BBCM4103

COMPENSATION MANAGEMENT

SEPTEMBER 2015

FACULTY OF BUSINESS

MATRICULATION NO : 820406075613001

IDENTITY CARD NO. : 820406-07-5613

TELEPHONE NO. : 012-7616474

E-MAIL : bigben012@gmail.com

LEARNING CENTRE : OUM Seremban

 Table of Contents
Description Page

1,Introduction. 1

2, First Element - Wage 2

3,Bonuses 3

4,Health Insurance 4
5, Incentive 5
6, Conclusion. 6

7,References 7
INTRODUCTION

If you ask me, what will be my dream job ? I will clearly tell you that it is none other
being a Vice President of operation in any organization. A vice president of operations
oversees day-to-day operations to support the growth and add to the bottom line of an
organization. They focus on strategic planning and goal-setting, and direct the operations
of the company in support of its goals. By measuring progress and adjusting processes
accordingly, the VP of operations keeps the entire organization on track.

The Vice President’s primary responsibilities are managing client accounts and assisting
in growth and development of staff as well as the overall firm. This involves expanding
and securing new business, managing project portfolio that meets or exceeds projections,
and participating in the internal management of the company. The Vice President will
guide staff development through identifying skills needs, delegating tasks appropriately
and motivating project staff to provide outstanding client service. Vice Presidents are
expected to specialize in a specific business silo (i.e. training, policy, positioning), but
should be proficient in all aspects of the business and be able to lead assigned accounts as
needed regardless of client’s needs

Vice presidents of operations are responsible for a variety of job duties, all with a goal of
positively impacting an organization’s bottom line. They often plan, direct and coordinate
operations in support of a company’s growth. Typical duties include formulating policies
and strategic plans for future growth, and managing daily operations of personnel,
purchasing, administration and other departments.

Specific job duties of a VP of operations vary according to the industry and size of the
company. Some may oversee manufacturing or sales, while others are responsible for
improving operational efficiency in a targeted area, such as customer engagement or
online marketing. Vice presidents of operations are often required to monitor revenue
margins for worker productivity, and developing guidelines for personnel evaluations,
staff advancement and recruitment procedures.

1
First element of the compensation package

The term “compensation” refers to the combination of wages, salaries and benefits an
employee receives in exchange for work. Compensation may include hourly wages or an
annual salary, plus bonus payments, incentives and benefits, such as group health care
coverage, short-term disability insurance and contributions to a retirement savings
account. A total compensation package can have several components. An “employee
compensation plan” collectively refers to all the components in addition to the manner in
which the compensation is paid and for what purpose employees receive case bonuses,
salary increases and incentives.

Let’s look at the first element of the compensation package. Annual salary or base pay
plays a major role in compensation package.Although there are salaried employees who
are classified as non-exempt and, therefore, entitled to overtime pay, the term “salary”
generally refers to an annual salary the employee receives or a method of employee
compensation that does not require overtime pay. For instance, the reference to a
“salaried employee” is generally used to describe a worker who does not receive
overtime pay.

An example of an employee compensation plan for salary levels is one based on a salary
scale that considers education, years of professional experience, credentials and
qualifications such as job competency and functional expertise. Subsequent increases
need to be based on an employee’s performance, value, and contribution to an
organization. For salespeople, it might be important to find a balance between salary and
commission.

Base salary, the foundation of your compensation, excludes bonuses, benefits and perks;
the annual figure is the one on which future salary increases are based. For example, if
your base salary is rm60,000, and you may receive a 5-8% raise in 12 months, your
salary increase in Year One could range rm3,000-rm4,800. Base salaries are considered
fixed compensation, paid in cash and short-term.

This is designed to reward achievement of specific company and/or individual

performance objectives.And also designed to reflect competitive rates for comparable
jobs within identified marketplace.

2
Bonuses

It’s undeniable that bonus play a vital role in the compensation packages. This is the
most attractive part of the whole package and something to look forward to.Bonuses are
considered variable compensation, are based on annual performance and paid in cash.

Bonuses can be paid when you accept a job (sign-on bonus), as part of a merit-based plan
(performance bonus) or as part of company-wide plan (profit-sharing bonus). Sometimes,
you can get all of these. Salespeople or other commission-based jobs may get bonuses for
meeting certain targets. Even if your type of job isn’t normally eligible for a bonus, ask
for one when you go above and beyond your current responsibilities. If you are eligible
for a bonus, understand the criteria for how it is determined, and make sure your
contributions are well-documented and known during the determination period.

Bonuses, which are usually paid in a single lump at the end of the year, are one way of
providing performance incentives. Profit-sharing plans are a more formal way of doing
this, but they’re not as effective for rewarding individual performance and compensating
employees for meeting their goals.

Not only that, many companies to offer tuition reimbursement, profit sharing, employee
stock purchase plans and retirement plans as part of the compensation plan. Tuition
reimbursement is usually contingent on the employee completing a management-
approved course at a higher education institution and earning an acceptable grade. Profit
sharing is based upon a percentage of the employee's salary and her years of service.
Employee stock purchase plans are an often overlooked, but valuable, form of
compensation. They allow employees to purchase shares of stock at a discount.

