Different Compensations

The Different Types of Compensation
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The Different Types of Compensation
Submitted by: ddgrogg
Date Submitted: 12/22/2010 03:29 PM
Category: Business
Words: 2326
Pages: 10
Views: 625
RUNNING HEAD: GROUP D CASE STUDY

Group D Case Study: Wal-Mart Stores, Inc.

Group D

HRMG 4201-1 Strategic Human Resource Management

Instructor: Rita Williams-Bogar

Walden University

December 26, 2010

Abstract
This essay is the collaborative effort of the following Walden University students assigned to ‘Group D’ for the Strategic Human Resource Management (HRMG-4201-1/MGMT-4120-1) course:
Claudine Baggett (Compiler), John Foy, Donald Grogg, Carol Latimer (Editor), Michael Moses (Organizer) and Latisha Schofield (Poster). All group members were responsible for the research efforts.
The purpose of this paper is to identify and discuss the different types of compensation that are currently being provided by Wal-Mart. Initially the strategic fit of the existing compensation program is discussed as well as recommended changes to the existing program. Along with the types of compensation that are provided, how the company compares itself to it industries competitors are also discussed. Direct and indirect compensation is discussed as well as the types of compensation programs that Wal-Mart needs. Finally, health care coverage and the cost of such coverage are addressed.

Group D Case Study: Wal-Mart Stores, Inc.

Introduction
Wal-Mart Stores, Inc was the brainchild of Samuel Walton. He opened the first Wal-Mart in 1962 with his brother (Anthony et al, 2010). It has certainly been a successful venture for Mr. Walton as Wal-Mart was named America’s largest retailer by 1990 (Anthony et al, 2010). He was able to do this because of the partnership culture he has created between Wal-Mart and its associates. Part of this culture includes a comprehensive benefits package, which will be discussed now.
Discussion
Existing Compensation Systems
At Wal-Mart, the compensation system, a pay for performance system, is designed to attract associates who are motivated to stay with the company for long periods and strive for advancement. The starting pay, which is above minimum wage, is also at a level that attracts individuals who believe they will be fairly compensated by the company. Wal-Mart offers raises based on performance. The first raise is offered when the new associate has been with the company for 90 days. At that point the associate is evaluated at one of four levels; “below standard, standard, above standard and outstanding” (Anthony et al, 2010, p.654). If the associate receives an outstanding level, they can receive merit raises at any time throughout the year (Anthony et al, 2010, p.654). The next evaluation for a pay increase comes at the associate’s yearly anniversary. The only other option for pay advancement comes with promotion, which can only occur when an associate has been in their current position for at least six months. In addition to the monetary compensation, associates are offered health insurance, discounts on purchases, company sponsored 401(k) and a stock purchase program (Anthony et al, 2010).
On the other hand, critics of Wal-Mart have stated that the retail giant pays their associate’s too low in comparison to the top executives at the company. In 2007, Wal-Mart released a report stating that company contributions to employee profit sharing and 401(k) were $818 for each worker. In comparison, the top five executive were given company contributed stock options that ranged from one to five million dollars and the average contribution by Wal-Mart to the executives 401(k) was $8,400 (Barbaro, 2007). The critics of Wal-Mart do not take into account that the entry-level associate usually has little education. Whereas, the top executives are more educated individuals and Wal-Mart needs to offer them a salary that is commiserate with their level of education and talent.
Changes to Compensation System
Wal-Mart’s pay system works for the particular business they represent. If they were in a business where a person’s total abilities were important, Wal-Mart would be advised to use a different system. The skill-pay and person-pay systems look at the underlying abilities of an employee, to determine what pay scale they should be receiving. In Wal-Mart’s case, using one of these systems would possibly inflate wages, which in turn would raise prices throughout the store. This situation would not work, as the theme “everyday low prices” would be in jeopardy (Anthony et al, 2010).
Strategic Fit with Regard to External Equity
“Management must decide the importance of external equity in the organization’s compensation system” and the definition of external equity is considered “the degree to which an organization’s wages are competitive with those of its competitors” (Anthony et al, 2010, p.342). It must be understood that a company has to make the determination on what they will pay or what will be the compensation that they are willing to provide to their employees. Anthony, Kacmar and Perrewe go on and identify that the company compensation package can “influence (1) who is attracted to and who remains with an organization, (2) and employee’s motivation level, and (3) the organization’s operating costs” (2010, p 337).

When comparing Wal-Mart to other competitors, for instance Target, it has been identified that Wal-Mart compensation package is superior to that of Target. An article that was written in 2005 that identified certain differences between the two, indicates that Wal-Mart places itself in a better position than its competitors. Understanding at the time of this writing, Target refused to provide its compensation package and the information that was provided where based off former and current employees of Target. One area is the hourly wage page where the seems to be a difference from the low end by $2.75 to the top end of $1.00 compared to the low end of what Wal-Mart provides to its hourly wage (Serres, 2005).

