HRMT 44008D | Business Fundamentals | Assignment #2

Pay Level/Mix, Pay for Performance, Comp Administration

85 marks 10%

Student Names: [Student 1 - insert here] [Student 2 - insert here]

This assignment is focused on how a Compensation Manager or team will work to examine the structure of
compensation across an organization. Students will demonstrate their ability and understanding of how pay mix
and structures integrate with benefits and pay for performance plans. The idea of compensation budgets and
administration is then applied by examining all of these in an organization and deciding on the possible
compensation strategies for the future. Assignment Information
• This assignment is primarily related to Chapters 9,10,11 and 13, but other chapters may apply.
• NOTE: This information is related to the content in the final exam. Make sure you conduct a thorough
analysis and completion of the questions, so you can be in a better position to prepare for the final exam.
• SUBMISSION INSTRUCTIONS: This is an individual assignment, but it is strongly recommended to complete as
a Pair Group. If submitted as a Pair Group, only one person submits to the Assignment Box. Ensure both
names are on the title page. A Pair Group agrees to a shared grade.
Assignment Value: 10% of Total Grade | DUE DATE: See instructions in SLATE
Assignment Instructions:
1. Answer all questions based on the Super-Tech Water (STW) scenario below. Marks are assigned on specific
numerical values, visual representations, case facts, and use of course theory.
2. All percentage values must be rounded to ONE DECIMAL. All dollar values must be rounded to the next dollar
amount. (Example: Universal rounding rules apply – i.e., 21.561% = 21.6% or $1,233.48 = $1,233 or $159.51 =
$160]
3. You MUST use/apply COURSE THEORY (when/where appropriate) to assist with supporting and/or reinforcing
answers provided to maximize full grades. Especially those that require compensation/business
recommendations.
4. You MUST neatly and accurately show ALL calculation work (when/where appropriate and/or requested) to
obtain full grade(s). There are no exceptions to this requirement. If there is no support, a grade of zero (0) is
given.

Super-Tech Water (STW)

Super-Tech Water (STW) is one of the leading Water System Purification companies in North American responsible
for the design and manufacturing of modern-day water technology that treats and cleans domestic, commercial,
and industrial water. The company is 10-years old and based on its recent company town hall meeting, has stated its
strategic goal of wanting to become a 2-billion-dollar company in the next three years from its current worth of 950
million. This would clearly make them a market leader and consistent with their “Pay-for-Performance” type of
approach that tends to be consistent with the industry. STW revenues have started to stagnate this year (i.e.,
remained even or even a slight drop 1-2%) because of (1) an increase in new competitors, and (2) the influence of
increased government requirements across the world for water protection. Illustration 1 shows the progression of
company results over the past few years. The change in the market space has made the “war on talent” in this
industry much fiercer and more competitive. The need for talented and high-performing employees (Note:
Especially in Product Development departments and specifically Research Scientist positions) has been elevated
because of the critical need to ensure water systems can meet and treat the different water challenges around the
world. This could literally mean the difference between bigger contracts and established long-term maintenance
contracts to service and maintain critical water systems for customers. As a result, STW has had to elevate its total
rewards given the need to find and engage a highly educated and experienced workforce that will need to commit
to longer than average working days to help STW achieve its strategic and financial goals. STW has had to maintain
aggressive recruitment practices nationally and internationally. As a result, STW’s compensation budget has
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 HRMT 44008D | Business Fundamentals | Assignment #2
Pay Level/Mix, Pay for Performance, Comp Administration
exceeded by 5% each of the last two years (24 months) past their initial estimates. Expenses are very high in this
high-tech competitive industry. STW hires a broad range of technical and scientific workers from all over the world.
Many will have exclusive knowledge in water chemistry and engineering design; who most often make up the
various types of scientific professionals and departments within most of their Technical and Product Development
teams.

