Creating a Compensation Philosophy

For an organization to implement an effective compensation and benefits policy, it is helpful to look at both the needs of the company and the individual, from both a practical and ethical perspective. Within this context is the legal and regulatory framework that guides the standards of HR policy.

Through this assessment, you will get an opportunity to establish the groundwork for studying compensation and benefits policy development. You will review labor laws that were referenced in your other human resource courses, and you will take a more focused look at the laws more relevant to wages and benefits. You will also look at the basic elements of any pay system.

Consider the ethical issues that influence compensation policy and how they may or may not harmonize with personal, corporate, and societal values. Also, think about the fundamental relationship an individual has with a company and how the contract for work and reward may represent a deeper contract between the employee, the employer, and the society in which the business is conducted.

Imagine you are the HR manager for a new company just opening its doors in your community. The CEO has asked you to prepare the initial guiding principles you will use to define the company’s compensation philosophy regarding how the company compensates its employees.

Complete the following:

  • Describe the type of business, the number and types of employees (exempt and non-exempt), and the customer base you will use as your example company for this assessment, as well as the state and city or area of the state where your company is located.
  • Describe the factors will be used to determine salary decisions (for example, appropriate qualifications, contributions, performance, and budget considerations).
    • Discuss where the company wants to fit regarding compensation in the industry and related market. Bottom quartile? Industry average? Top quartile?
    • Discuss whether the company will reward top performers with incentive pay.
  • Discuss the role benefits (health, 401(k), et cetera) will play in the overall compensation package. Does the company want the benefits plan to be below market, at market, or above market? Why?
  • Describe how other existing businesses in your community affect the guiding principles for your compensation guidelines. You can reference the “Overview of BLS Wage Data by Area and Occupation” from the Bureau of Labor Statistics to help you research information for your response.

Additional Requirements

Your assessment should also meet the following requirements:

  • Written communication: Written communication is free of errors that detract from the overall message.
  • Formatting: One-inch margins, appropriate headers, and a title page.
  • Length: 1–2 double-spaced pages.
  • Font and font size: Times New Roman, 12 point.

Important: You will use this same company as the focus for the upcoming assessments in this course as well.

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