HURS107 Week 7.

5 – HR Compensation & Benefits Goals

Lesson 1: Attracting, Retaining & Motivating Employees
Attracting & Retaining Employees
A compensation and benefits package should attract the best people for the job. An
organization that does not pay as well as others within the same industry will likely not
be able to attract the best candidates. This will likely have a negative impact on
company performance.
If you don't pay a competitive wage, it puts the company at a disadvantage. According
to an Office Team survey, 44% of respondents said they’d leave their current job for one
with better pay. In terms of gender, 47% of women would resign if offered more money
elsewhere, compared to 40% of men (Office Team Survey, n.d.). Compensation was the
most cited reason for leaving a job; other reasons for leaving include:

 Leaving for a company with a higher purpose/stronger mission (12%)

 Employee doesn’t feel appreciated (12%)
 Employee feels bored/unchallenged by the work he or she does (12%)
 Employee’s commute is too long/wants something closer to home (7%)
 Corporate culture is not a fit (7%)
 Employee is unhappy with his or her boss (6%)
(Office Team Survey, n.d.)
In addition to compensation, benefits also play a huge role in attracting, retaining and
motivating employees. Please read the article below titled, “The 6 Benefits That Attract
Top Talent” written by Saige Driver for Business News Daily. After reading the article,
you will be able to do the following:

 List the six benefits recruiters rank as the most effective in attracting, retaining
and motivating talent.
Click the link below to read the article:
The 6 Benefits That Attract Top Talent

Type your response here

Article Takeaways
Recruiters list medical and dental insurance as the most important benefit. In order for a
company to stand out and be more competitive, they need to provide affordable health
insurance.
The second benefit is 401(k) plans. When you offer 401(k) plans with employer-match
funds, it shows you're a stable company that's ready for growth.
The third benefit is working from home. Letting your employees work from home and
offering a flexible work schedule makes their lives easier. Having a flexible schedule or
working from home allows employees to go to doctor appointments, pick up kids from
schools, etc.
Fourth is casual dress. Casual work attire can break down barriers and allow people to
bond more on a personal level, breaking down hierarchy. It also makes people feel
more at ease.
Fifth is continuing education reimbursement. Offering a stipend for student loan
assistance or continuing education would help your employees with bills, making their
lives more stable.
Sixth is a signing bonus. Signing bonus can help with relocation expenses.

Motivation
Properly compensating employees shows you value them as workers and as human
beings. When people feel valued, they feel better about coming in to work. Overall,
company morale increases and people are motivated to come to work and do a good
job. “The right compensation program invests employees into the work being done,
which gives them a stronger sense of satisfaction when the company succeeds. They
know they will be rewarded for their efforts; everyone likes to be appreciated”
(Leonard, 2019, para. 3 & 4).

Lesson 1 Complete!
You completed the first lesson of this lecture. Please scroll down to complete the Check
Your Knowledge activity, in which you answer four True/False questions. You will
have unlimited attempts to do this activity, so do not worry if you do not get it correct
the first time. This is a non-graded activity.

Check your Knowledge #1

True or False: An organization that does not pay as well as others within the same
industry will likely not be able to attract the best candidates.
True or False: In addition to compensation, benefits also play a huge role in attracting,
retaining and motivating employees.
True or False: Employee motivation is not a goal of compensation and benefits.
(employee motivation is a goal of compensation and benefits)
True or False: Recruiters list medical and dental insurance as the most important
benefit.

Lesson 2: Alignment with Business Strategy

HR plays an important role of ensuring compensation is aligned with the organization’s
business strategy. It is important that they have a clear understanding of the business,
and the direction in which the company is headed. Organizational, employee and
business needs must also be balanced with the financial and strategic goals of the
company. When this balance is found, a company can effectively use compensation to
execute and achieve desired business results (Milkovich, 2017).
In this lesson, we will focus on a sales compensation aligning with sales business
strategy. “Sales compensation is the combination of base salary, commission, and
incentives that are used to drive the performance of a sales organization” (Lucero, 2019,
para. 1). “Sales Strategy defines the sales organization’s action plan to achieve its goal.
The sales strategy will drive decisions concerning product and service focus,
concentration on certain markets, value propositions, and the resulting approach to
market” (SalesGlobe, n.d., para. 4). By strategically aligning your business and sales
objectives, you can ensure your sales force is driving success at the organizational level.
There are five steps to ensure sales compensation is strategically aligned with company
objectives:

