Question

Explanation of the principle components of your revised compensation and benefit system for a large-scale organization as well as a recommendation for each component.

Answer 1

The principle components of your revised compensation and benefit system for a large scale organization are:

- Compensation philosophy- This is a document which provides a formal statement about the position of the employee and its relative compensation. I strongly recommend the statements to be straight forward and have clarity rather than vague statements.

- Pay structure architecture- The pay structure and architecture provides the maximum and minimum pay level for the job positions. It also provides the pay ranges and the pay grades (Band A, Band C, etc). Recommendation- There should be a clear line of difference between the different pay grades to differentiate the different levels.

- Base pay and Incentive pay Ratio- The bonus or incentive pay in comparison to the base pay need to be provided is one of the components of the compensation and benefits system. Recommendation- The base pay is usually very less and the incentives are variable as per the job requirement. I recommend that there should be a balance between base pay and incentives to allow the employees to earn for their efforts.

- Fairness or equivalence on internal or external equity- The compensation and benefit system should stress on the importance of the fairness the internal equity (compensation compared to others within the organization) and external equity (in par with market standards).

- Benefits- The compensation and benefits system should include different types of benefits such as health insurance, paid vacation, sick leave allowance, etc. Recommendations – Benefits help to retain employees hence companies should not hesitate to provide benefits to motivate them for its success.