SMC Executive Summary Compensation Proposal

The SMC Company manufactures ergonomic office equipment. The company answers the need of employers to ensure the health and safety of employees who use computers in a daily basis in the performance of their jobs. Ergonomically designed office equipments prevent any health related work injuries. The SMC Company has a complete list of ergonomic products; in addition, SMC provides consultation to their clients by conducting on-site evaluation of the workstation, ergonomic training, office space planning and on-site installation of office equipment.

To be competitive in the marketplace, SMC must see to it that they can attract, hire and retain the best workers, to offer the most equitable compensation structure and to motivate employee performance. At present, SMC is faced with the problems of shrinking local labor market and increasing turnover rates within the company. Thus, the Management of SMC tasked the Human Resource Department to evaluate its current compensation and benefits program. The HR department conducted an extensive research and analysis on its current compensation and benefits package. HR evaluated the various positions within SMC and chooses to first focus on the manufacturing department of the company because of the high turnover rates in the department. The manufacturing department is also the backbone of the company as it is responsible for the production of the goods that the company markets.

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After intensive research and analysis, HR is proposing to SMC upper management the following compensation and benefits package to employees within the manufacturing division of SMC.

a.       To increase the minimum wages

b.      To provide cash incentive program (based on what each worker produce)

c.       401K program

d.      To provide health insurance coverage

e.       To give each employee 1 week paid vacation leaves, paid sick days and paid holidays (Christmas, 4th of July, Labor Day and Thanksgiving).

The cost in administrating the new plan won’t be very expensive in terms of finances for the company for the changes would involve the manufacturing division only. Increasing the base rate pay of employees and providing additional benefits should be worked out by both the top management and the finance department. Money and fringe benefits had always motivated employees to increased performance and loyalty to the company thus the amount of the increase should answer the objectives of the new compensation package and that is to decrease turnover and be able to keep the best workers. On the other hand, the psychological costs of this plan might be greater.  The plan may cause some emotional issues within the company since other employees aside from the manufacturing division might react negatively to the new pay increase since they are not included in it. Thus, the planned compensation changes must be communicated to all employees as well as the time frame with which the changes will take place.

A compensation committee should be formed to oversee the implementation of the new compensation package. Before the implementation of the program, it should be communicated to the employees repeatedly and management should be able to give employees the opportunity to clarify and ask questions regarding the new program as well as explain to them the mechanics in the new program like will they be asked to contribute more, will their taxes increase, etc. Finally, the changes should be implemented in a step by step manner, wherein each aspect of the compensation package is integrated into the existing compensation structure.

The new compensation package for the manufacturing division is hoped to meet the need of the company to attract and retain the best workers and in turn increase job performance and also increase in production. Moreover, if the changes prove to be advantageous to the company, the changes can also be applied to the rest of the company. An evaluation of the compensation program should be done after a year of implementation.