XYZ Supply Business Compensation Philosophy

XYZSupply Business Compensation Philosophy


XYZSupply Business Compensation Philosophy

Iam a human resource manager at XYZ Supply Business Company. XYZCompany hired nine employees and is seeking to come up with acompensation policy. An excellent compensation philosophy can beuseful in attracting and retaining enough employees to a company(Kahneman &amp Thaler, 1991, p. 341-346). I will apply acompensation philosophy that involves a base and variable pay. A basepay assures employees of their protection in the post that hold inthe company. Variable pay will be essential in encouraging our staffto work harder as they will be aware that their pay will be abouttheir productivity. Sales and marketing jobs will be highly dependenton the variable pay, as employees will develop a feeling ofappreciation for the contributions they make to our company. XYZbeing a supply company will much depend on their employees`aggressiveness to maximize the number and area of coverage of theirclients.

Asa human resource manager at XYX Supply Business, I choose to hire ourstaff at the middle end of the salary range. Hiring employees at themiddle end of pay range gives employees the morale to work hard andincrease their productivity to the business. Employees feel motivatedwhen they on paying them good money and will in turn reciprocate byworking hard for them to continue enjoying the same high pay or havean increase in their salaries. Hiring employees at the middle payrange will also enable XYZ Company a chance to hire and retainquality employees. Qualified personnel will be recruited andevaluated in that only the competent employees will remain in thecompany as those whose quality will not match the high salarypackages would be relieved. However, hiring employees on a middle-endpay range could also be of harm to our company. XYZ may end up payingemployees who are not productive the same amount of salary that otherproductive staffs will be earning. Non-productive employees could bepaid just for being present in the business premises and enjoying thefruits of the hard work of other employees. Our company could alsosuffer the mess of employing incompetent employees who could behaving academic qualifications but do not have an interest in thework that do in our company. No-interested employees could apply forthe positions in our company because of the high salary packages thatwe offer employees and not that they will be interested in the job.It will take the business to recognize such employees and expensiveto relieve them, and the company will be searching for a replacement.

Evaluationof the compensation policy that XYZ will adopt will be both onqualitative and qualitative measures. On quantitative measure, thehuman resource department will carry out a study on the productivityof the employees. Excellent compensation policies have the ability tomake employees meet organizational set targets (Kahneman &ampThaler, 1991, p. 341-346). Our staff will be productive when theyfeel happy with the compensation policy and in case they are notsatisfied, they will show some unproductivity. Another quantitativemeasure will be the level of employees’ turnover. The humanresource department will check on whether the level of workers thatwill be seeking transfer increases. When employees get satisfied withtheir work, there will be fewer cases of transfer requests. Employeesstart developing some feelings of being undermined when they feelthat they are not on an effective compensation in most workplaces.The sense of undermining may be a qualitative measure as employeeswill lose focus and more cases of lateness and absenteeism will bereported.


Kahneman,D., &amp Thaler, R. (1991). Economic analysis and the psychology ofutility: applications to compensation policy. The American EconomicReview, 341-346.