The second difference seems to be that of health care that is provided to the employees of both companies. Chris Serres identifies that “both companies offer health care insurance to employees, but Target 's is considered more restrictive. Two years ago, Target dropped health care insurance coverage for all part-time workers. By contrast, Wal-Mart makes its medical plan available to all workers, full- and part-time” (2005). Serres also explains that at Wal-Mart, cashiers to the chief executive can obtain the same medical coverage, whereas Target offers many different medical plans based on location. With just these few examples, it can be seen that Wal-Mart strategically places itself in a better competitive posture than its competitors do.
Direct and Indirect Compensation
Direct and indirect compensation work in concert with each other to the extent that if an employee is not happy with one piece of compensation, it will have an effect on the other. Direct compensation refers to monetary benefits offered and provided to employees in return for the services they provide to the organization. The monetary benefits includes base salary, incentive pay, stock based incentives, bonuses, and commissions (Anthony et al, 2010). Indirect Compensation includes things that have a monetary value but are provided as a benefit. This includes health insurance, life insurance, retirement Plans such as pension and 401(k), vacations and holiday leave, and child care facilities and/or subsidies (Anthony et al, 2010).
Wal-Mart’s compensation packages should be linked to their business structure, employee recruitment, retention, motivation, performance, feedback and satisfaction. Compensation is typically among the first things potential employees consider when looking for employment. Wal-Mart’s direct and indirect compensation benefits program is extensive and very competitive in the industry. The benefits package includes profit sharing, comprehensive health-care plan and dental insurance for employee and his/her dependents, group life insurance and optional term-life insurance plans, business travel accident policy, salary continuance, long-term disability insurance, paid vacations, purchase discounts, generous stock purchase plan, and store manager’s bonus programs (Anthony et al, 2010). Wal-Mart’s executive compensation program is designed to provide fair compensation to executives based on their performance and contributions to the organization; provide incentives to attract and retain key executives; and instill a long-term commitment and develop pride and a sense of company ownership (Anthony et al, 2010).
Wal-Mart has a compelling competitive advantage, especially in its pricing strategy that pulls shoppers from greater distances, past other chains, to its stores. One reason why Wal-Mart has competitive advantage over other retail stores because of the number of stores they have and the lowest prices that they guarantee. Wal-Mart also provides supportive atmosphere for personal and career development of its associates. The company reimburses associates and their spouses for expenses incurred while obtaining a GED, and offer more than 7000 scholarships to high school seniors to put toward the college of their choice (Anthony et al, 2010).
Types of Compensation Programs
One of the most challenging tasks of any organization is strategically structuring their compensation program. “An organization’s compensation system should be consistent with the overall strategy of the organization” (Anthony, et al, 2010, p. 346). Because Wal-Mart’s culture tends to incorporate the idea of “inventiveness” in all of its associates, the compensation programs should be given another look.
There are several compensation programs that Human Resource can integrate for all of its employees – especially for those that are hourly, and this will minimize what some call “Corporate Welfare” (PBS, n.d.), where the hourly pay keeps the Wal-Mart employees at a poverty level. Some suggested compensation programs that could promote a win-win situation for both employees and associates and decrease turn-over are as follows:
• Merit Pay – Wal-Mart associates are encouraged to be inventive in ways that will increase sales and productivity; so, this form of compensation can pay them for their performance.
• Profit-Sharing Plans – This form of compensation would entice associates to be more eager to be more creative in increasing profits, and it will make them feel that they (hourly employees) have equal investments in the company
• Gain-Sharing Plan – This compensation plan would increase participation in the hourly associate as well as the managers. Knowing that one will be compensated for the many suggestions and implementations of profits and gains for the organization would be advantageous for all stakeholders.
The Manager should have compensation plans that are comparative to their skills and performance, along with the suggested compensation plans of the hourly employee.
Healthcare Coverage & Cost Containment
Wal-Mart offers its employees a comprehensive benefits package, which includes a health-care plan and dental insurance (Anthony et al, 2010). The coverage is offered to employees as well as his/her dependents. “Every associate can become eligible for health insurance for as little as $5 per month” (Anthony et al, 2010, p. 655).
Many employers offer health-care coverage to their employees. This benefit is seen as an essential part of any comprehensive benefits package. At times employers use this benefit to justify lower salaries (Purcell, 2009). However, the cost to employers for this coverage has greatly increased over the past few decades. As a result, employers need to address cost containment options. Wal-Mart also needs to address this if they have not already.
Wal-Mart may want to conduct an audit of the dependents currently receiving coverage. An audit may reveal that the employer is providing coverage to people that is not eligible. Examples of those that are not eligible include adult children and ex-spouses. Wal-Mart should require documentation for full-time students (Purcell, 2009).
Wal-Mart may also want to share a larger portion of the cost with employees. There are several ways to do this. First, Wal-Mart can ask that employees pay a percentage of the monthly cost of their health-care coverage. Second, Wal-Mart could increase co-pays in an effort to defray some of the cost to the employees (Purcell, 2009). “At the same time, employers must carefully evaluate these increases, as studies have shown that cost-sharing can cause plan participants to forgo needed medical care, which can have negative effects on participants who have chronic conditions …” (Purcell, 2009, p. 42).
Conclusion
Wal-Mart is an employer that seeks to forge a partnership with its’ associates. They offer a compensation package that not only fits the strategic environment but is also very competitive for its’ industry. At this time it is not recommended that Wal-Mart make any changes in regards to compensation but it is advised that Wal-Mart take a look at its health-care coverage cost. Wal-Mart must continue to offer this benefit but it can take steps to ensure that it is containing the cost of this necessary benefit.