Retirement plans allow the employee to contribute a percentage of his earnings into an
investment account and receive a company match.

3
Health Insurance

Thirdly, health insurance is considered another important element in the compensation

package and undoubted as one of the best packages as well.Medical, dental, life
insurance, and disability are just some of the benefits some people get in their
compensation package. There are usually several different plans offered for each benefit,
varying in price and coverage. Health insurance is an insurance policy that will pay
specified amounts of money to cover medical expenses or treatments. Employer-provided
health insurance policies, also known as group health insurance policies, offer employees
many different options for insurance coverage.

Differences lie in deductible amounts, percent coverage and network providers. Higher-
priced plans usually have lower deductibles, higher coverage and a wider variety of
providers. The compensation plan also includes rates for insuring spouses and
dependents.

Employer-sponsored health insurance is fairly standard among medium-size companies.

Plus, it’s a benefit that has great value to employees. An employer-sponsored plan saves
employees money, and gives them peace of mind in knowing that they won’t be denied
coverage, even if they have existing health problems.

And remember that getting health insurance coverage from an employer is a major
benefit because you will not only have the luxury of not having to think about paying the
premiums because it will be automatically done for you, but the cost is also much lower
than policies you could get on your own.

4
Short and Long term Incentive

Short-term incentive compensation might covers in the form of stock options or cash; in
most executive compensation packages, it is linked to some short-term, measurable
objective that can be attained within a one-year time frame. These objectives are
reasonable, very important to the company, measurable and time-constrained ,so there is
no uncertainty on the part of the company, the executive or the board of directors as to
whether the goals have been achieved.

Long-term incentive compensation is considered the most important part of

compensation packages for most execs. Top executives look for a long-term
compensation package that is generous and provides them with a powerful incentive to
put in the long hours needed to make the company successful so they ultimately earn that
long-term reward.

For the company, this part of the compensation package should be structured as the
“golden handcuff” to keep the executive from getting the itch to look elsewhere; a
generous long-term incentive plan helps improve the chance for a stable and committed
executive team. This compensation form is typically stock options with vesting
requirements and/or performance objectives, or for private companies, the opportunity to
earn an ownership position.

Stock options or stock grants not only provide long-term incentives to employees, but
they can also help retain valuable team members through your organization’s crucial start
up phase. It is designed to reward long term company performance. Individual job
level/performance may impact eligibility to participate. Please bear in mind , that this can
be an effective retention tool.

5
Conclusion.

Not everyone is eligible to receive all of these compensation components. For example,
entry-level staff may not have employment agreements or supplemental benefits, whereas
executives may receive all of the components.

Nevertheless, we need to fully understand our rightfully deserved compensation

packages. Compensation is payment to an employee in return for their contribution to the
organization, that is, for doing their job. The most common forms of compensation are
wages, salaries and tips.Compensation is usually provided as base pay and/or variable
pay. Base pay is based on the role in the organization and the market for the expertise
required to conduct that role.

Health and dental benefits are considered the foundation of any benefit program design.
When considering the root issues of all absenteeism from the workplace, most employers
agree that health or dental related illness is cited most as the cause. While many have not
thought of dental coverage as being a key attraction point, a number of medical reports
have been published recently, that indicate that many of our common virus and illnesses
are actually related to poor dental health. An organization’s ability to be creative, flexible
and generous in providing health and dental coverage can be a key to attracting and
retaining top performers as part of the total compensation package.

Some elements of compensation are related, meaning that the value of one element
affects the value of another element. Increasing base salary increases target bonus
opportunities, savings, pension and disability benefits. Increasing or decreasing bonuses
also affect pension and savings plan benefits, but long-term incentive awards are
excluded from calculation of pension and savings plan benefits.

Remember to tailor the benefit section of your executive compensation packages to meet
the needs of those you’re hiring and wish to retrain.There are two main reason for this
planning of compensation packages. First,is employers are able to attract and retain
employees who will contribute to the organization’s success.And secondly, employees
feel they are compensated/rewarded fairly/equitably for their efforts and contributions to
an organization’s success

6
 (2046 words)

Reference

C.B. Mamoria and S.V. Gankar, A textbook of Human Resource Management, Himalaya
publishing House, 2003.

K. Aswathappa, Human Resource and Personnel Management: Text and Cases, Tata
McGraw-Hill Publishing Company Limited, New Delhi, 2002.

Gary Dessler, Human Resource Management, Prentice-Hall of India Private Limited,

New Delhi.

Lawrence S. Kleiman, Human Resource Management, Biztantra Innovations in

Management, New Delhi, 2003.

Arthur Sherman, George Bohlander & Scott Snell, Managing Human Resources, An
International Thomson Publishing Company.

Edwin B. Flippo, Personnel Management, MacMillan India (6th Ed. 1984)

Charles P. Greer, Strategic Human Resource Manager: A General Managerial

Application, Pearson Education Asia, 2001.

Beer, Michael, et al. Human Resource Management. New York: Free Press, 1985.
Greenlaw, Paul S., and John P. Kohl. Personnel Management: Managing Human
Resources. New York: Harper & Row, 1986.