Reference no: EM132774777

Question: You have just finished reading an article in a personnel journal about compensation plans. The turnover rate in your company is too high, considering the cost of losing experienced employees. The CEO has indicated there is a 50% chance the budget for a new compensation plan would be available next year. You must decide which compensation plan warrants further study by your HR staff. Each study costs $3,000-automatically charged to your budget under the "Employee Relations / Other" category.

- Job Evaluation: A system based on the relative worth of jobs. Many feel that higher-level employees perform sufficiently different work and should be paid at a higher rate. This may be contributing to an unspoken morale problem. This system may help protect the company against discrimination claims, as employees would receive equal pay for equal work.

- Performance-Based Pay System: Standards would be established for all jobs that could have standards and employees would be paid a base hourly wage plus a bonus if their productivity exceeds the standard.

- Team Incentive Plan: The workforce would be grouped into as many teams as practicable and standards set for the team. Workers would receive a base hourly wage plus a bonus based on the team's performance.

- Piece Rate System: Piece rates would be established for all jobs that could have a piece rate determined, and all workers would be paid on each unit produced. If it were a service job, it would be paid on such items as orders taken, calls made, etc.

- Profit Sharing or Gain Sharing: A goal would be established monthly, quarterly, or annually, and workers would share in profits if goals are exceeded. This would be an organizational-wide plan; that is, all employees of the company would participate.

- Employee Stock Ownership Plan (ESOP): Similar to profit or gain sharing, employees would be paid their bonus with company stock. Employees would feel like they were part owners of the business and could help prevent hostile takeovers (Employees would be unlikely to vote the sale of "their" company). (If non-profit, this option is not available.)

- Guaranteed Cost of Living Adjustment (COLA): All employees would have their wages increased each year according to the local cost of living increase, based either on an equal percentage or equal dollars. This is a clause in many union contracts, which helps employees feel the company is doing its best to maintain an acceptable standard of living.

- Merit Increases: All employees would receive an annual performance appraisal and receive a merit increase if deserved. You may only choose one response from the options given below. If the one you choose pertains only to production workers, you may assume that another system would also be instituted for management.

1. Job Evaluation

2. Performance-Based Pay System

3. Team Incentive Plan

4. Piece Rate System

5. Profit Sharing or Gain Sharing

6. Employee Stock Ownership Plan (ESOP)

7. Guaranteed Cost of Living Adjustment (COLA)

8. Merit Increases

9. Pass on this project at this time