Holland Enterprises Marketing Strategy

Running Head: Compensation and Benefits Strategy

Title

A revised compensation and benefits strategy for Holland Enterprises.
Introduction:
Holland Enterprises Inc is a large firm with about 3,500 employees. However, the company is facing a huge problem in terms of its human resources as records show that the company has lost over 25% of its workforce since 2007. Exit interviews of leaving staff members show that most of the employees have resigned because of their perception that the compensation and benefit system at Holland Enterprises is very unfair and uncompetitive in the marketplace. I hereby present an analysis of the concept of the compensation and benefits and a revised strategy for the same for Holland Enterprises as a
HR consultant. Compensation refers to the monetary aspects of a pay package and includes bonuses, merit increases, variable pay, and long-term incentive compensation. The term “benefits” refers to everything else such as healthcare, pension plans, stock options and legal services. It must be understood that compensation and benefits package offered by an organization is very important for motivating, recognizing good performance and rewarding of an employee (Arthur, 2001). It also gives the company a fair employer status in society. It is understandable that exit interviews at Holland Enterprises show that 25% of its employees are leaving for better prospects. According to Aon Consulting survey of 1800 U.S. employees, “25% employees have said that they would quit their present jobs for 10@ more and more than 55% would leave for less than or equal to 20%” (Arthur, 2001, p. 61). Thesis: To help in the retention of its employees, it is recommended that the Holland Enterprises Inc fixes a competitive and fair base salary for its employees, have a variable pay component that would be associated with performance and ensure that the employees have a wide range of benefits such as healthcare insurance, pension plans, training and education, vacations, stock options etc.
Compensation:
Compensation and benefits makes up for a large part of the total expenditure for a company and hence it has to be closely aligned with the accounting section (Biswas, 2012). A total compensation structure would involve “base, cash incentives or bonuses, equity compensation; cash based long-term incentives, executive compensation, sales compensation, risk benefits, retirement benefits and other benefits” (Biswas, 2012, p. 1). Base or base salary refers to the fixed amount that has to be paid to the employee. It is the largest portion of the total pay package. Jobs of similar value from both - the external market and the internal perspective- are grouped together and most salary structures have a minimum point, a mid point and a maximum point. The minimum refers to the least base pay that can used for entry level employees and the maximum refers to high pay rates for employees who perform very well and have lots of experience. It is best to have employees in the minimum and mid-point levels so that can be salary increases in the future (Arthur, 2001). Bonuses are another element of compensation. Bonuses may be as little as fifty dollars for lower job levels and maybe even $25000 for top level managers (Arthur, 2001). Merit salary increases are periodic increases to base pay after an annual performance evaluation. It’s generally greater for those employees closer to the minimum point in a range. They are not sufficient to motivate or reward performances, but necessary as employees feel entitled to it. Performance-based variable pay refers to a percentage of base pay that is awarded to an employee based on his individual contribution or performance. They are often paid in cash on an annual, biannual or quarterly basis (Arthur, 2001). There is also the Skill- and Competency-Based Pay that rewards employees who acquire new skills that would add value to their services. This is particularly useful when the skills are competency based such as software skills. Some companies offer long-term incentive compensation in the form of stock option plans or others. Randy Siegel (1992) insists that employees must be compensated by their worth to the organization.
Benefits:
Benefits that a company can offer can range from health insurance to prepaid legal services and often employees choose a job with most benefits when they have multiple job offers (Arthur, 2001).
It is interesting to note that for many employees training means a lot more than money and they consider sponsorship to training programs as a major benefit. Healthcare costs are on the rise and hence employees value their healthcare plans a lot. It is important for companies to review their healthcare benefits annually so that they could know what the total requested coverage is and how much it would cost and to what extent it might be utilized (Arthur, 2001). Many employers offer no pension coverage to their employees. There are two types of pension plans: defined benefit (DB) and defined contribution (DC). In DB plans, employers have to pay the employees the pension amount that is calculated using a fixed percentage of their salary and years of experience (Arthur, 2001). DC plans are those that allow workers to manage their own retirement savings and investments. “Stock Options” allow employees to buy the stock of their company at a fixed price for a limited time period. They profit when the company does well on the market (Arthur, 2001). Employers may also offer their employees legal benefits according to which employers can utilize the services of a lawyer for their varied needs. Some employers bear the total costs and some others contribute partially (Arthur, 2001).
“LegalWise is a very popular and affordable legal plan that comes at three dollars a month with unlimited telephone access to attorneys, simple document review, a free will, unlimited third-party calls and letters, and discounted rates on other services” (Arthur, 2001, p. 84). There are many other high-end plans with greater benefits for higher premiums. Tocher et al (2006) have found that new employees desire to have a portion of their salary to be linked to incentive pay. It was also found that new employees preferred to have “monetary and security related benefits compared to time and family related benefits” (Tocher et al., 2006, p. 84).