 Understand the overall sales goals and objectives. By first defining and
understanding the goals and objectives of the sales team, you can ensure they
are in alignment with the overall company strategic goals and objectives. Both
short- and long-term needs must be addressed.
 Identify the sales process, the job design and the training required to support
the sales goals. Answer questions such as: What sales model would be most
successful (e.g. direct sales or selling through distributors; selling locally or
nationally)? How long is the sales cycle? Does the company want to get new
customers, or grow business with existing customers? HR must communicate
the expectations to the sales team and ensure everyone understands how their
role ties in to the organizational goals.
 Develop the sales compensation program based on this knowledge. After you
know the internal goals, continue the process by doing market research on best
practices in your industry—then incorporate that information.
 Design the implementation and administration to ensure the organization can
support the goals and the sales process in terms of timing, payroll, and
financing. Address transition issues and consider using a phased approach if
 necessary. Confirm in advance that the organization has the ability to track goal
progress and accurately monitor the items tied to variable pay. Also, be sure that
those who will be administering the program fully understand it.
 Monitor sales effectiveness, get feedback, and administer re-training as
needed. Be sure to provide ongoing performance feedback to the team.
Periodically assess the plan to confirm it is meeting the objectives; make
adjustments if needed, but be careful not to change the whole system too often,
as this will certainly be de-motivational.
(HR Daily Advisor Editorial Staff, 2013).

Wage & Salary Determination

Sales wage and salary determination is made according to pre-established rules set by
the HR department. This includes policies regarding pay increases, pay equity,
competitive pay and legalities of pay.
With your business and sales goals aligned, you can drill down into the specific
structure of your compensation plan. To do this, you will need to determine target pay,
pay mix, and upside potential for each sales role.
Target Pay
The target pay (also called total target compensation or on-target earnings) is
everything the company provides to the employee including base salary, commission,
bonuses, and perks. This number will help you budget and break down the rest of the
commission payout (Walberer, 2018).
Pay Mix
The pay mix is the ratio of base salary to target incentives that make up the total target
pay. How you balance the pay mix will depend on the sales roles and your overall
goals. Your pay mix should be more aggressive for roles that have a higher influence on
the final purchasing decision. For instance, as closers, account executives should have
aggressive pay mixes to incentivize them to hunt down new opportunities (Walberer,
2018).
Upside potential
Upside (or leverage) is the amount of pay available to sales reps who exceed their
quotas. Upside can be a valuable motivational tool but should be incorporated into your
plans thoughtfully. Like pay mix, the more influential the sales role is on the final
purchase, the greater the upside opportunity should be (Walberer, 2018).

The Role of Variable Pay

Variable pay is a method of paying employees based on performance. It can comprise
the employee’s total compensation or be paid in addition to their base pay.
Pros of Variable Pay
There are many positive benefits of paying employees with variable pay:

 High performers will thrive – Variable pay feels more “fair” to those who
perform at a high level, since they have the chance to be compensated and
acknowledged for the extra effort and higher-level results they bring to the
business.
 Average performers will be inspired to work harder – Once employees
understand which behaviors (customer service, safety, quick turnaround time)
you value, they’ll be focused more on those aspects of their job, and work harder
to earn those rewards.
 Your payroll expenses will more closely match your business results – In
months that employees don’t earn sales, or your revenues are off, your payroll
will also be lower as you won’t be paying workers bonuses if they aren’t
bringing money in the door.
(Handrick, 2018).
Cons of Variable Pay
 Variable pay has its disadvantages as well, mostly on the business /
administrative side:
 It can be complex to manage – Unless you have a very simple system, tracking
variable pay can be tricky. For example, if you bonus your sales staff on units
sold each week, you’ll need to track units sold by worker in order to calculate
each employee’s bonus weekly.
 You have to budget for it – You may have a budget line item for payroll that’s
consistent each pay period. You’ll need to do the same for your variable pay. For
example, if variable pay is expected to be about 25 percent of an employee’s
compensation, you’ll need to have that much extra in your payroll account ready
to be paid out once it’s earned—whether that’s monthly, quarterly or annually.
That requires you to estimate and set the funds aside in advance.
 It may backfire – This is the most misunderstood downside of variable pay. You
need to be very careful about what you incent employees to do. For example, if
employees are given incentives for high customer service scores, might they be
“giving away” product to earn higher ratings? Or if they’re incented for faster
delivery times, might they be taking shortcuts in safety?
(Handrick, 2018).

