HRMT 200 - Compensation System Review: McDonald's Canada Analysis

This report provides a comprehensive review of McDonald's Canada's compensation system, analyzing its effectiveness based on factors like internal and external equity, benefits, and alignment with market standards. The report begins with a background of McDonald's Canada, including its function, size, employee types, and locations. It then delves into how internal equity is established through job comparisons and fair pay practices. The report also examines the process for determining pay for new hires and aligning it with existing staff, ensuring internal equity. Furthermore, it explores the procedures used to align compensation with the market (external equity), the types of benefits employees receive, and an overall assessment of the compensation program's effectiveness. The report concludes with recommendations for enhancing the compensation program, such as performance-based promotions, recognition awards, employee development, wellness programs, and flexible work options.

Running head: MANAGEMENT OF HUMAN RESOURCES
Management of Human Resources
University Name
Student Name
Authors’ Note

2
MANAGEMENT OF HUMAN RESOURCES
Table of Contents
Background of the company:.....................................................................................................2
Way internal equity is established..............................................................................................3
Pay for new hires determined and aligned with existing staff to ensure internal equity...........4
Procedures that company use to make sure their compensation is aligned with market...........6
Type of benefits received for working with that corporation....................................................6
Effectiveness of compensation programs...................................................................................7
Recommendations provided to enhance their compensation program system..........................9
References................................................................................................................................11

3
MANAGEMENT OF HUMAN RESOURCES
Background of the company:
Function, Size, Type of employees (diverse occupations) and location
The company selected for the current study is the McDonald’s Restaurants of Canada that is
the master franchise in Canada of the chain of fast food restaurants of McDonald’s owned by
the American parent corporation McDonald’s Corporation. It being one of the largest chain of
fast food restaurants, franchise markets food items, counting hamburgers, French fries,
different soft drinks and chicken throughout the nation.
McDonald's Canada operates through 1,400 stores (counting locations in Canada) and this
includes Canada, and over and above 85,000 Canadian workforces (Around the World
McDonald’s 2018). There are different types of employment that can be observed in this case
namely, permanent employment, contract employment, part time employment as well as
other types of employment. McDonald’s has permanent employees who usually get base
salary, different health benefits, bonuses, company stock option schemes along with other
personal incentives among many others. Also, the employees of the company include part
time employees who work in food as well as retail, stores and are mainly service jobs
(Cascio, 2018). The locations in which the firm operates include North and South America,
Europe, Africa as well as Asia & Oceania. However, the area served by McDonald’s Canada
is the Canada.
Way internal equity is established
Management of McDonald’s makes certain preservation of internal equity that refers to
comparison of different positions within the enterprise to ensure fair pay. Employees also
need to perceive that they are paid fairly in comparison to their co-workers. In order to
generate fair pay, there is need to compare different employees who undertake identical jobs

4
MANAGEMENT OF HUMAN RESOURCES
for the business enterprise (Cascio, 2018). There is requirement to take into account different
tasks that employees undertake. At the time when two different employees undertake
identical tasks, there is need to earn identical wages (Bratton & Gold, 2017). Management of
the firm does not base wages of the employees solely on titles of the job. Management of the
firm ensures that in case when two different workforces possess diverse titles but undertake
identical tasks need to have identical wages. Identical tasks can be considered to be main
concern at the time of establishing wages of employees. Fundamentally, this includes
educational qualification as well as experience of each and every employee (Bratton & Gold,
2017). In a bid to maintain and preservation of transparency as well as fairness within the
payroll of the business and there is need to explicate decisions of compensation of
employees. At the time of establishing wages of employees, management of the firm register
different facets that help in framing the decision. In case if a specific employee ever question
their wages, it is important to explicate the specific reasons for selecting the wage (Brewster,
2017).
Pay for new hires determined and aligned with existing staff to ensure internal equity
Internal equity refers to an appropriate association between wages disbursed for diverse jobs
within the business enterprise. For instance, when salary earned by a Sr. Manager is lesser
than that of a manager; then there is short of internal equity. Again, pay differentials need to
be associated openly to differential in job necessities. In case of fair pay differentials between
different jobs can be instituted with the aid of analysis of job (Armstrong & Taylor, 2014).
Internal equity subsists at the time when different employees in a specific corporation
observe that they are being rewarded fairly as per relative value of the jobs within a specific
business enterprise. Management of the firm McDonald’s consider another method of
mentioning this and this includes statement of perception of person regarding their

