Designing a Competitive Compensation and Benefits Plan

Fishers is a mid-sized manufacturing company seeking to maintain market leadership through the development and implementation of a compensation plan that meets the needs of owners, clients, and employees. Compensation programs are critical to organizational effectiveness because they play a fundamental role in employee motivation, satisfaction, and productivity. The company seeks to achieve two crucial objectives from this plan: (i) to reduce turnover, which has been an imminent problem over the last couple of years, and (ii) to attract new talent while retaining and improving the existing workforce.

The company is at a critical juncture. It can no longer offer the perks of a small entrepreneurial enterprise since it has exceeded the employee threshold for such categorization. Employees have been complaining about what they perceive as below-market compensation, and noticeably, their morale appears to be diminishing. Sales have been on a consistent downward trend since the beginning of the year, and with the employee turnover rate hitting double digits for the first time since the company's inception, it is becoming evident that an upgrade to a corporate-scale benefit plan is necessary. Through its mission statement, the company has committed itself to satisfying employee and consumer needs. It understands that satisfied employees will be crucial to the actualization of this and other corporate goals.

One of the primary objectives of this compensation plan is to attract new employees while retaining existing ones. The company intends to achieve this by staying ahead of competitors for talent. Cappelli (2012) notes that companies are finding it increasingly difficult to fill skilled job positions due to a lack of qualified applicants. To avoid such a scenario and remain competitive, a clear understanding of compensation and benefit programs common to the industry is required. The company does not intend to make changes to basic pay structures; instead, it seeks to achieve its objectives by upgrading benefit packages to reflect its new corporate scale.

Some of the most significant employee benefits offered by comparable firms include:

Paid Time Off: An array of options exists for paid time off work. Bereavement or funeral leave, paid personal days, and paid sick days are common forms. Such breaks are aimed at allowing employees to unwind and respond to non-work issues (Beam & McFadden, 2012).

Health Insurance: Employee assistance counseling service programs (EAP), disability coverage, prescription drug plans, vision and dental insurance, and medical coverage are standard options. Health insurance is considered the most important employee benefit (Beam & McFadden, 2012).

Retirement Plans: Pension, 403(b), and 401(k) retirement plans serve as vehicles for investment, allowing employees to defer taxes and save a proportion of their incomes for the future. Most employers match 25 cents to every dollar that an employee contributes to retirement (Beam & McFadden, 2012).

Finance-Safeguarding Insurance: Long-term care insurance, long-term disability insurance, and short-term disability insurance are common benefits that provide financial cushioning in case of emergency (Beam & McFadden, 2012).

Training: Employee training benefits both employers and employees. It improves employees' on-the-job skills, increasing their earning potential and job worth. Employers benefit from improved output quality, employee retention, and increased corporate performance (Beam & McFadden, 2012).

Lifestyle Benefits: These benefits are offered to relieve employee stress and ensure they remain happy and contented (Beam & McFadden, 2012).

In addition to core benefits such as disability and health coverage, employees require voluntary benefits (Cappelli, 2012). Employers can provide benefits that are most meaningful to employees based on their life-stage needs (Cappelli, 2012). Employees from the Baby Boomer generation value benefits such as long-term care and critical illness coverage and prefer dental and health benefits that are comprehensive and provide predictability and stability (Cappelli, 2012). However, this generation is retiring, and the Millennial generation—who consider benefits such as pet insurance, movie tickets, apparel discounts, computer discounts, mortgage refinancing, and fitness programs more important than high-cost health plans—are quickly dominating the workforce (Cappelli, 2012). Employers must recognize these generational differences and provide employees with meaningful choices if they are to create a satisfied workforce.

Recognizing that benefits satisfying Baby Boomer employees may not have the same effect on Millennials, the company will offer a flexible benefit and retirement plan that gives employees discretion to elect or forego various health and welfare components. Table 1 outlines the proposed total compensation structure, while Table 2 shows the breakdown of health and welfare benefits.

Proposed Compensation Structure

Table 1: Proposed Total Compensation Components

Table 2: The Breakdown of the Health and Welfare Benefits Component

Healthcare (Employee Elects Preferred Choices)

• Medical
• Dental
• Vision