Examples of sales compensation using variable pay -

Variable Pay as a Commission
Sam works for a farm equipment company and is paid a commission in addition to his
base salary of $500 per week. Sam’s pay is variable pay. One week he may make no
commissioned sales, and only receive a check for $500. The following week he may
make $1,500 extra based on having sold a large piece of farm equipment. Therefore, his
pay is variable. Sam’s variable pay is designed to incent him to sell big-ticket equipment
items, in addition to helping existing customers with parts and service (Handrick, 2018).
Variable Pay as a Percent of Sales
Julia works as a media advertising executive and manages several accounts. In addition
to her hourly pay rate, she receives 5 percent of all advertising dollars paid by her
clients each month. That means that her pay (her variable pay compensation) changes
based on her client’s payments. Her variable pay works as an incentive to Julie to keep
her current advertising customers happy, as well as to find new ones (Handrick, 2018).
Variable Pay as a Bonus
Kiko works as an IT programmer on a project. He receives a base pay of $65 per hour. In
addition, he is eligible for a bonus based on variables, such as whether his projects are
completed on time and what percentage of his code passes testing criteria. His variable
pay compensation encourages him to meet deadlines as well as to provide code that is
accurate (Handrick, 2018).

Lesson 2 Complete!

You completed the second lesson of this lecture. Please scroll down to complete the
Check Your Knowledge activity, in which you answer four True/False questions. You
will have unlimited attempts to do this activity, so do not worry if you do not get it
correct the first time. This is a non-graded activity.

Check your Knowledge #2

True or False: Organizational, employee and business needs must also be balanced
with the financial and strategic goals of the company.
True or False: Understand the overall sales goals and objectives is the last step to
aligning sales compensation to business strategies.
(it is the first step)
True or False: The target pay (also called total target compensation or on-target
earnings) is everything the company provides to the employee including base salary,
commission, bonuses, and perks.
True or False: One con of variable pay is that “It can be complex to manage.”

Lesson 3: Compliance with Laws & Regulations

When it comes to designing, implementing, and administering a comprehensive
compensation plan, it’s not just the employer and employee(s) who must agree that the
arrangement is fair. Federal, state, and local laws and regulations all place restrictions
on how employers compensate their employees and provide guidelines on how an
organization’s compensation program must adhere to these restrictions and standards
(Deyermenjian, 2018).

Federal Government Role

The U.S. Department of Labor states that employers and employees are to follow the
law that provides the highest standard of protection to employees and the strictest
standard for employers (Department of Labor Website, n.d.).
Some federal labor laws to be mindful of include:

 The Fair Labor Standards Act (FLSA): the FLSA requires employers pay
covered, nonexempt employees the applicable minimum wage, as well as
overtime pay for hours worked in excess of 40 in a work week. It also requires
that employers maintain basic payroll records for covered employees
(Deyermenjian, 2018).
 The Equal Pay Act of 1963: this act prohibits pay discrimination on the basis of
sex between employees that perform equal work in jobs that require equal skill,
effort, and responsibility, under similar working conditions at the same
establishment (Deyermenjian, 2018).

State and Local Laws

Employers must also be mindful of state and local laws that may exceed the
requirements of federal laws. State wage and hour laws can differ from the
requirements of the FLSA. Some states and localities have adopted higher minimum
wages, more expansive overtime rules, and tougher rules on independent contractor
misclassification and unpaid internships (Deyermenjian, 2018).
“There has been an emerging trend where states have been adopting pay equity rules
that exceed the requirements of federal law. These laws vary by state, but have included
measures barring rules that prohibit employees from discussing their compensation,
prohibiting employers from inquiring about an applicant’s salary history, and easing
the standard for establishing whether two employees perform equal work”
(Deyermenjian, 2018, para. 9).

The importance of HR compliance

HR must hire and retain individuals that are knowledgeable about HR specific laws
and can create policies and procedures that comply with these laws. Once these
policies and procedures are established, they must be effectively communicated
throughout the organization.
This is most likely to happen in cases where HR compliance has been integrated with
the organization’s overall business strategy, and the organization’s leadership has taken
steps to ensure all employees understand the importance of HR compliance (Davis &
Carnovali, 2019). Please read the article below titled, “HR Compliance: What Business
Owners Need to Know” written for Paychex. While reading the article, pay close
attention to the list of compliance challenges that businesses face and then answer the
following question:

 List and describe 3 compensation compliance challenges businesses face.

