CASE STUDY

Compensation Management

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Table of Contents

Introduction1

Effect of Compensation Policies1

Equal Pay Act2

Improvements Made to Minimize the Gap2

Ways to Attract, Retain and Motivate Employees3

Recognition3

Training3

Career Path4

Stress Management4

Conducive Work Environment4

Impact of Education on Compensation4

Comparison of Salaries5

Jobs in Demand5

Conclusion6

Compensation Management

Introduction

Compensation policies vary significantly in different industries. Some organizations offer a complete lucrative package, whereas others just offer a basic salary plus bonus. Difference in package affects the competitiveness of the company. This concept is elaborated further in the light of the insurance industry. The insurance industry in America consists of about 135,000 organizations including big giants like Marsh, Arthur J Gallagher, and State Farm. The individual package differs from one company to another; the basic theme remains the same. The salary package in the insurance industry mostly revolves around the performance of the employees. Sales agents are the core revenue generating employees who get a sizeable portion of income from commissions on sales. Since this job is performance-based, therefore, the net-salary largely depends upon the sales of the product and its contribution in the revenue (Carson, 2002).

Effect of Compensation Policies

In the insurance industry, demand is related to the economic conditions of the country. When the economy expands, so does the demand for insurance. The percentage of employment, income-level and commercial business activities also influence the industry. Another important factor is that the revenue of agencies depends on client referrals, effective marketing, and customer service. All these factors lead to unethical and noncompetitive practices by the sales agents. The fact that the major part of their salary depends upon commissions from insurance related transactions; it prompts them to engage in aggressive marketing and adopt strategies that may hurt the competition in the industry.

Lawsuits alleging unethical and illegitimate insurance sales practices have received widespread publicity in recent years. One of the major sources of ethical conflicts for insurance agents is the industry reliance on straight commission compensation. Controversial practices by insurance agents such as accepting contingent commissions and bid rigging have come under legal scrutiny. A very common practice followed in this regard in the submission of low bids by forged buyers. The purpose is to create the appearance of high demand. The practice of contingent commissions is also criticized for creating conflict of interest for brokers in regards to serving insurers to the detriment of policy buyers. This is so popular in the industry because the brokers get compensation from insurance carriers depending upon the volume of business they generate.

Equal Pay Act

The American Congress passed equal pay Act in 1963. The intention behind this act was to restrict discrimination in wages on account of gender. The employer cannot pay lower wage to a woman than man for performing the same job. The only difference can be on the basis of seniority, education and experience. At that time, women earned 69 cents to a dollar as compare to man. At present, this gap is lessened up to 80 cents a dollar. Still, minimum gap of twenty percent exists. African countries are experiencing ...