References
Anthony, W.P., Kacmar, K.M., & Perrewe, P.L. (2010) Human resource management a strategic approach (6th ed). Mason, OH: Cengage Learning.
Barbaro, M. (2007, May 04). Business. Retrieved December 16, 2010, from The New York
Times: http://www.nytimes.com/2007/05/04/business/04walmart.html
Clark, E., & Edelson, S. (2009). Scott’s $30.2 Million Payday At Wal-Mart. WWD: Women’s Wear Daily, 197(84), 14-1Null. doi: Retrieved from EBSCOhost
Fogleman, S.L. (2001, May). Creative compensation. Western DariryBusiness Magazine, Retrieved from http://www.cnr.berkely.edu/ucce50/ag-labor/7article/article33.htm
Gupta, R. L. (2010). Closing the trust gap on executive pay. Directors & Boards, 34(5), 16.
Income, Poverty, and Health Insurance Coverage in the United States: 2009. (2010). Retrieved from http://www.census.gov/prod/2010pubs/p60-238.pdf
PBS (n.d.). STORE WARS: Wal-Mart Business Practices Retrieved from http://www.pbs.org/itvs/storewars/stores3.html Purcell, M.. (2009, April). Health-Care Cost Containment Strategies. Government Finance
Review, 25(2), 41-44. Retrieved December 16, 2010, from ABI/INFORM Global.
(Document ID: 1684869841).
Serres, C. (2005, May 22). Target vs. wal-mart is target corporation any better for workers?. Minneapolis Star-Tribune, Retrieved from: http://reclaimdemocracy.org/walmart/2005/target_better.php 2nd Paper Example
Running Head: Human Resources

Maintaining Human Resources Systems

Abstract
This paper covers issues related to maintaining the Human Resource system and explores the role of health and safety programs that avoid accidents and control liability as well as describes the major approaches to compensation and rewards.

Role of Health and Safety Programs and approaches to Compensation and Rewards
A human resource system in any organization plays a key role in the health and safety, compensation and rewards for its employees. Maintaining a health and safety program protects employees, prevents lawsuits, and ensures compliance to government rules and regulations. In addition, compensation and rewards for an organization make employees feel that they are valued, reduces employee turnover, and increases productivity, which can increase return on investment. That is why maintaining the Health and Safety programs and having approaches to compensation and rewards is critical to the human resource system.
Health and Safety Programs
Health and safety is critical to organizations and for the employees because it controls liability. Fazzari, A., & Mosca, J. (2009). states, “outdated business models, and lack of strategic planning” are couple of reasons human resource programs are very important. It is critical to have a human resource system focuses on maintaining health and safety program that encompasses the businesses as well as the employees. According Fazzari, A., & Mosca, J. (2009), “good human resource practices produce …positive organizational outcomes [such] as productivity increases, lower turnover, and enhanced performance.” Businesses should ask questions before investing time and money into systems. What will be the best way to maintain the system? Should a company establish programs to promote growth? What policies structure to use in the business? Preserving policies and procedures help businesses to become better at developing a

References: Anthony, W.P., Kacmar, K.M., & Perrewe, P.L. (2010) Human resource management a strategic approach (6th ed). Mason, OH: Cengage Learning. Barbaro, M. (2007, May 04). Business. Retrieved December 16, 2010, from The New York Times: http://www.nytimes.com/2007/05/04/business/04walmart.html Clark, E., & Edelson, S. (2009). Scott’s $30.2 Million Payday At Wal-Mart. WWD: Women’s Wear Daily, 197(84), 14-1Null. doi: Retrieved from EBSCOhost Fogleman, S.L Gupta, R. L. (2010). Closing the trust gap on executive pay. Directors & Boards, 34(5), 16. Income, Poverty, and Health Insurance Coverage in the United States: 2009. (2010). Retrieved from http://www.census.gov/prod/2010pubs/p60-238.pdf PBS (n.d.) Review, 25(2), 41-44. Retrieved December 16, 2010, from ABI/INFORM Global. (Document ID: 1684869841). Serres, C. (2005, May 22). Target vs. wal-mart is target corporation any better for workers?. Minneapolis Star-Tribune, Retrieved from: http://reclaimdemocracy.org/walmart/2005/target_better.php