Compensation and Benefit Plans
Agenda/Overview
 This week’s Seminar is about what constitutes an adequate compensation









and benefit plan.
During the discussion, consider compensation and benefits that you have
received from your employer.
Enhanced Audio Seminar Format
Compensation
Benefits and Incentives
Cost Control
Motivation
Executive Compensation
Abuse and Legislation
Questions
Compensation
 Strategic Compensation
 Pay for Performance Standard
 Incentive Pay
 Skill-Based Pay
 Expectancy Theory
Compensation Plans:
 Pay-for-Performance
 Managers tie pay to effort and performance
 Link pay to performance to maximize productivity
 Studies prove out increased output
 Incentive Plans
 Focus on specific performance targets
 Compensation is directly related to Operating Performance
 Rewards and attracts top performers
 Most systems are viewed as fair by employees
 Sales Professionals
 Salary, Commission, or Combo
 Group Incentives
 Team, Gainsharing, Profit Sharing
 Skill-Based Plans
 Link to strategy, organizational values, motivation and reward
 Common in Manufacturing
 Benefits include increased productivity, a willingness to learn, and, flexible
scheduling
 Expectancy Theory
 Predicts motivation to rewards
Incentives
 Professional Employees
 Profit Sharing, Stock Ownership, Hiring bonus
 Sales Professionals

Salary, Commission, Combo
 Group Incentive Plans
 Team Compensation
 Gainsharing
 Merit Pay
 Hourly Pay
 Means to reduce managerial levels


Align compensation plans with organizational strategies
Reward systems
Compensation Strategies
Factors Affecting the Wage Mix:
Internal Factors
Employer’s Strategy
Employee’s relative worth: Ability and Capability
Employer’s ability to pay: Public, Private, Government
External Factors
Conditions of Labor Market: Recession, Economic Growth
Area wage rates
Cost of living
Union Environment: Collective Bargaining
Legal requirement: Federal Minimum wages Law
Wage and Salary Surveys: Department of Labor
Job Evaluation Techniques
 Job Ranking System
 Job Classification System
 Point System
 Work Valuation System
Benefits
 Why Organizations offer Benefits
•
•
•
•
To attract and hold capable people.
To keep up with competition.
To foster good morale.
To keep employment channels open by providing opportunities for advancement and
promotion as older workers retire.
 Common Benefits








Medical health Insurance
Life Insurance and Short term disability insurance
Disability insurance
Vision and Dental
401K
Vacation and float day
Nurse Hotline
Other Compensation and Benefits
Assistant Program
 Employee
 Membership Benefits

Tuition reimbursement
Cost Control
 Healthcare costs are a threat to many organizations
 Employees pay more out of pocket
 New Law: Every employer has to provide health insurance?
 Compensation Issues
 The issue of Equal Pay for Comparable Worth
 What is Comparable Worth?
 The issue of Wage-rate compression
 What is Wage-Rate Compression?
 The issue of Low Salary Budgets
 Pay raise freeze
 The impact of Globalization
Executive Compensation
 Executive: CEO, President, CFO, COO, Board of Director
 Base salary, cash bonus, pension, perks, stock options, profit





sharing
Health, vision, Dental, term life, life insurance, travel accidental
insurance, Short term disability
Paid spouse travel for meeting, Country club membership, Health
club membership, Airline club membership, Corporate jet,
Severance package
Gap between hourly and executive pay
CEO pay: 364 times (avg $10.8 mil)more than workers (2007)
525 times recorded in 2000 (2000)
http://money.cnn.com/2007/08/28/news/economy/ceo_pay_workers/index.htm
 Investors and public Feelings
Executive Abuse
 Bob Nardelli (Home Depot), Jack Welch (GE)
 Stockholders “Say-on-Pay”

http://dealbook.blogs.nytimes.com/2009/02/19/sec-commissioner-backs-say-on-pay/
 Outrageous Perks
Outrageous Perks
 Country Club Bill, including $200,000 initiation fee






(Countrywide Financial CFO)
Upgrade of $365,916 to TXU CEO’s Dallas home
$1,000,000 donation in the name of Lockheed Martin’s CEO
Robert Stevens
$894,014 cost to sell CFO Tom Horton’s New Jersey home (AMR)
$1,000,000 bonus to reward acquisition of Knight Ridder (CEO
Gary Pruitt)
$10,000,000 pay package for J.C. Penny CEO Catherine West
(who only lasted six months)
AIG: A $440,000 lavish getaway. Merrill Lynch: A million-dollar
office re-do for its former CEO just before the company got
government bailout money
Legislation and trends governing pay and
Perks
 Corporate Boards no longer “Rubber Stamp” recommendations of




managers following Enron
Investors are opposing compensation packages
New Federal mandates require large companies to disclose executive
pay (more straightforward)
Companies replacing traditional stock options with rewards linked to
specific targets
Securities and Exchange Commission (SEC) approved an overhaul of
executive pay disclosure

Http://crossbordergroup.typepad.com/say_on_pay_forum/

http://www.swamppolitics.com/news/politics/blog/2009/07/say_on_pay_house_says_yea.html
Early History of Legislation Enacted to
Regulate Compensation
 Davis-Bacon Act (1931)
 Walsh-Healy Act (1936)
 Fair Labor Standards Act (of 1938, as amended)
Questions
 What other questions do you have at this time?