Plastec Company: A Strategic Compensation Plan
Webster University

Plastec Company has not had a good compensation plan, and as a result, they have had tremendous turnovers in the company. In an effort to make the compensation plan more effective and competitive, Plastec needs to compare their wage including variable pay and benefits with other employers. Recruiting and retaining machine operators has been a recurring problem for Plastec, and this is a result of lack of professional development in addition to the unattractive compensation plan. The company needs to provide appropriate benefits that cover the middle aged with a mix of employees who are single and others who have families.
Paul, the HR manager from Plastec Company has seen employees from the organization express that pay and benefits for employees are not as good as competitors such as Acme’s through several exit interviews. John, one of the managers at Plastec has also heard employees expressing this as well. Paul can identify using some simple methods which can compare Plastec Company pay and benefits with their competitors. Paul will need to determine if the organization will pay for labor below market, at market or above market. With the issue at Plastec Company, one can assume that the organization is paying below market. Benefits such as holiday and vacation with Acme have been perceived better in their organization.
Paul can use numerous recourses to determine comparable pay and benefits both locally, nationally, and globally. After he determines that the raw data on benefits such as pay, unemployment benefits, Social Security contributions, retirement, holiday and vacation benefits between Plastec and their competitors, he can use the U.S. Department of Labor website to compare hour and wage pay with like organizations in the area or region to develop a good baseline (U.S. Department of Labor, 2009) . He can also use U.S. Bureau of Labor Statistics or even job placing agencies to compare the true employee compensation rate on all benefits the organization has to offer (U.S. Bureau of Labor Statistics, 2012). Benefits often allow organizations to maintain the best talent, giving the organization the competitive advantage. It is vital that Plastec Company will need to attract and retain their employees. The culture of the organization will need to be changed and will need to begin with their orientation of new employees. The benefits programs at Plastec will need to be reviewed at the orientation of new employees and at annual reviews. Employees and managers will need to understand that total compensation at Plastec Company is not only pay, but other benefits such as unemployment benefits, monthly Social Security contributions, and retirement plans are benefits of the organization, and some of these benefits may not be the same with their competitors.
Recruiting and retaining machine operators has been a recurring problem for Plastec and one senior management wants to quickly solve. Exit interviews consistently show compensation, benefits, and professional development as key drivers in why employees decide to leave. Many of the operators feel they can do better elsewhere, and this constant turnover is disrupting Plastec’s potential for future growth. Machine operators are critical to Plastec’s operations but the work is generally viewed as mundane and repetitive. Unless deliberate action is taken to incentivize and motivate these operators to stay, Plastec will continue losing this talent to their competition. Variable pay as defined by Mathis & Jackson is compensation linked directly to group or individual performance. Variable pay plans are designed to provide tangible reward to employees who perform beyond expectations and exceed established goals. These plans can also serve to discourage mediocre or uninspired performance as well. Rewarding the machine operators for superior performance not only motivates them to stay with the company longer, but also encourages them to work harder and more efficiently. In order for any type of variable pay plan to work, Plastec must establish clear and attainable production goals and then tie those goals to operator performance (Mathis & Jackson, 2011).
By approaching variable pay from a group perspective, Plastec would promote goal sharing and instill a sense of teamwork and shared responsibility in meeting or exceeding production goals. When an organization rewards an entire group/team for their performance, cooperation among the members of that team also increases (Mathis & Jackson, 2011). Plastec’s machine operators perform similar tasks, therefore, individual incentives would be very difficult to measure or reward. A variable pay plan directly linked to Plastec’s production goals offering bonuses based on the collective efforts of the team makes everyone accountable for results. An effective bonus program draws employees into the process and creates buy-in and loyalty when those same employees feel their performance is making a measurable difference in attaining company goals or increasing profit. According to Jack Stack, president and CEO of SRC Holdings Corp, and contributing editor to Inc Magazine, “There is no greater motivator in the world than the opportunity to make a difference, to contribute, and to do something significant for yourself and your community.” (Stack, 2000). By instituting a variable pay plan focused on goal sharing, both the company and machine operators profit, and as production increases, so do the incentives and rewards.
