Term Paper on "Compensation and or Benefit Program Challenges"

Term Paper 5 pages (1766 words) Sources: 5

[EXCERPT] . . . .

Compensation Program Challenges

Over the last several years, the issue of employee compensation has been increasingly brought to the forefront. Part of the reason for this is because a shift is occurring, as the total number of low paying jobs is increasing for unskilled workers. While at the same time, the best positions that pay good benefits are steadily declining. Evidence of this can be seen by looking no further than the statistics that were compiled by the Bureau of Labor Statistics (BLS). They found that since 1983, the total number of union jobs has been declining by 20.1%. The reason why, is because union positions have higher hourly wages and other benefits. Furthermore, the BLS also determined that the gap between union and non-unionized positions are large. As union workers, are paid an average of $20.65 per hour; in comparison with non-unionized employees that earn $16.42. This is significant, because it is showing how there is a major gap inside the labor force. (Longely, 2011)

In the case of Family Dollar Stores, many of their former employees have alleged that they are engaging in practices that are in direct violation of the Fair Labor Standards Act. This requires all employers to compensate their workers for any time above 8 hours per day and 40 per week. However, there are exemptions to various provisions of the law. One of the most notable is that if employees are classified as managers, then their compensation packages are seen as a paid salary vs. wages. Under the law, this means that this particular individual does not qualify as an employee and is not protected by the Fair Labor Standards Act. In the case of Family Dollar, they are using this provision to go around the law by making the majority of store employees' managers. Once this occurs, they can begin having everyone work 60 to 80 hours per week, without having to worry about being in compliance with the Fair Labor Standards Act. This is significant, because it is showing how the company is side stepping the law when dealing with labor issues. To fully understand how this is occurring requires looking at: their compensation package, strategies, possible recommendations, the way changes can be implemented / challenges that will take place and examining how this approach will deal with the company's labor issues. This is the point that we will be able to see the current challenges facing Family Dollar and how they can effectively deal with these kinds of situations in the future. (Patterson, 2010)

The Compensation Package at Family Dollar

Family Dollar has a number of benefits for their employees. A few of the most notable include: a 401K, medical / dental plan, flexible scheduling and an employee stock purchase plan. Yet, at the same time their hourly labor costs are right at minimum wage. This is challenging, because the compensation package does not provide enough benefits to make a difference in the lives of their employees. The reason why, is because it only address select elements that are not as important to staff members. While failing to tackle the major issues that they are concerned about (i.e. monetary compensation). This means that there are high amounts of turnover at these locations. ("Team Member Benefits," 2011)

The Strategies that are used by Family Dollar

The basic strategy that is used by Family Dollar is to have everyone start out working as an employee. During this process, their hours are kept within the scope of the Fair Labor Standards Act. Those who remain with the company for a while are then promoted to the position of manager. They are given a base salary of about $550 per week and their hours increase. Inside the various store locations, the company has a tendency to promote employees to this position as a part of an effort to reduce their costs and increase productivity. What makes this approach so effective is that the company can find trained employees, who will work more and they are receiving the same benefits as someone that is paid minimum wage. The only difference is that Family Dollar was able to legally go around the various provisions of the law. (Patterson, 2010)

Recommended Strategies to Address these Issues

To address these issues, the company needs to change their policies in how they are determining who is a designated employee. Part of the reason for this, is because the current approach could lead to possible class action law suits against Family Dollar for sidestepping these legal standards. At the same time, it could increase the amounts of regulatory scrutiny they are under (based upon the current policies). (Edwards, 1999, pp. 24- 117)

To avoid these kinds of issues, the company needs to have a tiered pay structure. This is when employees and executives will follow a select process for promotions and raises. What would happen is each person, will be able to make more money and will have greater amounts of responsibility based upon how long they have worked with firm. In some cases employees will be paid by predetermined hourly wages. While at other times, they will receive a salary (depending upon where they are at in the structure). If this kind of approach can be taken, it will ensure that the company is able to maintain high levels of profitability. At the same time, it is making certain that they do not have kind of litigation or legal issues from regulators surrounding employees and executive compensation. (Edwards, 1999, pp. 24- 117)

How Changes can be Implemented and Possible Challenges

The best way that changes can be implemented is to first conduct an anonymous survey of employees and see their views about the proposed compensation system. The basic idea is to determine if this is something that they would support. This will help executives to decide if the strategy will be effective over the long-term. Once this takes place, the company can begin designing an approach that will take into account the viewpoints of employees. (Edwards, 1999, pp. 24- 117)

Next, the company must be able seek out employees and managers who share similar views about the changes that are being proposed. This is because there could be resistance to the new program. To prevent this from happening, we will have key allies in different areas of the company letting everyone know how this is better. This will reduce any kind of reluctance of implementing the new procedures. (Edwards, 1999, pp. 24- 117)

Once the new policies have been implemented, is when you would have a series of follow up exercises to determine if the new process is effective. The way that this would be accomplished is through conducting a series of different anonymous surveys. As, you want to see what are the underlying views about the new program. This would help executives to understand the challenges that they are facing and how to quickly adjust with various issues. (Edwards, 1999, pp. 24- 117)

How this Approach will Deal with Family Dollar's Labor Problems?

The way that this approach will deal with Family Dollar's labor issues is to change the focus of management. What has been happening is that executives have been concentrating on increasing the overall profit margins of the firm in order to compete with Wal Mart. During the recent recession, the competition for unskilled labor has grown dramatically (thanks in part to the unemployment rate remaining above 9.0%). For Family Dollar, this has meant that they have ability now to purchase low cost items for their stores and they can maximize their productivity by: essentially placing more expensive employees on a salary. Once this occurs, is when they can demand more of them by claiming that they are a manager. Yet in reality, this person is doing the same job as an hourly employee. The only difference is that they have worked there longer and they have more seniority. These elements allow the firm to argue that these are low level managers who are on a salary. This is when they can begin asking more from these individuals and paying less. Over the course of time, this can lead to possible regulatory problems and litigation against the company.

The approach that we are taking will avoid these kinds of issues by focusing on the root causes of the problem and specifically addressing them. This will be accomplished by understanding what issues are most important to staff members and then specifically addressing them in the new program. While this is taking place, alliances are formed with key staff members and executives who could help to promote change along with acceptance of this policy. This would ensure that there is a balanced approach used by: slowly phasing in employees to higher designations and making certain they are receiving fair compensation.

The way that this will impact the organization is to force them to pay attention to the needs of employees. This means that managers will have to look at… READ MORE

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