Click the link below to read the article:
HR Compliance: What Business Owners Need to Know

Type your response here

Article Takeaways
Some of the compensation compliance challenges mentioned in the article include: pay
issues, off-the-clock work, improper salary deductions, breaks and meal periods, travel
time and exempt/non-exempt status. Ways to keep up with compliance issues include:

 Conducting an internal human resource audit of strengths and weaknesses of

existing compliance levels.
 Ensure that anyone accountable for compliance in the organization is properly
trained.
 Install a monitoring mechanism to ensure that internal processes for compliance
are up to date and consistently followed.

Lesson 3 Complete!
You completed the third lesson of this lecture. Please scroll down to complete the
Check Your Knowledge activity, in which you answer four True/False questions. You
will have unlimited attempts to do this activity, so do not worry if you do not get it
correct the first time. This is a non-graded activity.

Check your Knowledge #3

True or False: The U.S. Department of Labor states that employers and employees are to
follow the law that provides the highest standard of protection to employees and the
strictest standard for employers.
True or False: HR must hire and retain individuals that are knowledgeable about HR
specific laws and can create policies and procedures that comply with these laws.
True or False: The FLSA prohibits pay discrimination on the basis of sex between
employees that perform equal work in jobs that require equal skill, effort, and
responsibility, under similar working conditions at the same establishment.
(The Equal Pay Act of 1963)
True or False: State wage and hour laws can differ from the requirements of the FLSA.

Conclusion
HR compensation goals include attracting, retaining and motivating employees,
aligning compensation with the business strategy and being compliant with federal,
state and local laws. HR is responsible for ensuring that compensation and benefits
plans are also fair and competitive. Once the compensation plan is designed and
implemented, it must be communicated to all employees. HR must also ensure its
design and implementation follows all laws and regulations in order to be compliant.

References:
Davis, R, & Carnovali, M. (2019, March 13). The HR Function’s Compliance Role.
Retrieved from https://www.corporatecomplianceinsights.com/hr-function-
compliance-role/.
Department of Labor Website. (n.d.). Retrieved from https://www.dol.gov/.
Deyermenjian, K. (2018, May 21). Tips to Ensure Your Compensation Plan Meets HR
Compliance. Retrieved from https://www.salary.com/blog/is-your-comp-plan-is-
compliant-with-the-law/.
Driver, S. (2019, January 7). The 6 Benefits That Attract Top Talent. Retrieved from
https://www.businessnewsdaily.com/11204-top-benefits-attract-top-talent.html.
Handrick, L. (2018, October 11). Variable Pay: Definition, How it Works, Benefits,
Providers. Retrieved from https://fitsmallbusiness.com/variable-pay/.
HR Daily Advisor Editorial Staff. (2013, September 16). Sales Compensation Plan:
5 Steps to Ensure Strategic Alignment. Retrieved from
https://hrdailyadvisor.blr.com/2013/09/16/sales-compensation-plans-5-steps-to-
ensure-strategic-alignment/.
Leonard, K. (2019, March 1). Importance of Compensation in the Workplace.
Retrieved from https://smallbusiness.chron.com/importance-compensation-
workplace-38470.html.
LucidChart Wesbite. (n.d.). Retrieved from
Lucero, K. (2019, February 21). What is Sales Compensation? Retrieved from
https://www.xactlycorp.com/blog/what-is-sales-comp/.

Milkovich, G. (2017). Compensation. New York, NY: McGraw-Hill.

Office Team Survey. (n.d.). Retrieved from http://rh-us.mediaroom.com/2018-07-09-

44-Percent-Of-Workers-Would-Quit-Their-Job-For-A-Bigger-Paycheck.
PayChex Website. (2019, April 26). HR Compliance: What Business Owners Need to
Know. Retrieved from https://www.paychex.com/articles/human-resources/balance-
hr-strategy-compliance.
SalesGlobe Website. (n.d.). Aligning Sales Compensation to the Sales Strategy.
Retrieved from https://www.salesglobe.com/blog/aligning-sales-compensation-sales-
strategy/.
Walberer, L. (2018, November 28). Defining Pay Mix. Retrieved from
https://www.xactlycorp.com/blog/pay-mix-differ-sales-role/.