5
MANAGEMENT OF HUMAN RESOURCES
accountabilities rewards along with work conditions that can be regarded to be fair else wise
equitable when compared to diverse other employees in identical positions. Payment for new
hires of the firm McDonald’s are also ascertained by using factors namely level of skill,
degree of effort and the accountability of the specific role along with conditions of working
(Brewster et al., 2016). Human resource management of the firm McDonald’s studies internal
equity to ascertain in case if there is payment of equity between like-positions and in case if
different roles in business concern are necessarily governed by the same compensation
directives. Normally each and every role is mainly assigned a range of pay with
corresponding criteria that sketches the way to ascertain where a specific employees need to
be positioned in the range (Brewster et al., 2016).
Diverse internal as well as external factors for compensation program
Figure: Different factors of internal and external for compensation programs
(Source: Storey, 2014)

6
MANAGEMENT OF HUMAN RESOURCES
Procedures that company use to make sure their compensation is aligned with market
As per reports it can be said that average salaries of cashiers of McDonald’s stand at $11.53
every hour. Again, customer service associates of McDonald’s are known to receive average
salary of $11.59 every hour and service crew receive average salary amounting to $12.12
every hour. In essence, external equity subsists at the time when rates of payment of business
concern are at least equal to mean rates in the market of the organization or else sector.
Different employees have the need to make certain that there have the capability to disburse
what is necessary to find, maintain and motivate a sufficient number of qualified employees
(Albrecht et al., 2015). For the purpose of maintaining external equity, management of firm
McDonald’s formulate a structure of compensation that begins with competitive base
payment that can be considered to be vital. Also, employees also compare roles as well as
payment to role along with pay in different other business concerns. Regrettably, they
necessarily do not always compare with identical categories of business concerns or even in
the similar sector. In general, employee takes into account more than base payment in
ascertainment of external equity (Purce, 2014). However, for emphasis can be laid on benefits
of employees, security of job, different physical environment of work else wise opportunity
for progression in deciding in case if external equity subsists. Administration of the firm uses
different surveys of salary for determining if compensation as well as benefits is comparable
to identical roles in other business concerns (Brewster et al., 2016). In essence, it is vital to
ensure that the important accountabilities along with goals of different roles are identical
since this is the segment where the corporation is aligned with (Jackson et al., 2014).
Type of benefits received for working with that corporation
The plan of the company is essentially maintained for US based members of the staff and
contains a 401 (k) facet along with match with the employer. Also, this 401 (k) facet permits

7
MANAGEMENT OF HUMAN RESOURCES
different participants to make pre-tax contributions that are aligned to each period of payment
from company shares that are released under mainly leveraged Employee Stock Ownership
Plan as well as cash contributions of employees. Different balances of current account, varied
future contributions as well as associated earnings can be invested in 8 investment
alternatives along with stock of McDonald’s as per investment elections of each of the
partakers. As mentioned in the annual report, future contributions by different participants are
restricted to mainly 20% of investment in the stock of the company McDonald’s (Wilton,
2016). Also, participants also select to make distinguished choices of investment for different
current account balances as well as future contributions. Furthermore, the company also
maintains specific non-qualified supplemental benefit schemes that permit participants to
present tax deferred contributions and accept company offered allocations that necessarily
cannot be carried out under 401k plan owing to limitations of particularly IRS. The
investment alternatives as well as returns are founded on specific market-rate investment
substitution under 401k scheme (Albrecht et al., 2015). Again, the company has entered into
derivative agreements to hedge market driven issues in case of the liabilities (Banfield et al.,
2018). Alterations in liabilities for different non-qualified plans and in different fair value of
different derivatives are registered in income assertion as the agreement deliver the
counterparty with a choice to make settlements in cash else wise shares.
Effectiveness of compensation programs
Is their compensation program effective on the whole?
Ratings are assigned to each and every component of compensation program of McDonald’s
Elements of Employment Compensation
Program
Ratings Justification

