The Fit Stop: A Comprehensive Compensation Strategy Case Study

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Case Study
The Fit Stop
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Table of Contents
INTRODUCTION............................................................................................................................. 3
1. Explain how base pay should be offered as one element of the compensation mix for staff.
Support your recommendation with four reasons........................................................................3
Recommendations.....................................................................................................................3
2. Recommend an organizational performance pay plan for “The Fit Stop”. Describe two key
elements of the plan......................................................................................................................4
The Fit Stop Pay Plan................................................................................................................. 4
3. Using the five-step compensation strategy formulation process and formulate a strategy
and summarize. Rationale for each of the three elements of the compensation mix...................5
Rationale....................................................................................................................................6
4. Identify the benefits that you would recommend for this organization. Justify each of the
benefit offerings............................................................................................................................ 7
Benefits of indirect pay..............................................................................................................7
CONCLUSION................................................................................................................................. 8
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INTRODUCTION
The case study is all about to analyze the strategy for compensation that is suitable for The Fit
Stop. Compensation mix strategy is fitted to the organization in competitive benefits and
forming for ensuring the job satisfaction of the employees. The Fit Stop must monitor the
contribution of managerial strategy in compensation strategy formulation process.
1. Explain how base pay should be offered as one element of the
compensation mix for staff. Support your recommendation with
four reasons
Base Pay is the initial rate of return to the staff receives in exchange of services based on a
month or per day salary, it excludes bonus or extra pay or lump sum compensation. The base
pay is related to time-based pay and it is feasible for the jobs. The Base pay is offered as a
component of compensation mix because of the reasons below:
Recommendations
 Base pay is a time-based salary and supports the managerial strategies, it increases
flexibility between the employees and the superiors
 It permits the staff to encourage and recognize the job behaviour which results in the
development of skills
 A pay-for-knowledge strategy of base pay can improve the involvement in managerial
strategy and support the base pay technique
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 Base pay is easy to implement and administer, it guides the employees for better
performance according to the need not by restricting to an individual behaviour
2. Recommend an organizational performance pay plan for “The Fit
Stop”. Describe two key elements of the plan
The plan for organizational performance includes the employee profit sharing, employee’s stock
and long term compensations.
Choosing from these three plans Profit Sharing Pay Plan is appropriate for The Fit Stop. The pay
plan bonus is provided to the staff which is based on a proper compensation system and on the
organizational overall profit.
The Fit Stop Pay Plan
 The current distribution plan
The plan of profit sharing is also called cash plan which pays a part of the profit of the
organization in cash. This plan is frequent and depends on the availability of the profit data.
 A deferred plan
In this deferred plan, the profit gets distributed as a bonus based on profit sharing on the day of
termination or retirement of the employees.
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3. Using the five-step compensation strategy formulation process and
formulate a strategy and summarize. Rationale for each of the
three elements of the compensation mix
Strategy formulation process is based on the five-step process.
 It is important for the organization to define the behaviour pattern of the employees for
success
 Defining the roles that played by compensation and reward system
 The component needs of the compensation mix are to be determined
 Policies should be developed for the employees to receive the established
remunerations
 To determine the strategy of the remuneration process, it is important to evaluate the
pre-implementation process that meets the criteria of success
Compensation strategy
Job family: Staff
Total pay
 Base pay
1. Job evaluation
2. Pay for knowledge
3. Market pricing
 Performance pay
50%
-
-
50%
30%
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1. Organization performance
2. Group performance
3. Individual performance
 Indirect pay
1. Health & life insurance
2. Pension plan
3. Mandatory benefits
5%
10%
15%
20%
3%
4%
8%
Rationale
 Base pay
The base pay is related to time-based pay and it is feasible for the jobs and important
component of the compensation mix. Base pay connotes the employer assurance towards the
employee with the help of increasing the managerial strategies. This also indicates the
significance of the job profile to the staffs. The base pay is based on two labels such as the
competency-based pay and skill-based pay.
 Performance pay
The performance-based pay includes the behaviour of the employees towards the organization
and the actions of motivation. This helps in motivating the employees towards the success of
the organization and establishes the relation among the capacity to pay and remuneration to
employees. The remunerations are based on the performances of an organization, group or
individual.
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 Indirect pay
The indirect pay is the extra payment that gets received by an employee rather than a basic
salary, this includes mandatory benefits, health and life insurance, pension plans etc. It attracts
the employees towards the extra benefit of indirect pay as remuneration. These can be in the
form of rewards in place of cash or cheque and by creating purchases in massive quantities, the
organization also achieve the economies of scale.
4. Identify the benefits that you would recommend for this
organization. Justify each of the benefit offerings
Remunerations and rewards are indirect pay which attracts the employees towards the benefits
they are getting from the organization. This will be helpful for organizational success as well as
for the employee's motivation.
Benefits of indirect pay
 Competitive pressure
The benefits of indirect pay get increases as the increase in competitive pressure, where
employees are getting more. In competitive pressure, the employer has to offer similar or more
benefits to the employees that are getting by others to attract them. For example: Providing
Health & life insurance security as indirect payments to the employees to attract them.
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 Financial security
The benefit related to financial security and maintains the peace of mind can protect
employees and maintain good employee's performance. Employees, who have concerned
about their ability to deal with the problems like disable, health expenses etc., may have faced
difficulty in work. Financial security is important for them to work properly in the organization.
 Additional benefits
This is important to satisfy the security needs of the employees and the employer has to take
care of the needs for comprehensive benefits of employees. Some additional benefits are given
to the employees of the organization such as providing fitness classes, providing medical
coverage etc. when they miss the work due to sickness.
CONCLUSION
This case study determined that the fit stop needs to focus on implementing the plan for
sharing of payment for its employees to inspire and motivate them. Besides to the base pay the
employer need to focus on the other benefits including performance pay and indirect pay to
the staffs for the overall improvement of the organization.
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