This report reviews three different compensation strategies PepsiCo can develop and implement within all of our PepsiCo. Brands and businesses for our employees. Compensation is one of the most important and rewarding factors for our employees based on our organizational health survey conducted in 2011, so a thoughtful and thorough approach should be taken as we think about changing the way in which our companies reward our employees for the work they perform on a daily basis. Salary and hourly compensations are easy and constant ways of paying the employees of our companies. Salary and hourly compensation can be a set wages employees will earn based on their job description. This wage will not change based on seniority or merit. The stability of this type of compensation system is appealing to employees as they are aware of how much income they will receive on a regular basis.
Hourly based pay has very little room for opportunity of growth for the employees. Commission/productivity based pay also known as performance based pay is a relatively common and popular approach to compensation where the employee is paid by the employer based on their job performance; this inspires them to do their best work on a daily basis and gives the employees control of how much they make to maximize their own income. With quality performance and high productivity, employers are able to increase profit and become more competitive. Longevity Pay is the last recommendation of compensation we as a company can consider for our employees. Longevity Pay is compensation based on the employee’s length of service, seniority, or tenure. This compensation can be in the form of monthly amounts added to their checks, or annual bonuses on their employment anniversary date. This provides motivation to the employees to continue their employment and career with the company.
As a member of the human resources department in a PepsiCo. Manufacturing facility with 120 employees, I have been asked to evaluate different compensation strategies that are available for adoption within the PepsiCo. Organization. I have compared and contrasted three compensation strategies and determined recommendations for how they may be implemented within our organization.
I have selected three very different but potentially productive strategies I feel would best fit our business needs as well as the needs of our employees. The first is Salaried/Hourly compensation, second is Commission/Productivity based compensation, and last is Longevity compensations. All of these strategies have equal advantages and disadvantages and are based on the position for which the employee applies. In conclusion I have listed my recommendations for implementing each strategy. Possible Compensation Strategies
a. Salaried/Hourly Compensation
Summary: Well established pay ranges provide structure for employees to learn their positions in the organization and ensures pay increases are administered impartially. “Salaried/Hourly compensation helps the organization to stay competitive in the job market as well as attracting and retaining talent.” (Besedes, Tibor, Cary Deck, Sudipta Sarangi, and Mikhael Shor – 2012). Salaried: Most salaried employees like the stability that making a set amount of money offers. With the salaried approach companies are better able to predict their payroll expenses. The disadvantage of salaried employment is the hours work verses the hours paid. More often than not the salary worker puts in more hours than an hourly employee and still gets paid the base pay without overtime this is an advantage to the company but not the employee. Hourly: An advantage of hourly to the employee is that they get paid for overtime and have less responsibility than that of a salaried position. A disadvantage is that some people find some hourly jobs degrading and undesirable with few opportunities for bonus or advancement.
Analysis: Salaried employees generally make a large sum of money and have extra benefits such as, no time clock, better bonuses, guaranteed wages, opportunities for faster advancement, and breaks/lunches at will. Hourly employees do not have these advantages. A benefit of hourly wages is that you can reduce cost based on volume by changing the scheduling of the hourly staff based on business need. Hourly pay is pre-determined and can be different hourly amounts for straight time, overtime, or weekend and holiday pay based on if you are a union or non-union facility and based on the contracts you have with the hourly workforce. b. Commission/Productivity-Based Compensation
Summary: Commission based employment can appear to be a transparent reward structure based on success and is a common way to reward top performers. “Commission based pay can make the employee feels they are sharing in the organizations success which motivates the individual to maximize their success” (Clark, Robert, and Sylvester Schieber Fourth Quarter 2000). This compensation strategy allows employees to work hard and get further. The theory with harder work more pay will occur. The employee is paid based on how they perform or how much they sale. If they sale or make more the more they will be compensated. A disadvantage to this type of compensation to the employee is the uncertainty as to the amount of their paycheck and for the employer it can make it difficult for the company to predict payroll expenses. Analysis: Sales employees have a direct and measurable impact on the company’s bottom line profit, so pay structures for sales employees are
typically represented in the form of compensation rather than a fixed salary. Total compensation may consist of either commission only or base salary plus commission. c. Longevity Compensation
Summary: This type of strategy pays associates based on longevity with the company in an effort to create loyal associates and is a very appealing option for perspective associates. Employees can accumulate funds and increase their retirement/profit sharing throughout their employment with the option of tax free deductions. The longer the employee remains with the company the more these savings type accounts grow. “A disadvantage to the company would be that the company could suffer from this compensation method due to weakening economic times and higher life expectancy rates.” (Milkovich, G. T. 1987) Analysis: Longevity pay is based on years of service and rewards the employees based on this factor alone in the way of a pension plan or 401K. The amount of longevity compensation is calculated in the employee’s salary. Longevity payments are based solely upon time on the job therefore work performance has no bearing. Recommendations
1. Associates should start out with the company as salaried or hourly pre-determined hourly rate depending upon their job function and classification. Supervisors and Managers should be on salary based on the band level associated with the position in which they are hired. All employees should be offered pay increases after satisfactory 30, 60, 90 day performance evaluations are completed by their reporting supervisor or manager. The logic in this compensation method is that our payroll expenses will be pre-determined; as a company we will know how much of our company’s money we will be using for forecast and AOP planning purposes. 2. For our company to be successful financially we budget making a pre-determined profit every year for five years, we should begin by compensating our associates using productivity/commissioned based compensation. This compensation strategy will potentially help our company build more motivated and stronger associates, thus providing our company with more revenue. 3. Associates after ten years of service will still have the option to convert to longevity pay. This will be an option available to each associate. This recommendation will help our company build reinforce the values and mission that we truly and genuinely care about each of our associates and will help to build associate loyalty to our company.
In conclusion I feel it would benefit our business to use all three types of compensation strategies. It is of the upmost importance to incorporate all three types of compensation strategies in our business to appeal to the needs of individuals as a whole. Each strategy has advantages and disadvantages but ensuring the work force is diverse and well compensated will ensure our business future and we must appeal to potential employees to grow our business and market shareholder interest.
By offering Hourly, Salaried, and Longevity compensation strategies we appeal to a wider range of age demographics bridging the gap across generations and bringing new innovative ideas to already stable processes. Well established pay ranges provide structure for employees to learn their positions in the organization and ensures pay increases are administered impartially.
With the compensation strategy breakdown consisting of Salary and hourly compensations which are easy and constant ways of paying the employees of our companies; Commission/productivity based pay also known as performance based pay is a relatively common and popular approach to compensation where the employee is paid by the employer based on their job performance; and finally Longevity Pay, compensation based on the employee’s length of service, seniority, or tenure, the future of our company and the employees who make us a best place to work as well as the needs of the employees and our company are met and offer something for everyone. References
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