Illustration 1: Revenue Distribution (Super-Tech Water - STW)

As the Director of Compensation, you’re asked to take on important support and assessment functions for the CEO
and founder of STW. Focusing department-by-department, you will first need to re-assess the compensation
structure in the Water Research Department (WRD), given this department requires highly technical and
experienced water Chemists and Scientists. In fact, Water Chemists are in high demand. Second, you will work side-
by-side with the new Director of the Research Department to complete a Pay-for-Performance merit allocation.
Finally, you will complete a more comprehensive compensation administration breakdown using a cross-section of a
few departments to gain a better perspective on the organization’s overall compensation structure and
performance. This will help make some early recommendations to the CEO and then a larger more robust plan for
an organization-wide analysis next year.

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 HRMT 44008D | Business Fundamentals | Assignment #2
Pay Level/Mix, Pay for Performance, Comp Administration
Here are some key company facts from your meeting that will be important for the completion of your work
assignment. Use this information (as needed/where relevant) to complete the assignment:
• One challenge because of this fierce competitiveness in the industry has been turnover; this needs to be
further analyzed in the compensation figures for the upcoming budget and to HR for recruitment
strategies:
o There has been 15% turnover rate in Grade Level 5 jobs
• Despite the turnover, the company has committed to a 3.5% merit increase for each department this year
in all grades (except Executives). Executives receive a 10% merit increase.
• Executives receive a 15% lump sum bonus each year regardless of performance.
• A 25% Benefit Expense factor should be used in determining the compensation budget.
• Lump Sum bonuses at 8% were given to all Red Circled employees this year in fear of more turnover.
• A bottom-up budgeting plan approach has been used, but the CEO has expressed concern about this
approach.
• All Level 1 employees were given an additional 2.0% to their Benefit Expense factor for the upcoming year
to deal with Green Circles, as well as offer additional long-term health options because of the higher OH&S
risks.
• STW used the following minimum/maximum percentages with the corresponding points allocations values:
JE Points Min-Max Percentage
40-49 5% and 5%
50-69 7.5% and 10%
70-85 10% and 15%
86-99 12% and 17.5%

• Table 1 and Table 2 summaries are provided (See below)

Table 1: Water Research Department (WRD) – Compensation Summary by Position at

STW
JE Base Total Total
Job Position (Grade 2)
Points Pay* Cash Compensation
[1] Water Quality Technician 45 55, 725 58,470 65,985
[2] Hydrologist 55 60,155 65,485 74,520
[3] Water Quality Chemist 65 70,255 78,670 90,490
[4] Water Purification Chemist 80 82,835 92,675 109,110
[5] Water Management Research Scientist 95 95,865 107,225 128,350
*Base Pay is Super-Tech Water (STW) current company pay values

Table 2: Super-Tech Water (STW) Total Compensation Data and Industry Salary Survey Information
2022 Super-Tech Water - Total Compensation Data Information 2022 External Salary Survey
No of Avg. Base Avg. Total Avg. Total
Grade Employee Category Salary Range Average Salary Other Information
Employ Salary Cash % Comp %
Executive $495,000- 15% LS bonus
---- (CEO, EVP) 2 $985,000 $785,000 10% Merit $790,000 $1,200,220 $1,610,200

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 HRMT 44008D | Business Fundamentals | Assignment #2
Pay Level/Mix, Pay for Performance, Comp Administration
Management $75,000-
6 (VP, Director, Mgrs.) 12 $120,000 $89,000 25% are Red Circled $93,250 $102,575 $114,900

5 Production and $70,000-

Engineering 20 $90,000 $77,500 15% Turnover $79,520 $85,484 $95,500

Water Research: $74,976 $82,115 $93,691

1. Water Qual Tech $56,525

2. Hydrologist 5 $55,725- -------------------- $61,120
4 $72,967
$72,995
3. Water Qual Chem $95,865
4. Water Purif Chem
5. Water Mgmt. RS

