Compensation – Discussion Case
1. If you were on the banks HR committee, what would you do regarding raises for the tellers?
I believe it is an important thing to pay attention to the external equity, especially if you are paying less than the labor market average. In State Bank case, however, tellers would be happier, as they are being paid a higher wage than the competitor banks. The situation for tellers at State Bank is an above-market compensation, which will result in lower turnover of tellers. It will be a bigger concern for the bank to override the internal equity. Having that said, raises for the tellers can be based on individual plan depending on factors like work load, or responsibility.
2. How much faith should the HR committee place in the accuracy of the wage survey?
If the survey is conducted directly by another bank, there may be manipulations to the results in accordance with the benefits of the bank. However, if the survey has been conducted by an independent professional subcontractor, the benchmark results would be much more accurate, as this independent company would not benefit from result manipulation. If HR committee does not place enough faith in the results, another survey sponsored by State Bank can be performed. I believe it is always a good practice to get use of independent organizations for activities like auditing or statistics collection, if there is a treat of manipulation of data.
3. Critique the bank’s policy of giving merit raises that range from 0 to 12 percent, depending on job performance.
Giving merit raises to employees seems to be a successful practice and apparently motivates the employees. However, it may not be the best practice to range the merit raises between 0 to 12 percent each year, as I believe the raise rate shall be dependant on the yearly profitability of the bank, with a set maximum of, for example, 12%. This will end up with two benefits: first it will balance the pay rates of the employees compared to the other banks,
I believe it is an important thing to pay attention to the external equity, especially if you are paying less than the labor market average. In State Bank case, however, tellers would be happier, as they are being paid a higher wage than the competitor banks. The situation for tellers at State Bank is an above-market compensation, which will result in lower turnover of tellers. It will be a bigger concern for the bank to override the internal equity. Having that said, raises for the tellers can be based on individual plan depending on factors like work load, or responsibility.
2. How much faith should the HR committee place in the accuracy of the wage survey?
If the survey is conducted directly by another bank, there may be manipulations to the results in accordance with the benefits of the bank. However, if the survey has been conducted by an independent professional subcontractor, the benchmark results would be much more accurate, as this independent company would not benefit from result manipulation. If HR committee does not place enough faith in the results, another survey sponsored by State Bank can be performed. I believe it is always a good practice to get use of independent organizations for activities like auditing or statistics collection, if there is a treat of manipulation of data.
3. Critique the bank’s policy of giving merit raises that range from 0 to 12 percent, depending on job performance.
Giving merit raises to employees seems to be a successful practice and apparently motivates the employees. However, it may not be the best practice to range the merit raises between 0 to 12 percent each year, as I believe the raise rate shall be dependant on the yearly profitability of the bank, with a set maximum of, for example, 12%. This will end up with two benefits: first it will balance the pay rates of the employees compared to the other banks,