Reference no: EM133431724

Assignment:

Greener Environmental Services, Inc.

Flexible Benefit Program

Raj Chandra looked over the auditor's report for the company's financials from the last year. It was official: Greener Environmental Services had weathered the tough economic times and was finally back in the black. Nearly 10 years ago, Raj had left his position as an incident commander for Shell Canada to launch his own environmental consulting firm. Raj founded Greener with the vision of comprehensive environmental assessments pre-disturbance and remediation strategies that would renew the environment back to its pre-disturbance state.

In the decade since its inception, both the number of people and the range of environmental services offered by Greener had grown. Greener's current suite of offerings included comprehensive environmental services from environmental site, risk, and pre-disturbance assessments to monitoring, reclamation, and remediation services. Although most staff had environmental backgrounds (including environmental technology, environmental science and engineering, soil science and wetlands ecology), Greener also employed equipment operators, project managers, accounting/billings, and a small office staff. Lagging economic slowdowns for its mining and energy customers had significantly diminished the Phase I and Phase I environmental site assessment and pre-disturbance assessment aspects of their business. While the soil and groundwater monitoring and remediation services related to potash mining had remained reasonably strong, Raj and Greener had faced some fiscal challenges over the past three years.

Raj sat back in his chair and thought about the employees who had been with the company during the past few tough years. Raj knew they would be relieved to see confirmation that the company was at a turnaround. It was not hard to recall memories of an all-staff meeting he had held 18 months ago to lay out the company's financial situation to employees. He had asked employees to stick with the company based on projections for economic recovery of their customers in the energy sector. As their customers returned to new projects, Greener would be hired to conduct environmental assessment work.

Rather than cut any staff from the assessment side of the business and focus only on the profitable monitoring branch, Raj had convinced Greener's investors that the assessment side would see recovery and growth. He had proposed that rather than lay staff off only to rehire them later as the company rebuilt, they should keep everyone on staff. However, Raj had implemented a salary freeze across all employees. Staff in the slow assessments areas had been asked to assist with business development and sales to drum up business, and to assist staff on monitoring and mining remediation projects.

It had now been three years since Greener staff had seen a pay raise, and Raj knew that he would have to invest some of the company's recovered profits in direct pay. Last week, chief financial officer Natalia Wong and Raj had determined that 4 percent of revenue should be invested in employee compensation.

The question Raj was now facing was whether to implement a flat increase across all Greener staff or to differentially reward some key contributors. Raj wondered if, even though the salary freeze had been implemented evenly across all employees, he would have to provide equal raises to all staff. He really wanted to channel some of the hard-won funds toward a few of his assessment staff who had really added value on the monitoring and mining remediation projects, even though the projects weren't in their focal areas of expertise. Furthermore, Raj knew that the mining remediation and monitoring groups had sought-after skill sets. These areas had been busy throughout the slowdown and would be key to revenue generating projects for Greener over the next few years. While Raj was pleased that the overall compensation news would finally be good news, he needed an effective compensation distribution plan.

DISCUSSION QUESTIONS

1. What are the pros and cons of providing even increases in base pay to all Greener staff?

2. What type(s) of variable pay might Raj want to consider? Which staff should be eligible for them variable pay plans?

3. What proportion of the 4 percent of revenue that Greener has available should be allocated to base pay increases versus variable pay? Justify your decision.

4. What recommendations would you have for Raj on how to communicate with Greener employees about the changes to their base pay and/or variable pay?