Term Paper on "Art Hallen Corporation Compensation Management Program"

Term Paper 7 pages (2111 words) Sources: 3 Style: APA

[EXCERPT] . . . .

Art

Hallen Corporation Compensation Management Program

Compensation Management

To understand compensation management one must first understand what the term compensation refers to, and then decide how to "manage" it. Compensation is largely considered any "reward or payment for services performed" typically offered to employees of a company (Caruth & Handlogten, 2001). Compensation is not limited to financial incentives and direct incentives; rather, compensation may include wages, bonuses, insurance or other "monetary benefits" that the employer provides to the incumbents of a facility (Caruth & Handlogten, 2001). Compensation in a more defined sense is "total reward package offered by an organization to its employees" (Caruth & Handlogten, 2001:2). This paper will provide an overview of the compensation management program for Hallen Corporation, which employees 50 people, followed by a legal analysis of how the compensation program will be implemented. The compensation strategy inclusive of benefits and other indirect compensation is discussed below.

Hallen company's compensation program is designed to match corporate strategy. Corporate strategy includes (1) attracting qualified and skilled workers to fill vacant positions within the company (2) retaining the employees the company has hired to help reduce turnover and (3) motivate employees so they perform to the best of their abilities (Caruth & Handlogten, 2001:3). Compensation includes wages and all commission-based pay, regardless of whether an employee is paid by the hour or annually. Indirect payments in the form of benefits are also provided to employees. These benefits include health insurance, life insurance and short-term disability insurance coupled by optional benefits which will include an employee EPA program that will provide employees with counseling protection, free parking to employees because the company is located in a dense area with little parking available and "employer-subsidized cafeteria" since the company is a manufacturing plant and employees work around the clock to keep the organization up and running.

The company will also consider what types of compensation encourage or motivate the employee to work with the company Often employees will seek out a company that allows them to perform "meaningful work" and enjoy "social interactions with others" (Caruth & Handlogten, 2001:4). Employees will also benefit by on-the-job training and "advancement opportunities" in house to encourage and motivate employees to work with the company and remain employed by the company (Caruth & Handgloten, 2001:4). These benefits are more "psychological" in nature because they appeal to the employee from a motivational vantage Employee satisfaction often comes from indirect compensation that may include recognition for work well done or innovative practices brought into the company.

The compensation program includes a written document to formalize the compensation system because this type of system is more likely to attract incumbents with highly valued skills, so they will apply for positions in the company. To enhance retention, it is critical the company offers "equitable pay and a sound benefits program and a psychologically supportive organizational climate" (Caruth & Handlogten, 2001: 4). All of these components work synergistically to help retain employee motivation and dedication. The company decided on a formal compensation program not just to recruit employees, but also to maintain control of costs associated with the hiring, training, payment and firing processes. A formal program also decreases the odds of violating the Equal Pay Act and Title VII of the Civil Rights Act of 1964 (Caruth & Handlogten, 2001). All jobs are "equally compensated" among employees with similar skills and experience to help reduce discrimination or inequalities in pay the company may not be aware of Caruth & Handlogten, 2001). The company will ensure internal and external equity, meaning employee will follow a hierarchical pay system where employees with the most skill and experience are paid the most, and where the internal pay system provides funds that match the external competitive work environment.

Employees will also be subject to pay that is performance related. This means employees may have the same skill set, but the employee that provides the company with outstanding performance daily is more likely to receive pay incentives including corporate bonuses at Hallen Corporation than an employee that performs "average" on any given day (Martin, Bartol & Kehoe, 2000). To ascertain which employees are going "above and beyond" the call of duty, Hallen Corporation will take advantage of a bi-annual performance evaluation system. This performance pay system will rank employees by assigning all employees a percentage of points for the work they have done and for any individual accomplishments, including progress toward the employee's goals or the company strategic goals (Martin, Bartol & Kehoe, 2000). If deficits in skills are noted during a performance review, the employee will have an opportunity to participate in training or engage in some other activity including mentoring that will help bolster their performance so they have a chance to receive a much higher appraisal at the end of the year and subsequently receive a bonus. This bonus may be lesser than those awarded to employees for outstanding contribution to Hallen Corporate strategy throughout the year (Martin, Bartol & Kehoe, 2000). Nonetheless, Hallen Corporation believes that all employees should have an opportunity to maximize their pay whenever possible.

Legality of Compensation Management

Legally there are benefits a company must offer employees and benefits that are discretionary, meaning the company does not have to award employees these benefits but it may do so if it desires. Many laws govern compensation management. For example, the "Davis-Bacon Act" of 1931 allows a minimum wage to be set that employers must pay to employees that work on government contracts (Caruth & Handlogten, 2001: 21). The Social Security Act of 1935 (amended) provides for unemployment compensation insurance to employees; employers and employees must "share the cost of old age, survivors and disability insurance" which all fall under the category of "Social Security" (Caruth & Handlogten, 2001:22). The Wagner Act of 1935 allows employees to form "unions" and requires that "employers recognize unions of employees and bargain with them in good faith" when debating wages, work hours or other terms related to employment (Caruth & Handlogten, 2001; Martin, Bartol & Kehoe, 2000).

The FLSA or the "Fair Labor Standards Act" which is sometimes called the "wage and hour" act establishes minimum wages for private sector employees (Caruth & Handlogten, 2001). This act also established the traditional 40-hour work week, meaning employers have to pay extra or 1.5 times their normal rate of pay if they work 40 or more hours total in a week. The work "week" is a recurring period of time that lasts 168 hours or "seven consecutive twenty four hour periods" (Caruth & Handlogten, 2001: 24).

Still other laws include the equal pay act of 1963, which ensures employers do not discriminate against employees on the basis of sex, race or other qualities. It does state that differences in pay between sexes can be allowed if based on merit or seniority-based systems. Title VII of the Civil Rights Act of 1964 (amended) states that employers engaged in interstate commerce like Hallen Corporation, and those that have more than 15 employees (like Hallen Corporation) that work every day during the calendar year described as a normal working day, must not discriminate based on race, color, sex, religion or national origin when hiring, firing compensating or promoting employees (Caruth & Handlogten, 2001: 24). Hallen Corporation does not have any "BFOQ" positions or "bona fide occupational qualifications" that would allow Hallen Corporation the right to discriminate for a legitimate reason (like needing a female attendant to work in a restroom for women (Caruth & Handlotgen, 2001). Yet another important law is the "Age Discrimination in Employment Act ADEA of 1967) which prevents employers from discriminating against employees that are older than 40 for positions they are eligible for skill-wise (Caruth & Handlogten, 2001). The law also prevents an employer like Hallen Corporation from requiring "mandatory retirement" for employees after the age of 70 (Caruth & Handlotgen, 2001).

Hallen Corporation is also subject to the "Health Maintenance Organization Act or HMO Act of 1973 because it employs over 25 people. This act requires employers to offer the option of HMO membership in "lieu of medical insurance coverage" if the HMO "exists within a 25-mile radius" of the employment area. Hallen has the option of offering a pension plan. If it does offer a pension plan (which it plans to) then the company must follow the standards established by ERISA, which provides employers like Hallen with guidelines for regulating employee retiring plans. In a nutshell, Erisa maintains that all employees over age 21 that have completed one year of consecutive employment must be protected by the retirement plan. The act also regulates vesting, when an employee is eligible to take all monies invested personally and by the company in the retirement plan. This occurs after five years of service, although employees are 20% vested after two years and 20% more for each year after (Caruth & Handlotgen, 2001).

There are also legal requirements that will govern other areas of benefits including COBRA (White & Druker, 2000). The… READ MORE

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