Compensation can be a strategic tool for organizations to attract, retain, and motivate their employees. More than a wages and salary earned by employee, compensation also includes benefits provided. An official statement specifying a company’s standpoint on compensation is known as compensation philosophy. According to the article, “It essentially explains the “why” behind employee pay and creates a framework for consistency. Employers can benefit from being transparent about their compensation philosophy and having an official pay strategy” (SHRM, 2015). Based on many factors, including the company’s financial status and employee talent requirements, the compensation philosophies are established by a collaborative effort with HR and senior leadership. A successful compensation philosophy supports the organization’s strategic plans, mission, and culture (SHRM, 2015).
When considering the A.P. Moller-Maersk Group study, Maersk established a compensation philosophy that would encourage quality, high performing talent to stay with the organization. After experiencing an increase in turnover, growth in business, and global expansion, Maersk’s executive members and HR leadership applied a people strategy session to focus on the company’s talent. As a result, the Maersk Group established a performance based compensation program. Divided into three groups, employees are classified by job performance and how their performance outcomes were attained. As stated in the study, “Employees were categorized as high performers (30%), successful (60%), and less successful (10%)” (Groysberg, pg. 7, 2013). In turn, the “high performers” receive maximum bonus amounts, “successful” performers receive 50% of the maximum bonus, and the “less effective” group receives 25% of the maximum bonus pay. According to the study, “ Employees with top scores under this system were entitled a bonus and a merit increase of 5%, while employees with lower scores were reviewed by their managers to determine if they were in the right position or if they needed more training” (Groysberg, pg.10, 2013). Ultimately, Maersk group changed from a compensation philosophy that promoted “family culture” to a philosophy that now focuses on high performance, which proved to direct the talent management strategy (Groysberg, 2013). A salary survey determines the wages paid to employees by other businesses within the same labor market. Salary surveys include results from a local, national, or even a global level, which may be used in multiple ways. Mainly, these surveys target the wage data; however, they can also collect data on additional employee benefits. The information collected from a wage surveys, can help HR build an effective strategy for compensation. In addition, a company can benefit by using the survey data for establishing employee rewards (like a company outing), benefits, and setting pay ranges including premium pay for shift differential or overtime. The biggest value of salary surveys to any organization is the data it supplies to construct a competitive pay structure. For example, a company that struggles with recruitment studies the results of a salary survey. This data shows their starting base pay is ten percent lower than other industries within their market, which is likely causing the recruitment issues. As stated by the author, “ It is the wage and salary survey that permits an organization to maintain external equity-that is, to pay its employees wages equivalent to the wages similar employees earn in other establishments” (Snell,
When considering the A.P. Moller-Maersk Group study, Maersk established a compensation philosophy that would encourage quality, high performing talent to stay with the organization. After experiencing an increase in turnover, growth in business, and global expansion, Maersk’s executive members and HR leadership applied a people strategy session to focus on the company’s talent. As a result, the Maersk Group established a performance based compensation program. Divided into three groups, employees are classified by job performance and how their performance outcomes were attained. As stated in the study, “Employees were categorized as high performers (30%), successful (60%), and less successful (10%)” (Groysberg, pg. 7, 2013). In turn, the “high performers” receive maximum bonus amounts, “successful” performers receive 50% of the maximum bonus, and the “less effective” group receives 25% of the maximum bonus pay. According to the study, “ Employees with top scores under this system were entitled a bonus and a merit increase of 5%, while employees with lower scores were reviewed by their managers to determine if they were in the right position or if they needed more training” (Groysberg, pg.10, 2013). Ultimately, Maersk group changed from a compensation philosophy that promoted “family culture” to a philosophy that now focuses on high performance, which proved to direct the talent management strategy (Groysberg, 2013). A salary survey determines the wages paid to employees by other businesses within the same labor market. Salary surveys include results from a local, national, or even a global level, which may be used in multiple ways. Mainly, these surveys target the wage data; however, they can also collect data on additional employee benefits. The information collected from a wage surveys, can help HR build an effective strategy for compensation. In addition, a company can benefit by using the survey data for establishing employee rewards (like a company outing), benefits, and setting pay ranges including premium pay for shift differential or overtime. The biggest value of salary surveys to any organization is the data it supplies to construct a competitive pay structure. For example, a company that struggles with recruitment studies the results of a salary survey. This data shows their starting base pay is ten percent lower than other industries within their market, which is likely causing the recruitment issues. As stated by the author, “ It is the wage and salary survey that permits an organization to maintain external equity-that is, to pay its employees wages equivalent to the wages similar employees earn in other establishments” (Snell,