As a part of total rewards, pay is a critical factor in employee retention. However, in addition to compensation, employee benefits are a very important aspect affecting retention, as well as a significant expense to the employer (Lytle, 2012). Employee benefits include not only health insurance, vacation and pension plans, but also work/life benefits such as flexible scheduling, child care support and non-standard working times. Employee benefits cost employers between 30% and 45% of total payroll costs, though, there are benefits (such as particular work/life benefits) that employers can include that have few costs (Fell, 1998). To determine the best mix of benefits that the Plastec Company should offer to stay competitive, Plastec should consider conducting an employee survey and a utilization review with their health insurance program to determine what general benefits are most important to their employees, and as well, to see which health services are most commonly used (Lytle, 2012; Mathis & Jackson, 2011). Plastec’s management has already discovered that the company is losing employees to competitors due to insufficient benefits. Two of the most apparent issues that employees have with Plastec’s benefits package are high health insurance co-pay costs and the company’s vacation policy. To correct these issues, Plastec needs to look into better or alternative health insurance programs and revise their vacation policy to match their competitors.
Since health insurance costs are an issue for Plastec employees, Plastec needs to consider what they can do to lower costs for both the company and the employee. When health insurance premiums and co-pays are too high, employees may reject company health insurance and choose to remain uninsured, driving up costs overall for everyone (Fell, 1998; Mathis & Jackson, 2011). By providing insurance that is low-cost to the employee, Plastec may encourage employee participation and therefore lower the group rate and the company’s overall health insurance expenditure. Plastec could also consider alternatives to traditional health insurance, such as an à la carte-style or “cafeteria” plan or a limited mini-medical plan, depending on the results of their utilization review.
Another factor that Plastec needs to take into account, when determining an appropriate benefits package, is the company’s employee demographics. Currently, Plastec Company’s employees are middle-aged workers, in their mid to late forties, with a mix of employees who are single and others who have families. Since Plastec employees are at an age where preventive care and early detection health screenings are important, Plastec should opt for a health insurance program that caters to this need, to keep their workers healthy and provide appropriate coverage for this demographic (Lytle, 2012). Because Plastec also has a mix of employees with families, Plastec can add domestic partner/family benefits to their health insurance package to remain competitive. In many cases, providing this option is low-cost to the employer since many spouses and domestic partners may already have their own insurance and will not utilize this option (Fell, 1998). In addition to updating their vacation policy to match competitors, Plastec could also implement flexible scheduling or non-traditional work schedules. Implementing flexible scheduling and/or non-traditional work schedules can be attractive to workers who have families, since this may help with work/life balance (Fell, 1998). Plastec may find that by implementing non-traditional work schedules (such as longer shifts per day, but less days worked per week), employees may prefer this over more generous vacation benefits. Implementing flexible scheduling and non-traditional work schedules is of little or no cost to the employer, and therefore a good alternative for Plastec consider (Fell, 1998).
Yes, there has been a lack of understanding of employment laws and regulations, but that doesn’t mean the new human resources manager can’t elevate or realign Plastec Company into an organization that can motivate and retain their employees. It will not be easy to retain the machine operators at Plastec without many things such as a better compensation plan, a better way of strengthening their training and educational needs and making improvements assessing their employees learning outcome so they are willing to strive for better positions within their organization. Plastec Company Management Team understands to go forward they must select qualified employees and assure they are provided with adequate training, better pay and benefits, and given an opportunity to help make Plastec Company a great organization to grow with.

References
Fell, K. (1998, November-December). What workers want: Benefits trends. Harvard Magazine, Retrieved from http://harvardmagazine.com/1998/11/ner.benefits.html
Stack, J. (2000, November 1). The problem with profit sharing. Retrieved from http://www.inc.com/magazine/19961101/1864.html
U.S. Department of Labor. (2009, July). Wage and Hour Division (WHD). Retrieved from http://www.dol.gov/whd/regs/compliance/whdfs16.htm
U.S. Bureau of Labor Statistics. (2012, August). International Labor Comparison. Retrieved from http://www.bls.gov/fls