$85,960
$98,280

Quality Assurance and $54,250-

3 Control 15 $80,500 $67,375 ------------------- $69,990 $78,450 $89,550

$50,500-
2 Sales 20 $82,500 $66,500 -------------------- $68,050 $75,775 $85,825

Clerical, Office and $42,500- +2% Benefit Expense

1 12 $55,750 (Current Year Only)
Receiving $48,650 $51,735 $53,028 $60,982

Assignment Questions:
1) Create the current company pay line for ALL positions in the Water Research Dept. using Illustration 2 Graph
below. [Note-1: Include ALL paygrades for this line. Note-2: Include ALL required/relevant identification on the graph must
be identified]. Attention to detail is required. This includes neatness, dot accuracy, etc.). No regression lines. [2 marks]
2) STW has referred to a 2022 External compensation survey (Table 2 Above) and you are now in the position to
assist the Director of Research. Create the industry market pay-line on the graph related to positions in the
Water Research Dept. Use Illustration 2 below. [Note-1: Include ALL paygrades for this line]. (Note-2: All
required/relevant identification on the graph must be identified. Attention to detail is required. This includes neatness, dot
accuracy, etc.). No regression lines. [2 marks]

Illustration 2: Graph: NOTE: You can either mark on the graph and then scan, or re-create, but you need to be accurate.
NOTE-2: Go to “Design” tab in Word, click on “Shapes”. Select circles, place on graph, and attach straight lines to make graph
lines.

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3) Calculate the compa-ratio for each position at STW’s Water Research Dept. in relation to the industry pay line.
What do the numbers say about STW’s current pay structure for this department? Be specific to the data and
briefly explain. (Show ALL calculation work – properly labelled/identified below) [8 Total Marks = 5 mks
calculations + 3 mks explanation]

• [insert]

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• [insert]

4) Based on STW’s current salaries in the Water Research Dept., calculate minimum and maximum salary values
for ALL positions by completing the Table 3 matrix below: [NOTE: Complete ALL required information in the
table for full marks. You MUST show calculation work for Positions #1, #3 and #5. [16 Total Marks = 10 mks matr +
6 mks calc]

Table 3: Research Department – Compensation Ranges

Range
Pos JE Points Range - MIN Research Dept Salaries Range - MAX
Spread

Calculation Space for Question #4 – Show calculations for Position #1, #3 and #5 ONLY (Round to nearest dollar)

[insert calculations in the space provided]

5) The Executive Team at STW is reviewing each department as it works toward achieving its business goal. They’re
not certain whether to lead, lag or match in the Water Research Dept. Based on internal and external
information (hint: look at the graph), what you know of the company’s strategy and goals and the nature of the
industry overall, what should STW do for this department? Explain
a) Explain your recommendation. Be specific. Use scenario facts and/or course theory to support. [5 marks]

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 HRMT 44008D | Business Fundamentals | Assignment #2
Pay Level/Mix, Pay for Performance, Comp Administration
• [insert answer in the space provided – you can use bullet points to explain, but be explicit w/rationale]

b) Based on your answer in (a) above, calculate the new pay line for the positions in the Water Research Dept.
[Note: If a lag decision is recommended, (5%) | If a lead decision is recommended, (10%) | If a match
decision is recommended, (Determine required percentage). Use matrix below. Rounding rules apply [10
marks]

Lead by 5%-10% Lag by 5% Match by “x” %

Current Industry Line
(Insert new value) (Insert new value) (Insert new value)

c) Plot the new pay line with the policy values on the graph (Illustration 2). (Suggestion: Use a different colour
in your graph to differentiate pay lines; Attention to accuracy is required. [2 marks]

6) Based on the company’s allocated merit increase and employee information, determine the BEST merit
distribution for the five positions in the Water Research Dept. using the matrix below. (Note: Director of
Research is being assessed at appropriate grade level) [Total = 15 marks]

