Compensation and Benefits recommendation
Learning Team C
Luis Heredia
Alberto Cuen
Ramon Castillo
HRM-531
March 26th, 2014
Claudia Camacho A market evaluation and analysis conducted using common available internet sources for the compensation that a Limousine service company should offer in the Austin, TX area for the limousine driver’s job compensation package in order to stay competitive in its local area is described in the following paragraphs:

Employee compensation is composed of two parts:

Cash compensation is the direct pay provided by employers for work performed. Cash compensation has two elements: base pay and pay contingent on performance (e.g., merit increases, incentive pay, bonuses, gain sharing, and tips).

Fringe compensation refers to Employee Benefits programs. Fringe compensation is also broken-down into two parts: mandatory programs (Social Security, workers’ compensation, etc.) and discretionary programs (health benefits, life insurance benefits, pension plans, paid time off, tuition reimbursement).

According to the bureau of Labor Statistics of the United States Department of Labor (2014) website, the median annual wage for taxi drivers and chauffeurs in the state of Texas was $22,820 in May 2012. Adjusting for an annual 4 percent inflation rate during the years 2013 and 2014 the cost of living adjustment to the median annual wage should be around $24680. Our recommendation for now is to create a market match wage policy, in which this policy closely follows the typical market pay rates that way we stay competitive, not to mention that more seasoned drivers may also receive higher tips by employing better customer service skills.

Compensation structure

As assumed all legal fringe compensations will be provided to the 25 employees plus the local average discretionary program benefits provided in the Austin area are: Medical Insurance, Vacation Pay and a Retirement Plan, therefore we will continue to match the market conditions with all these benefits that include a 401K retirement plan with an employer matching contribution of up to 3% of the employee’s annual wages.

Compensation and benefits strategy

Considering the cities within 75 miles as a potential competitor we need to establish a competitive initial compensation and benefits package. Based on this assumption, we need to compare similar businesses in San Antonio, Texas and position ourselves as the best option in the market.
Compensation level in the area is above the U.S. National average; we need to offer hourly mean wage of $13.30 for entry level position and consider a pay difference based on experience for senior level position plus a hiring bonus if they are coming from a competitor. The reason we might recommend a hiring bonus for senior positions is because this could create a difference on the introduction phase of the new business as they would have deeper knowledge and familiarity of services to be offer to the customers in the area, propose new options, or any business opportunities.
Benefits for this type of work are normally very limited to what is required by law such as Social security and Medicare; Benefits package could make a big difference if we like employees to stay with the business and developed seniority. Starting with disability and health insurance including Vision and dental we should offer low cost insurance with flexible spending accounts giving them the option to set aside certain amount of their paycheck for daycare or dependent medical expenses before taxes.
Offer them different pension or retirement plans (401K/403B) after their first month with the company; including matching their contribution to a limit of 3% of their salary per month.
Time off or vacation time will be earn after each month in the company, this time can be used for paid personal time or sick days. Perfect attendance during the year will earn an additional 2 days for the following year. Time off earned will need to be used during that calendar year, no time off will be carried over to the following calendar year except those days earned by perfect attendance.
Tuition reimbursement should be offered but reviewed on an individual basis considering seniority and possible business application; commitment to a minimum of 3 years after graduation on the contrary reimbursement of tuition expenses will be required to the employee.

Performance Incentives and Merit Pay
Rewarding employees by an established performance plan allows the employer to maximize the performance of employees and improve the business bottom-line. These programs should focus on specific business issues, particularly those that generate revenue. The strategy should always drive for performance improvement and presented to the participants in a way that will elevate employee behavior and explain the rewards for achieving targeted goals.
When implementing performance incentive plans, it is important to plan for resolution of unintended consequences because financial incentives can easily generate unethical behavior, increase employee turnover, and foster envy and discontent. To avoid this, the measurement of performance must be simple, specific, attainable, and measurable with well-defined objectives for the employees, giving them a reasonable chance to gain something.
Merit pay can be used as the result of the performance incentives to recognize the employees for their effort and stimulate them to continue improving on their performance. The performance can be measured with the use of a point system to evaluate the size of incentive awarded to the employee.
These are the areas of measurement considered for the performance accrual of points, and each area requires a specific amount of points to generate a financial incentive and merit pay based on productivity, commitment, and responsibility.
Safety 20 points
The limousine service is a business with a certain degree of risk, considering the daily traffic commuting and the transporting of passengers who could be injured in case of accident. All company personnel are responsible for the safety of customers, themselves, and vehicles operated in their functions. Zero accidents in the month generate a score of 20 points and any incident regardless of severity causes the loss of all points for the area.

Health and wellness 20 points
Employees are motivated to live active healthy lives by rewarding them if they maintain a healthy lifestyle. This helps in reducing organizational costs and absenteeism. The employee is allowed to miss one day a month with doctor’s proof and earn full points. Any unexcused absence causes the loss of all points for the month.

Productivity 30 points
Employees are required to meet high productivity goals whenever they are on duty. They are expected to collect a survey from customers served with a 100% satisfaction expressed by the customer. Vehicle expenses must be within the limits established for operation and vehicles maintained at its best at all times. Personal professional appearance is part of this evaluation. Any demerit earned causes the loss of points for the month.

Referrals and lead generation 30 points

Employees will earn points for referring business to the company. Five points each order generated for service allowing employee to produce more than 30 points if enough service orders are generated.
This point system can have a monetary value assigned to it and create an incentive for the employee that wishes to earn extra money. The value to be assigned is left up to Mr. Stonefield to assign it according to his revenue projection.

Laws Related to the Benefits and Pay Program

The State of Texas has a current minimum wage of $7.25 per hour for general employment purposes. Taxi and limousine service drivers have an hourly mean wage of $13.30 and for the Austin area is the same. Pay and benefits must comply with federal minimum wage laws and whether state or federal minimum wage is higher than the other, the higher wage is to be paid.
Texas does not have laws governing the payment of overtime, therefore federal overtime laws apply. An employer must pay its employees at least twice per month and each period must consist as nearly as possible of an equal same number of days.
Employer needs to designate paydays and these paydays need to be consistent in period of time. If the employee is absent on payday, the employer is required to pay the employee on the next day the employee shows up for work. Benefits granted increasing income must be treated as regular earnings and taxed accordingly to federal wage laws.

Reference

Texas Workforce Commission (2013). Fast Facts. Retrieved March 25, 2014 from http://www.twc.state.tx.us/news/efte/efte.pdf
United States Department of Labor (2014). Fast Facts. http://www.bls.gov/ooh/transportation-and-material-moving/taxi-drivers-and-chauffeurs.htm
Academic Journal Management Services. Autumn 2011, Vol. 55 Issue 3