3 components of a total reward system

Date

Abstract

This paper is provided to create, organize, and manage a total rewards program for an insurance company. First, it indicates the requirement of a total rewards system for the company. Then, it formulates a competitive strategy and explains it. Since the communication of a strategy is as important as the strategy itself, the paper includes a communication plan of the strategy. And last but not least it studies devising a competitive pay structure.

1. Create a brief overview of the company requirements for a total rewards system.

Company A is a holding company that provides financial protection, insurance and asset management services that employs 20,000 employees in 17 different countries in Europe, North America and Asia Pacific (The Datamonitor Group, 2011). There are 2,000 management-level individuals who speak a variety of languages. The company employs diverse individuals who are governed by multiple regulatory environments.

Company A’s business finds its primary source of strength in human competencies. The company believes in the power of talented and dedicated employees to make difference on the quality of the service delivered at the market. The company aims at gaining the preference of its customers and shareholders as well as its employees. Because the employees are at the core of purpose, the company intends to build its collective success around a relationship in which the needs of itself and of its employees are mutually satisfied.

The company needs a comprehensive total rewards strategy because it wants to:

* inspire and empower employees who continuously seek and adopt better ways to do his or her job to achieve their best.

* be competitive on the market with recruiting the best workforce. The expectation from employees is performing at high standards and aiming to exceed customer expectations.

* built a learning culture which fosters personal development, professional mobility, openness to change and willingness to learn.

* have employees who value individuals and their diversity, respect others and openly share information, knowledge and views to help colleagues succeed.

* act in line with its values of professionalism, innovation, pragmatism, team spirit and integrity.

2. Formulate a total rewards strategy to encompass the fundamentals of compensation and the regulatory environments.

A well-articulated compensation philosophy drives organizational success by aligning pay and other rewards with business strategy. It provides the foundation for plan design and administration and anchors current and future plans to the company's culture and values (Kaplan, 2006, p.32). Recognizing and rewarding achievement is the cornerstone of the company A’s compensation philosophy. The mission of the company is to attract, select, place and promote all individuals based on their qualifications. The company believes that performance-based compensation helps attract, develop and retain talented professionals. In addition to base pay which based upon local market conditions and targeted to be above market, the company provides the following types of potential compensation to reward performance:

* Annual Merit Increases (all exempt and nonexempt salaried employees are eligible)

* Annual Promotions (all exempt and nonexempt salaried employees are eligible)

* Annual Spot Bonuses (all exempt and nonexempt salaried employees are eligible)

* Short-Term Incentive Compensation (all exempt and nonexempt salaried employees are eligible)

* Long-Term Incentive Compensation (all exempt salaried employees are eligible)

Because of the compensation programs must adhere to specific laws designed to provide fairness in how employees are paid, the compensation system of the company sticks to laws and all of the regularities of the laws are followed well by the company (Worldatwork, 2007). There is no discrimination based on race, colour, religion, sex, pregnancy, national origin, and disability at hiring, firing or promoting. There are regulations about working conditions and workplace safety. Nonexempt employees’ wages, overtime pays are in unison with FLSA regulations. There is no child labour in the company.

Besides the compensation there are comprehensive benefit programs that the company offers to its employees which reward them for their hard work. The programs give them the opportunity to accumulate wealth, and provide for their protection and well-being. There are:

* Health insurance (all exempt and nonexempt salaried employees are eligible)

* Vision and dental insurance (all exempt salaried employees are eligible)

* 401 (k) plan (all exempt and nonexempt salaried employees are eligible)

* Disability plans (all exempt and nonexempt salaried employees are eligible)

* Adaption programs (all exempt salaried employees are eligible)

* Educational assistance programs (all exempt salaried employees are eligible)

* Life insurance (all exempt and nonexempt salaried employees are eligible)

* Day care service (all exempt salaried employees are eligible)

3. Explain the advantages of the total rewards strategy you are proposing and how it might satisfy the employees’ needs.

The purpose of this strategy, like every other rewards strategy, is to enhance recruitment, retention, and performance levels within the company. The company wants to be the first choice of potential employees to work which also affects its reputation in a good way. The company makes an emphasis on its wide benefits packages to show the value that it gives its employees as well as its compensation strategy. It drives organizational success through greater talent attraction, engagement and retention.

