RECOGNIZING PERFORMANCE
TEAM NAME
HRM/531
INTRO/SUMMARY
• Local Manufacturing Company
• Third largest in area
• 1,200 Employees
• Average Compa Ratio: .90
• Goals: increase compensation spending 4% annually for three years.
INTRO/SUMMARY
• Approaches to Consider
• Increase Base Pay
• Incentive Plans
• Combination plans of Increase base pay and incentive plans
IDEA 1:
INCREASING BASE PAY
INCREASING BASE PAY
• Option 1: Average all salaries times 4% to get amount to increase everyone's
salaries for year one and do that by year for three years.
• Ex. Average Salary x .04 = amount to raise for next year
year 1: $25,000 x .04 = $1000 increase
year 2: $26,000 x .04 = $1040 increase
year 3: $27,040 x .04 = $1,081.60 increase
INCREASING BASE PAY
• Option 2: Increase every employee salary by a certain amount based on
tenure.
• Ex: 1yr. = $400 raise
2yr. = $500 raise
3yr. = $600 raise
INCREASING BASE PAY
• Pros: option 1
• Everyone gets raise of same amount.
• Pros: option 2
• Time based raise to get to 4%
• Cons: option 1
• Employee value for time spent
• Cons: option 2
• Value felt by some employees might be
lower after raises.
TEAM INCENTIVE PLAN
• Variable Compensation Plan
• Includes both Personal and Team Objectives.
• Encourages the team to work together and support each other.
• Goals are achieved more effectively.
• Pay is determined by the completion of both personal and team objectives.
EXAMPLE OF A VARIABLE COMPENSATION PLAN
PERSONAL AND TEAM OBJECTIVES
COMBINATION OF BASED PAY INCREASE
AND INCENTIVE PLAN
• An annual increase of 2% in base pay - 2020 - 2022.
• •An annual increase of 2% in incentive plan - 2020 - 2022.
• Reduces turnover rates.
• Increases living standard of employees.
• Improves motivation and productivity.
REFERENCES
• Carter, Dr. S. (2019, September 12). https://www.forbes.com/sites/forbesbooksauthors/2019/09/12/the-impact-of-wages-onemployeeproductivity/#7609e85f60cf. Forbes,
Retrieved from https://www.forbes.com/sites/forbesbooksauthors/2019/09/12/the-impact-of-wages-on-employeeproductivity/#7609e85f60cf
• George Boué, S.-S. a. (2019). Does Incentive Pay Work? Retrieved from SHRM: https://www.shrm.org/hr-today/news/hrmagazine/summer2019/pages/does-incentive-pay-work.aspx
• Simple Metrics: How to Use Compa-Ratios to Guide Compensation Decisions. (n.d.). Retrieved February 14, 2020, from
https://www.cupahr.org/blog/simple-metrics-how-to-use-compa-ratios-to-guide-compensation-decisions/