Recommendations for Holland Enterprises Inc.:
According to a study by Odunlade (2012), that involved library personnel, there is definitely a relationship between employee compensation and job satisfaction. Holland Enterprises Inc can attract and retain its workforce if it redesigns its compensation and benefits system by taking the following steps: * Holland Enterprises must determine its base pay programs in accordance with the current market practices. To do this, first of all there must be an identification and evaluation of the competitive markets. The base salary has to be fixed based on nature of industry, the geographic location, total employment and annual revenue for all the organizations that can be considered as competitors of Holland Enterprises Inc. The assessment must also include the duties, skills and impact levels of all the jobs that are similar in size and scope. The salary structure for managing competitive base pay levels for all the jobs in Holland Enterprises must be developed such that there are pay ranges for specific jobs in a way that would permit salary growth. * Generally employees are given 5-25% of a year’s pay as bonus.
This is particularly useful to attract employees to Holland Enterprises Inc. without increasing salary levels. It would also be a great strategy for the company to absorb the withholding taxes that come with signing bonuses so that it would benefit the employees. * Holland Enterprises Inc must take a total value approach to its compensation plan. It must identify and offer a suitable mix of base and incentive pay to help in retaining its employees and achieve its strategic objectives. * Each employee must be made recipient to one of the company’s incentive programs all of which are based on performance of the employee. Such incentive plans will be the annual incentive plan that is based on performance results, a specialized incentive plan for certain groups of employees and a tactical incentive plan that would recognize the contribution of individual employees in certain particular projects. The payouts must be in cash. * Holland Enterprises Inc must communication to its employees, its pay philosophy and also the frameworks on which salaries and incentive pays are designed. An orientation session should be arranged for the employees where they get all the information they need on salary structures, incentive plans,
etc. * Holland Enterprises Inc must ensure it sends its top employees to conferences and seminars, off in-house managerial training and support their education. Other major benefits include retirement, healthcare, and time off with pay. * Holland Enterprises Inc must offer a defined contribution plan, such as 401(k) plans and a defined benefits pension plan. A matched savings plan can be included as part of the defined contribution plan. * The company must provide preventative programs that include training and education, health risk assessments and screenings, smoke-free workplaces, and disease management programs. * On average, employees must be given 10.5 vacation days and eleven paid holidays. * Holland Enterprises Inc must get to know what their employees want and what kind of healthcare plans they prefer. The employees must be given a choice of plans – Health maintenance organizations (HMOs) or Managed Care or Preferred provider organizations (PPOs) or Point of service (POS) plans. Employees must be given a list of options with the plans and costs and their benefits clearly explained. Next, after the employee has selected a plan, the selection must be confirmed in writing along with confirmed regular payroll deduction. The plans must be reviewed and updated annually. * Holland Enterprises Inc should offer options that are worth 10% of an employee’s usual pay. * Holland Enterprises Inc must first search for a A.M. Best rating of “A” when it searches for legal insurance provider. A good plan must be chosen depending on its breadth of services so that it covers wills and trusts, estate planning, credit card debt, bankruptcy, family law, criminal defense, emergency services, etc. Care must be taken that the employees are satisfied with the program.
Conclusion:
Compensation and benefit system of a company is very important for retention of its employees, to attract good employees and also to motivate, recognize and reward employee performance. Every organization must have a compensation philosophy that determines where it wants to position its pay levels with respect to its competitors in the market. After deciding on its philosophy, the company must focus on the various elements of the compensation and benefits system and make its decisions. The aim is not only to have fair and competitive base pay scales but also to retain top workers. In the case of Holland Enterprises Inc, the main objective is to retain its employees. And for that it has to focus both on the compensation and benefits to employees. By having a reasonable base pay with a variable component that would be linked to individual performance and by having a wide range of benefits in terms of health insurance, pensions, stock options and legal services, Holland Enterprises Inc would be able to retain its workforce.

Bibliography:
Arthur, D. (2001). The Employee Recruitment and Retention Handbook. New York: AMACOM Publishers
Biswas, B.D. (2012). Compensation and Benefit Design: Applying Finance and Accounting Principles to Global Human Resource Management Systems. FT Press
Odunlade, R.O. (2012). “Managing Employee Compensation and Benefits for Job Satisfaction in Libraries and Information Centres in Nigeria”. Library Philosophy and Practice 2012. Accessed online on 9 June 2013 at http://unllib.unl.edu/LPP/odunlade.pdf
Siegel, R. (1992). “Seven Steps to Keep Top Performers”. Public Relations Journal, 48(2): February1992, p. 12.
Tocher, N., Feild, H.S. and Giles, W.F. (2006). “Valuations of Compensation and Benefit Items by New Entrants into the Professional Workforce: Do Men and Women Differ?” Journal of Employment Counseling, 43(2): June 2006, p. 84+