HRPD705: Compensation Strategy and External Competitiveness Report

This report analyzes a compensation strategy for a software engineering firm, focusing on external competitiveness and the determination of a marketing manager's pay. It explores key concepts such as base pay, variable pay (bonuses, incentives), and indirect benefits like health insurance. The report examines the impact of pay-level and mix decisions on operating expenses, employee attitudes, and work behavior, recommending the use of lead policies to attract and retain employees. It also considers factors affecting pay levels, including labor market dynamics (quoted price vs. bourse) and product market factors (product demand and competition). The report also provides a job evaluation plan for Eastern Provincial University using the point method and includes compensable factors, factor scales, and a summary rating chart to determine the pay of employees based on the case study provided in the assignment brief.

Compensation strategy

External competitiveness
Task 1
The compensation strategy is the key remuneration principles for the company. Compensation
strategies are implemented in business to meet the competitive advantage as it needs the right
people consistently doing the right things in the right way and for the right reasons. The
compensation strategy is used by management to manage pay and benefits. A startup of the
company in McMurray, Alberta requires determining the pay of the marketing manager. External
competitiveness is a paying relationship in the organization and it pays relative to its
competitors. The organization sets a level of pay which is below, equal to or above to
competitors. The organization has to determine the pay relative to its competitors and it includes
base, bonuses, benefits and stock holdings (Hanson, et al., 2016). In an organization,
compensation strategies that are related to external competitiveness are attracted and retain
employees in the job, control cost and increase the revenue for the business. it also includes the
labor costs which is equal to the pay level times to several employees. When the pay level is
high, the labor cost will also be high and when the pay level is high like competitors it will
higher the cost of products or services. It is necessary to compare the pay of marketing manager
with the outside software engineering business.
There are alternatives that can be considered for deciding the pay of the marketing manager. Pay
levee is decided by management as it is an average of the array of rates within an organization.
Compensation best practices that are necessary to consider which deciding the pay in Alberta are
understanding the labor market, understanding job requirements, create a competitive strategy,
build a structure and pay according to performance. The advantages of pay structure are to
provide alignment in making the strategies for business. It helps in clarifying a relative worth of
the vacant position internally and externally. It is legally defensible to provide and ensure to pay
fair benefits to the employee. It helps in creating a clear path for the future career.
Lead policy- in external competitiveness, the lead policy is considered to maximize the ability
which attracts and helps in retaining employees and helps in minimizing employee
dissatisfaction with pay.

Lag policy- When a firm hinders their ability for attracting potential employees and form lag the
pay level by promising a return in the future as it increases the commitment of employees and
helps in fostering the teamwork. It helps in increasing productivity.
Flexible policies- there are other options of policy which can be considered in deciding the pay
of marketing manager. Policies vary for different occupational as it is based on the market and
critical skills of the employee.
Task 2
Forms of pay
Compensation for an employee can be decided on a direct and indirect basis. Direct
compensation for an employee includes a base pay which is basic salary and wages to an
employee. Variable pay is also included indirect compensation. Variable pay is bonuses,
incentives and stock options. Indirect benefits can also be given to employees like health
insurance, retirement plans, paid time off. Various types of payment and pay mix help in total
compensation of the employee. In exhibit 7.2, it is stated that the companies have the same total
compensation but the pay mix is different. Base, benefits, options, and bonuses are different for
employees but the total pay is the same (Heneman, et al., 2002). It helps in comparing a mix of
the same job of competitors but the pay mix is different for both.
Consequence of pay-level and mix decisions.
There are major consequences in the external competitiveness which are operating expenses and
employee attitudes and work behavior. The policies of competitiveness directly impact on the
objectives of compliance, efficiency, and fairness. It is recommended to consider the lead
policies for diminishing shirking and permit for hiring a marketing manager (Milkovich, 2002).
Fairness in pay level is the satisfaction of employees with pay as it is directly related to the pay
level. Compliance is to follow the wage laws and rights legislation as the various forms of pay
are regulated by the government.

Task 3
There are factors which affects the level of pay and mix while taking a decision
Labor market- there are two types of the labor market, one is quoted price and another is bourse.
In quoted price, price or ad’s of each item are labeled in a list of job opening starting wage and
the bourse market, it allows to occur haggling till when the agreement reaches to terms and
conditions. In these markets, employers are the buyers and employees are the sellers (Noe, et al.,
2017).
Theories of the labor market
Employers of the company always want to maximize the profits and the people in the labor
market are homogenous. The pay rate of labor reflects the cost which is associated with
employment like base wage, training, leaves, and benefits. Employers face the market as a
competitive and they are not allowed to pay above or below the rate of the market (Klimkiewicz,
and Beck-Krala, 2015).
Product market factor
It is essential for an organization to decide the pay and must generate enough revenue to meet all
the expenses like compensation. In the product market factor, product demand and degree of
competition are the important factors as product demand as the product in market lid on a
maximum pay level which can be set by employer and when the pay is above the maximum
level, the prices of the product increases to cover the expenses and allocate a greater share of
total revenue to cover labor costs (Cascio, 2015). In the degree of competition, employers are not
able to raise the prices because of the competitive market.
Task 4
It is recommended to hire a marketing manager for a software engineer firm and the pay will be
decided based on lead policy with taking consideration of competitors. It is recommended to
consider the theories for analyzing the pay level of the manager. It is necessary to consider the
external competitiveness to measure the pay as per the overall performance in the market.

To attract and retain an employee's employer has to set the different pay levels. Exhibit 7.1
illustrates that marketing manager pay is higher than the other profession as the base pay
depends on the overall performance of the market. Total compensation is higher as the
marketing manager is responsible for bringing the business for the startup of a software firm.
Reference
Milkovich, G. T., Newman, J. M., & Milkovich, C. (2002). Compensation (Vol. 8). New York:
McGraw-Hill.
Cascio, W. F. (2015). Managing human resources. McGraw-Hill.
Klimkiewicz, K., & Beck-Krala, E. (2015). RESPONSIBLE REWARDING SYSTEMS-THE
FIRST STEP TO EXPLORE THE RESEARCH AREA. Research Papers of the Wroclaw
University of Economics/Prace Naukowe Uniwersytetu Ekonomicznego we Wroclawiu,
(387).
Hanson, D., Hitt, M. A., Ireland, R. D., & Hoskisson, R. E. (2016). Strategic management:
Competitiveness and globalization. Cengage AU.
Noe, R. A., Hollenbeck, J. R., Gerhart, B., & Wright, P. M. (2017). Human resource
management: Gaining a competitive advantage. New York, NY: McGraw-Hill
Education.
Heneman, R. L., Ledford Jr, G. E., & Gresham, M. T. (2002). The changing nature of work and
its effects on compensation design and delivery. Strategic reward management: Design,
implementation, and evaluation, 35-73.