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Table 4: Water Research – Compensation Summary by Position
Job Position (From JE Current Work Team Merit Merit
Surveys) Points Base Pay Performance Performance Increase Increase
[%] [$]
[1] Water Quality Technician Meets Meets
[2] Hydrologist Meets Meets
[3] Water Quality Chemist NEW NEW
[4] Water Purification Exceeds Meets
Chemist
[5] Water Mgmt. Res Exceeds Exceeds
Scientist
2.5 mks 2.5 mks 5 mks 5 mks

Performance Appraisal Form Percentage Merit Allocation Options

Far Exceeds- Exceeds-Meets Meets Does Not Meets 1% - New/Developing
Exceeds 5% - 4% - 3% 2.5% - 1% 0% 3% - 2%
4%
NOTE: Final Merit Values MUST BE WITHIN + OR - 2% of the allotted merit offered to the department
Water Quality Technician: With the company 3 years. Always wants to offer new ideas or suggestions. Works well in team settings but could contribute more at times.
Has many processes to learn and is willing to do this. Has made some costly errors but has accepted feedback well.
Hydrologist: With company for 8 years. Knows the job and gets things done as required. At times becomes impatient and does not want to offer his ideas in meetings
but when he does, the contributions are excellent. Assumes others know what he is talking about but can be very cynical at times.
Water Quality Chemist: First year with the company. Has made significant data assessment errors that impacted two key customers – blamed one customer for error
due to apparent invalid data sets. Does not follow through on all instructions. Has good ideas in meetings and shares them. Took time to develop a presentation on a
software design to help save time for the department.
Water Purification Chemist: With company for 4 years; comes from a major competitor. Knows the work very well and can effectively multi-task. Needs to build better
trust with team. Displays a lack of confidence in other people’s knowledge. Always attends meetings but could communicate more – but always comes prepared.
Water Management Research Scientist: With company for 10 years. Considered for management role. Reliable and other scientists always request to work with her.
Other managers value and respect her feedback. Great at meetings and helps the Director run key meetings when not available. Has won company on-the-spot
awards for teamwork and work performance.

(a) What is the total merit allocated to the Water Research? Show the calculation for full marks. [2 marks]

• [insert calculation in the space provided]

7) Using this company and industry information, along with the various tables and graphs provided (If needed),
complete the STW Compensation Budget Estimate for next year using Table 5 below. [18 Total Marks = 2x 9
columns]

8) Based on all the information you have analyzed, and data gathered and calculated, describe TWO (2) critical
recommendations that you would give to senior team? These can be issues, concerns, etc.… [5 marks]
(NOTE: Place in the space provided. Be specific/explicit with course theory, case facts and calculated data to support your ideas).

• [insert recommendation #1]

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• [insert recommendation #2]

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Table 5: Super-Tech Water - 2020 Compensation Budget Estimate Final Summary Chart
No of Salary Average New TOTAL COMP Mks
Grade Employee Category Base w/out Merit Base with Merit Turnover Effect Bonus Benefit Cost
Emp Range Salary Total Costs COST Row
2
---- Executive $495,000- $740,000 2mks
(CEO, EVP $985,000

2mks
6 Management 12 $75,000- $89,000
(VP, Director, Mgr.) $120,000

2mks

20
5 Production and $70,000 - $77,500 2mks
Engineering $90,000
 Water Research:
1. Support Spec.
4 2. Technician 5 $55,725- 2mks
$72,967
3. Chemist $95,865
4. Analytic Chemist
5. Research Sci.

15
3 Quality Assurance $54,250- $67,375 2mks
and Control $80,500
20
2 $50,500- $66,500 2mks
$82,500
Sales
12
1 Clerical, Office and $42,500 - $48,650 2mks
$55,750
Receiving
OVERALL TOTAL COMPENSATION COST 2mks
Grading Requirement: Marks per line are based on a COMPLETED ACCURATE line item and not just a correct Total Comp value.
NOTE: Grade Level 6 is split in two rows with a dotted line - HINT.

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