I believe that this strategy is helpful to create employee commitment. Employee commitment comes from employees who believe their future is tied to that of the organization and their willingness to make personal sacrifices for the organization. The more the company is dedicated to taking care of its employees, the more likely it is that the employees will take care of the organization (O. Ferrell, Fraedrich, and L. Farrell, 2011, p.18). With the strategy, employees will feel their selves and their families valued by the company. Thus, they will have intellectual and emotional attachment to the company. It will reduce employee turnover within the organization. They will feel their selves as a member of the company. Employees will feel that their work contributes to the success of the organization and have a clear line of sight between their roles and company objectives. They will want to do their best, which will be increased profitability, and recommend their company as a good place to work which will affect the reputation of the company.

4. Determine the key communication components of the total rewards system.

A competitive and desirable total rewards system will not be effective if employees and prospective employees don’t know what is in it. This makes communication of the system just as important as the system itself (Nelson, 2010, p. 4). Before the company starts to communicate the strategy with employees, it needs to figure out some issues, like:

* How to communicate with different level of employees? (exempt- nonexempt)

* When to communicate?

* Which media should be preferred?

* Who will communicate with employees?

After the company clarifies its mind about these issues, it can start to communicate the strategy.

There will be two teams to communicate different levels of employees. Because of a need of different communication styles and media, team 1 will communicate all exempt employees, while team 2 is taking care of nonexempt employees. Team 2 will give detailed information to nonexempt employees about the strategy during the recruitment process. They will make the emphasis on implementing of the strategy and the policies. Team 1 also gives detailed information to exempt employees during the recruitment process but they will make emphasis on tailored rewards to motive them.

Also both team 1 and team 2 will be provided written explanation of the strategy to both exempt and nonexempt employees. Additionally, there will be audio about the strategy for nonexempt employees. There is a toll free lines are available to guide both exempt and nonexempt employees about the using of benefits.

Additionally, advisors will be available at the company for existing employees who wants to tailor the received benefits. For example, an employee who just had an accident and had some disabilities can start to benefit disability programs on guidelines of the company’s advisors. Also, the job of those advisors is to create a career path for the employees and guided them who want to have reimbursement opportunities as well as providing trainings within the company. So, employees can have verbal communication with them whenever they need.

When changes happen on one of the component of the program, the company gathers employees in a conference room to let them know about the changes. Also depends on the level of the employees it provides e-mails or flyers about the changes. Communication at the every stage of the program is too important for the company.

5. Indicate your strategy for devising a competitive pay structure.

First of all, to build a competitive pay structure the company has to develop an accurate description of the jobs to be evaluated. The job description is used to ensure accurate comparison with published market surveys and for internal comparisons with other jobs within the company. The job description should state the reason the job exists and list the key duties and responsibilities. It should spell out the qualifications needed for competent performance of the job duties, including educational and experience requirements, skills and abilities needed to do the job, as well as any physical demands and environmental exposures encountered (EarthLink Inc., 2012).

External equity is more important for the company than internal equity. Thus, the process of collecting data via surveys is really important process for the company. At the hiring process the rate is higher than market but over time, when a commitment was gained from employees over years with helping of benefits of the company, the rate is kept in line market price during the seniority years of employees. So, the minimum salary of the jobs is higher than market but midpoint and maximum are in unison with the market. Also the company considers internal equity somehow. There are different salary minimum, midpoint and maximum ranges for some nonexempt jobs according to the importance of the department that the job performed within the organization.

References

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