Reference no: EM132516411

Total Compensation Strategy

Salary Administration

Assignment : Individual Case Study

Compensation Administration at International Plastic Products

The Simpsons Plastic Products Corporation was recently purchased by a much larger organization, International Plastics Ltd. The human resource director of International Plastics is concerned that the wage and salary policies of Simpsons are irrational and in some cases violate the law.

Further, while Simpsons has been as established company for approximately 5 years it operates in a very competitive market and recently lost 5% of its market share. The strength of Simpsons in the past has been its R&D division - R&D has brought to market several innovative plastic products - however there has recently been a lot of turn over and Simpsons recently lost two of its key R&D people to competition.

International Plastics purchased Simpsons on the strength of its R&D and past success in bringing to market innovative products. International itself, is an organization that might be described as a Defender and part of its business strategy for the next 5 years is to develop new market opportunities increasing its market share by 5%. International Plastics has recognized a niche in the world of plastics and recycling that it believes it can capitalize on through the acquisition of Simpsons. International requires upgrading in its ability to use technology while Simpsons needs stronger business systems and organizational structure.

The human resource director is also looking for ways to assimilate the compensation systems of International and Simpsons hoping to achieve a balance of internal and external equity, while fueling innovation and entrepreneurship/intrapreneurship through attractive incentives. Both companies lack a comprehensive compensation philosophy.

To evaluate the compensation programs of both Simpsons and International, you, as a recent human resources management graduate was hired to make the investigation. Key points of the investigation included:

Simpsons
• The wage range for hourly employees at Simpsons is from $7.50hr - $14.00.
• Average age range was 20-35 years.
• Overtime was not paid at Simpsons.
• The wage rate for different workers varied widely even on the same job at Simpsons to the extent that those employees who are heads of households received approximately 18 percent more than those workers who were not. Those that received the additional 18% tended to be men in spite of the fact that there were more female household heads in the workplace than men.
• On highly technical jobs, Simpsons pays a rate that is 20% above market. All other jobs are paid an average of 15% below market.
• Overall the turnover averages 10% - in technical jobs the turnover was less than 2%; in non-technical jobs turnover was nearly 20%.
• Absenteeism followed the same pattern.
International Plastics
• The wage range for hourly employees is from $8.50-$18.00hr depending on job class and length of service.
• Average age range is 28-40 years.
• Benefits on top of wages were approximately 25%.
• Overtime paid by International was per the Employment Standards Act.
• International's compensation system included job classes and 5 pay grades within each job - internal equity was extremely important to them.
• Raises were performance based within a percentage range at the discretion of the supervisor based against a complex evaluation system that attempted to ensure fairness (though the evaluation system was not popular with International staff).
• Average turnover rate was 3.5% - labour intensive areas saw turnover average at about 5% while technical enjoyed a turnover around 2%. Absenteeism was about the same. International was known in the industry for its low turnover rates - industry average was about 7%.

Include in your introduction any assumptions that you may have based your responses on. Please list references used. Please answer questions in a sequential format as per the questions versus a traditional case study format.

Question 1. What are the external conditions facing International and Simpsons, both individually and as an amalgamated organization?

Question 2. What are the business issues facing both companies, individual, prior to and after the amalgamation?

Question 3. At what stage are each company in the business life cycle - prior to an dafter the amalgamation. Describe the key characteristics of each to support your description.

Question 4. What laws, if any, are being violated by either company?

Question 5. Based on the stated and probably desirable business objectives of International, design a compensation philosophy that would support and assist the company in meeting its business objectives. Identify the benefits of your recommendations as well the possible barriers and how you would overcome them.

Question 6. Develop a step by step strategy for the design and implementation of the new compensation philosophy that you designed.