COMPENSATION AND BENEFITS

Compensation And Benefits

Letter of Transmittal

August 21, 2009

Dear Mr. President, Board Of Directors, Professor,

I am pleased to transmit to you a copy of the proposed revised Compensation and benefits strategic plan for the company.

The report describes the current issue that the company is facing regarding the compensation and benefits packages. To authenticate the significance of a good compensation and benefits package it takes of past literature to draw conclusions. The rest of the repot comprises of strategies to bring the change and implement the change. The report concludes with recommendations.

I thank you for taking the time and evaluating this report and the proposed strategies for a better compensation and benefits plan.

With best regards,

Yours sincerely,

Table of Contents

LETTER OF TRANSMITTAL2

INTRODUCTION4

PROBLEM STATEMENT4

LITERATURE REVIEW5

STRATEGIC PLAN FOR CHANGE10

FINAL RECOMMENDATIONS AND POSSIBLE OUTCOMES13

CONCLUSIONS13

REFERENCES15

Compensation And Benefits

Introduction

Compensation takes many forms. Total compensation is comprised of three components. These are base compensation, pay incentives and benefits. The first two components comprise of direct compensation, which is the largest component and is an important motivator. However, money is not the only motivator. Indirect compensation is the other component and it takes two forms. These are benefits and employee services. These can also play and important role in building the relationships between employees and employers. Benefits remain crucial to attracting, retraining and motivating employees(Perrins, 1997). The company is also attempting to develop a new compensation and benefits package to enhance recruiting and retention in the organization with the strategic objective of increasing overall production within the organization 25% over the next 5 years.

Problem Statement

Due to shrinking local labor market and increasing turnover in the business world and an strategic objective of increasing overall production within the organization 25% over the next 5 years the board members of the company propose a comprehensive and progressive compensation and benefits plan to increase retention in the Company. It is assumed that traditionally the company must have paid only minimum wage and mandatory benefits. The following paper will propose the costs of the plan, external and internal equity, and creative methods of compensation and voluntary benefits for the company.

Literature Review

        Most employers provide their employees with benefits such as medical and dental benefits, life insurance or disability benefits. Benefits now constitute approximately 30 percent of all compensation costs. (Koskie, Zigler, Jobin, Longhurst, 1995). Controlling the costs of employee benefit plans continues to be a primary objective of many employers. Organizations realize that they need to properly manage these costs. However, ensuring a adequate level of benefits, an effective partnership between all stakeholders, including the carrier, benefits consultants, medical community, the employee and the organization is also required.

        There are many reasons why employee benefit programs are provided. These are outlined by Raymond Koskie and et al (1995). They are:

The paternalism of employers- the concern that any employer will feel for the well-being of its employee,

Economics of scale- the extent to which benefits can be provided at lower cost through "bulk purchase",

Competitive pressures- the need to provide benefits as part of the compensation package in ...