & Benson, 1986).

The pay package that a company designs should display its intent of equitable dispensation in its activities. It is important for a company to incorporate both external considerations as well-formed, quantifiable, robust methodologies to assess internal functions, expectations, and criticality while formulating its compensation structure. A sound compensation base makes it easier to evaluate it and revise whenever revisions are required in future. A well-established balanced method thus devised ensures status in the industry and is conducive to job satisfaction among employees. (Romanoff, Boehm & Benson, 1986).

Few Recommendations

In spite of its lofty statements of goals and objectives, Ford earned a bad name over the decades of engendering a rather detrimental corporate culture. There is a prevalence of minimal Communication between different echelons of the company executive. There prevails a sense of negative competition and rivalry rather than cooperation and bonhomie required of teamwork in any organization. Call to attention to the problems at workplace and business in general is discouraged as a norm. The complacency that had set in because of its exalted status as a result of its undisputed status as industry leader caused it to earning it a reputation it could ill-afford. A positive overhaul is urgently needed from ground up. (Daniels Fund Ethics Initiative, 2014).

Employer-sponsored retirement plans and health insurance programs

Ford appreciates the importance of a loyal and devoted workforce that it employs. It has invested in a slew of employee benefit programs to keep the employees motivated and improve their general well-being and quality of life. As an example, Ford has initiated a Sustainable Workforce Initiative to improve employee quality of life, performance, and throughput. The Sustainable Workforce Initiative is founded on four basic premises: strategic recruitment, education and training, security and safety, and well-being (Daniels Fund Ethics Initiative, 2014).

Ford advocates a strong pursuance of the doctrine of equal respect for diverse cultures, religions, ethnicity and education. Ford Motor crafted an employee initiative called Ford Interfaith Network to encourage employees appreciate and respect different faiths and religious following. Ford holds a National Day of Prayer annually at its Ford World Headquarters and welcomes employees of diverse religions, ethnicities and races to share a common platform and space. Ford GLOBE has been created with an aim to ensure a safe, secure and supportive work environment for gay, lesbian, bisexual, and transgendered employees (Daniels Fund Ethics Initiative, 2014).

Ford Retirement Plan (FRP)

The FRP is a tax qualified profit sharing plan. The Company is the only contributor in the FRP. Contributions will equal two percent- five and a half percent of the basic pay of the employee on a monthly basis. The company makes the Initial contributions in the FRP's default investment option (a target-date fund taking into account the age of the employee, and presuming that withdrawals by employees will begin at 65 years of age). Employees are at liberty to reallocate future Company contributions to, and realign status with any of the investment options prevailing under the plan at any time, subject to conditions and strictures of the investment options (Ford Motor Company, 2011).

Health insurance programs by company

Health Reimbursement Arrangement (HRA) Plan (Post-Retirement)

This initiative of the Ford Motor Company has been formulated in keeping in line with its objective of maintaining employee consideration even after the employee has left the organization - by way of retirement or simply resigning for whatever reason. The company adds the ex-employee can accrue interests and the total. The norms for such benefits are based on criterion of age and duration of service. Eligible participants are entitled to the sum of credits they earn and the interests added by the company on the base credits. The employees can avail the HRA benefits by submitting claim documents in prescribed form and take care of healthcare and medical expenses for themselves and their family members and…

Sources Used in Document:


Daniels Fund Ethics Initiative (2014).Ford Motor Company Manages Ethics and Social Responsibility. Retrieved from

Ford Motor Company (2014). Notice of 2014 Annual Meeting of Shareholders and Proxy Statement. Retrieved from

Ford Motor Company (2011). Summary of Compensation and Benefits for Ford Motor Company. Retrieved from

Joseph, B.S. (2003). Corporate ergonomics program at Ford Motor Company, Applied Ergonomics, 34, 23-28. Retrieved from

Cite This Essay:

"Compensation Plan Outline" (2014, November 17) Retrieved August 18, 2019, from

"Compensation Plan Outline" 17 November 2014. Web.18 August. 2019. <>

"Compensation Plan Outline", 17 November 2014, Accessed.18 August. 2019,