8
MANAGEMENT OF HUMAN RESOURCES
Employment Insurance 4
Canada Pension Plan 4 There is a defined benefit pension
schemes that is net of tax benefit
(expends) and stands at -$3.9, -$10.0,
as well as $1.3
Worker’s Compensation 5 There are outstanding awards
associated to common stock of the
firm. There are shares that are issued
under different plans that might be
from treasury of the Company’s.
Equity compensation plans of the
company include both approved as
well as disapproved plans. Total
amount of equity compensation stands
at 20,487,833.
Provincial Health Care 3 The company gets affected by the cost
as as well as other effects of
conformity
Vacations and Holidays 2 There is no mention about vacations as
well as holidays
Leaves and absence 2 There is no mention about leaves as
well as absences
Termination Pay 2 There is no mention about termination
pay

9
MANAGEMENT OF HUMAN RESOURCES
Recommendations provided to enhance their compensation program system
Management of the firm can consider the following facets for enhancement of compensation
program system:
- Promotions that are based on Performance: The only way to earn higher is mainly to
perform at superior standards. These employees are generally more inspired to deliver
generous payment for performance with regular meetings on performance (Tyson, 2014).
- Establishment of recognition awards: Employees of the company McDonald’s can thrive in
a specific environment in which they can accept frequent feedback as well as praise from
superiors. In essence, this is mainly true when it is about generation X and generation Y.
-Employees of the company McDonald’s who are inspired to be permanent learners
frequently can become top actors. Delivering members of the staff diverse tools as well as
resources can help in attaining specific industry certifications as well as degrees that can aid
in evaluating overall quality of work produced, whilst delivering a meaningful career
incentive that is acknowledged by all (Rothenberg et al., 2017).
- Management of the firm can introduce corporate wellness programs. In essence, a healthy
environment of work implies a productive environment. At the time when different
employees are provided resources to preserve on-site health, different employees have the
inclination to put effort to become more aware regarding personal health (Tyson, 2014). In
particular, there are multiple studies that reflect that corporate wellness program can be
utilized to promote compensation schemes and finally lessen diverse costs related to health.
- Work options that are essentially supple and collaborative

10
MANAGEMENT OF HUMAN RESOURCES
Management of the firm can present supple as well as collaborative options of work that can
help in enhancement of compensation reward program. Employees have the need to find out
ways to augment work-life balance, thus delivering overall capability to operate a flexible
schedule else wise collaborative work environment can be observed as a major plus. At the
time when offered as a part of the compensation stratagem, this necessarily can aid in the
process of recruitment as well as rates of retention a great deal.

11
MANAGEMENT OF HUMAN RESOURCES
References
Albrecht, S. L., Bakker, A. B., Gruman, J. A., Macey, W. H., & Saks, A. M. (2015).
Employee engagement, human resource management practices and competitive advantage:
An integrated approach. Journal of Organizational Effectiveness: People and
Performance, 2(1), 7-35.
Armstrong, M., & Taylor, S. (2014). Armstrong's handbook of human resource management
practice. Kogan Page Publishers.
Around the World | McDonald's. 2018. Retrieved from
https://corporate.mcdonalds.com/content/corpmcd/about-us/around-the-world.html
Banfield, P., Kay, R., & Royles, D. (2018). Introduction to human resource management.
Oxford University Press.
Bratton, J., & Gold, J. (2017). Human resource management: theory and practice. Palgrave.
Brewster, C. (2017). The integration of human resource management and corporate strategy.
In Policy and practice in European human resource management (pp. 22-35). Routledge.
Brewster, C., Chung, C., & Sparrow, P. (2016). Globalizing human resource management.
Routledge.
Brewster, C., Houldsworth, E., Sparrow, P., & Vernon, G. (2016). International human
resource management. Kogan Page Publishers.
Cascio, W. (2018). Managing human resources. McGraw-Hill Education.
Jackson, S. E., Schuler, R. S., & Jiang, K. (2014). An aspirational framework for strategic
human resource management. The Academy of Management Annals, 8(1), 1-56.

12
MANAGEMENT OF HUMAN RESOURCES
Purce, J. (2014). The impact of corporate strategy on human resource management. New
Perspectives on Human Resource Management (Routledge Revivals), 67.
Rothenberg, S., Hull, C. E., & Tang, Z. (2017). The impact of human resource management
on corporate social performance strengths and concerns. Business & Society, 56(3), 391-418.
Storey, J. (2014). New Perspectives on Human Resource Management (Routledge Revivals).
Routledge.
Tyson, S. (2014). Essentials of human resource management. Routledge.
Wilton, N. (2016). An introduction to human resource management. Sage.