Strategic compensation is a key factor in the management of staff within an organization . This is because it can significantly influence the behaviour of employees. In this regard, every employee must perceive the compensation as fair, competitive, motivating, understandable and in line with the current job market ( Aggarwal & Samwick, 1999) . The compensation experts, as part of the human resource team interact with groups within the company staff, which include staff union representatives as well as top managers. According to Martocchio (1998) , compensation entails both the intrinsic and extrinsic rewards that employees receive for undertaking their jobs. Intrinsic compensation covers the psychological perspectives of employees resulting from their employment duties. On the other hand, extrinsic compensation includes the financial and non-monetary rewards (Martocchio, 1998) .
In this essay, a strategic pay structure for CapraTek will be created using the five-step system proposed by Martocchio (1998). The essay will then analyze the merit-pay systems, sales-incentive compensation plans and person-focused systems and their applicability to CapraTek. Finally, the essay will analyze the alignment of job classifications to the pay structure.
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Strategic Pay Structure for CapraTek
Human resource professionals are mandated to develop pay structures for their respective organizations . The development stages may be carried out hand in hand with outsourced personnel or independently within the organization . The creation of pay structures must put into consideration several core steps as proposed by Martocchio (1998). CapraTek is progressively developing its newest facility in Illinois. In this regard, the Human Resource Department is charged with ensuring that a competitive strategy is developed with the aim of compensating the new staff members. In this pursuit, there is a need to recognize that there are several categories of workers at Mahomet. However, this pay structure will focus on the administrative job structure and will be based on the five steps proposed by Martocchio.
The merit-pay system compensates people based on their performance. Usually, the system focuses on giving bonuses to workers who are efficient and deliver outstanding results in their day to day tasks ( Aggarwal & Samwick, 1999) . The aim is to motivate employees for sacrificing their time to serve the company. On the other hand, the person-based system usually rewards employees on their acquisition of competencies related to their job instead of successful performance at work. Sales-incentive compensation plans are targeted at a firm’s sales representatives. The plans are based on individual role in the sales cycle, the kind of sales engagements the individuals are involved in, and their level of seniority. For efficiency, each sales-incentive compensation plan should be unique to its respective team. However, for a pay system to be holistic and fair, several factors must be put into consideration. This underscores the need for Martocchio’s five-step system.
Five-step Compensation System
The Human Resource Department should engage with several stakeholders in coming up with an unbiased pay structure. In this regard, employees must receive the pay that they rightfully deserve. This ensures that they are motivated and happy at work ( Aggarwal & Samwick, 1999) . Based on feedback from various stakeholders, several tactical decisions and contextual issues are strong determinants of the pay that an employee ought to receive. Some of these factors include the consideration of external factors that are beyond CapraTek. For instance, a competitive system must consider the market forces and ensure that it gives an organization the advantage of retaining its employees. Martocchio (1998) proposed the following steps in the development of pay structures.
Job Analysis: This process investigates the different jobs within a firm. Thereby, the result incorporates the title, summary of duties/responsibilities, and a brief description of the work context. Also, the analysis includes the qualifications, including skills and abilities that are essential in performing the job.
Job Evaluation: This is the process of determining whether or not a particular position is valuable to a company. Subsequently, ranking of the positions within an organization is done . This is aimed at ensuring that employees perceive the compensation fair.
Identification of Compensation Policy: This process determines the positions within an organization , depending on the current market. This will determine if a company is in a position to attract new employees and retain the existing ones.
Analysis of Pay Survey: This is the process of analyzing information collected from different organizations which relate to the labour market of interest to the company . This information assists in keeping the compensation within the organization competitive externally. Retention and attraction of personnel can be enhanced through externally competitive compensation plans (Noe et al., 2006) .
Creation of Pay Structure: This is the final stage of the process and merges the external factors (step 4) with the internal (step 2) in a “single regression to develop a market pay line” (Burke, 2008) .
Administrative Job Structures for CapraTek in Mahomet, Illinois
Informed by the job analysis and evaluation, the following are the key positions, ranked from the highest to the lowest. The job description and responsibilities for each position are also given .
Executive Assistant : Performs administrative duties for executive management. These include screening calls; managing calendars; coordinating meetings and travel plans; preparing reports using standard word processing, spreadsheet, and presentation software. Also involved in formatting financial data for reports and other uses ; and lastly, supervising the support staff.
Administrative Assistant : Performs administrative support activities such as the use of word processing, spreadsheet and presentation software. Duties also include fielding telephone calls, filing and data entry. May assist with extra work from the senior administrative and executive assistants. May also need to relieve or fill in as departmental or main receptionist wherever needed. Typically, the administrative assistant supports multiple supervisors.
Office Manager : Coordinates various office operations, services, and procedures. Prepares payroll; develops correspondence and filing processes and standards, reviews and approves office supply purchases. Assigns and supervises many administrative functions and assists with some aspects of the management of a facility. These include cleaning or maintaining lunch and break room supplies.
Warehouse Clerk: This clerk receives, stores and distributes materials, tools, equipment and products within the warehouse, ensuring accuracy and timeliness of all job functions. Duties may also include assisting with receiving materials and merchandise, matching purchase orders to sales orders; reading customer orders, work orders, shipping orders or requisitions to determine requirements, moving materials to or from designated areas, racks, shelves or bins according to predetermined characteristics such as size, type, style, color or product code. Also assists with the assembly of customer orders from stock (Noe et al., 2006) .
CapraTek Strategic Pay Structure
Development of a strategic pay structure is carried out with the involvement of various stakeholders. Subsequently, propositions are made of the different stakes based on the positions available and market compensation rates. This is aimed at maintaining a company’s competitive edge as well as the retention and attraction of employees. Informed by the above, the strategic pay structure for CapraTek’s new plant is as follows;
|Compensation range per annum
|Above average research skills, flexibility, outstanding interpersonal skills, the ability to work well with people including clients and vendors.
|$47, 000 – $51, 100
|Strong software skills, strong computer and Internet research skills, flexibility, excellent interpersonal skills, ability to work well at all levels of the organization .
|$44, 000- $46, 000
|Good communication skills and accounting knowledge
|$39, 000- $42, 000
|Good accounting skills, warehousing, interpersonal skills, shipping management, etc.
|$37, 000- $41, 000
The above pay structure will give CapraTek’s Mahomet plant a competitive advantage by ensuring that it not only retains its existing employees but also attracts new ones. The compensation plan incorporates information on the average earnings for personnel in the job market. The strategic pay structure also provides vital information to stakeholders, who are keen on ensuring that remuneration is both fair and attractive. In conclusion, the strategic pay structure will ensure that CapraTek’s employees are motivated . Overall, this will contribute towards the enhancement of the company’s performance.
Aggarwal, R. K., & Samwick, A. A. (1999). Executive compensation, strategic competition, and relative performance evaluation: Theory and evidence. The Journal of Finance , 54 (6).
Burke, L. A. (2008). Case Study and Integrated Application Exercises: Designing A Pay Structure. Alexandria, VA: Society for Human Resource Management.
Martocchio, J. J. (1998). Strategic Compensation: A Human Resource Management Approach. Pearson Education India.
Noe, R. A., Hollenbeck, J. R., Gerhart, B., & Wright, P. M. (2006). Human resource management : Gaining a competitive advantage.