Assignment:
Compensation and Benefits
Compensation Strategy Project
Techtron Corporation is a developer and manufacturer of electronic window systems for small and medium-size automobiles. It has several international customers, including Vauxhall Motors (UK) and General Motors Holden Ltd. (Port Melbourne, Australia). Techtron has recently landed a contract to produce electronic window systems for the Hyundai Sonata, manufactured in Montgomery, Alabama. They have nearly completed a manufacturing facility within the suburban perimeter of the largest city in your state, and the senior leadership and support staff are in place. The company is now ready to begin the recruiting and hiring process for production floor employees.
Here is the projected income statement for Techtron in its first year:
Revenues (from sales and all sources) $35,000,000
Manufacturing expenses:
Cost of materials (10,000,000)
Cost of manufacturing operations (2,000,000)
(includes all plant and equipment
maintenance and depreciation) (12,000,000)
Administrative Costs and Overhead
Administrative Overhead and Expense (1,000,000)
Research and Development (1,000,000)
Employee Expenses (10,500,000)
(target is 30% of sales over time) (12,500,000)
Capital Budget
Capital purchases (2,000,000)
Loans payable (4,000,000)
(for the first seven years, then
dependent on plant expansion) (6,000,000)
Projected Pretax income for the first year of startup 4,500,000
Depending on tax policy of state and federal governments,
net income may be used for additional research and development,
capital purchases, reduction of debt, dividends, and/or retained earnings.
The company projects that sales for years 2-6 will increase by 2%, 4%. -3%, 3%, and 4%.
The company projects that materials and overhead costs will rise by approximately the current rate of inflation (about 2.4%) for years 2-6.
Techtron will require approximately 140 hourly production technicians, 3 production supervisors, 2 manufacturing engineers, 1 process engineer, and 1 computer technician for their floor operations. Minimum qualifications and job descriptions for these jobs are as follows:
Hourly production technicians: Responsible for production and assembly of electronic window system components and subassemblies. Responsible for quality control of manufactured products. Minimal educational requirement is an associate's degree in business or manufacturing technology; applicants must have general mathematics skills and be able to interpret control charts and basic computer output. Prior experience valued but not required.
Production supervisor: Responsible for supervision of manufacturing processes, including troubleshooting problems and interfacing between production technicians and other company functions such as HR, Information Systems, etc. Minimal educational requirement is a BA degree in industrial management or quality management; applicants must have general mathematics skills and be able to interpret control charts and basic computer output. Three years of supervisory experience at the manufacturing floor level with JIT systems is required.
Manufacturing and Process engineers: Responsible for (but limited to) production scheduling, overview of quality systems, safety systems and ergonomics, and cost management within a JIT production system. The successful applicant should be an innovative thinker who anticipates problems and looks for ways to maximize production efficiency. Minimal educational requirements include BA degrees in manufacturing or process engineering, with a minimum of five years of successful experience in the multiple functions of a robotics-based JIT manufacturing system.
Computer Technician: Responsible for floor support of robotics, data management, and software maintenance for a JIT components manufacturing system. The successful applicant should be an innovative thinker who anticipates problems and looks for ways to maximize production efficiency. Minimal educational requirements include an associate's degree (BA preferred) with majors in software support or database support, with a minimum of three years of successful experience in JIT manufacturing support.
Requirements for the Compensation Strategy
As the HR compensation strategist for Techtron, your task is to develop a compensation strategy for the production employees at the new facility, which is located within the suburban perimeter of the largest city in your state. Some factors you will need to consider when developing this compensation strategy are:
1) The compensation bandwidth for employees performing similar functions at companies of similar size in the employment area in which the plant will be located.
2) The union status of your state. It is the intent of Techtron for this facility to be non-union, but whether your state is a union shop state (like New York) or a right to work state (like Alabama) will affect your compensation strategy. Specifically, if your compensation plan is competing with the compensation of area union employees, their pension may be a defined benefit pension as opposed to a 401K. You are not required by law to provide any pension benefits in any state.
3) The legislation in your jurisdiction regarding partner benefits or gay marriage will affect your benefits strategy.
4) There are no laws in any state regarding a requirement to perform performance evaluations as the basis of compensation adjustment, but you desire to make a performance evaluation the basis of compensation adjustment as well as promotion consideration. What are the relevant policies on performance evaluations among other companies similar to yours in your area?
5) Your compensation and benefits plan and your evaluation plan must be cost-effective and sustainable.
The requirements of the proposal include:
1) An introduction to your proposal that will preview what information will be presented and the overall goal of the compensation strategy. Keep in mind that the audience for this proposal is senior executive management at Techtron.
2) Develop a proposal for compensation bandwidths for each of the four job classifications described above. In addition to the compensation bandwidths, the proposal should include a rationale for each bandwidth that is data driven and grounded in current environmental factors.
The proposal should also include parameters and performance factors that would be used as a basis for differentiating employee salaries within the same job classification.
3) Develop a proposal for a benefits plan for each of the four job classifications described above. In addition to the benefits plan, the proposal should include a rationale for each benefit plan that is data driven and grounded in current environmental factors. The proposal should also include parameters and performance factors that would be used as a basis for differentiating employee salaries within the same job classification Benefits may include a number of health insurance options, tiered paid vacation, sick time or paid time off, pension contributions, and other options. Health care plans must be PPACA-compliant.
4) Develop a proposal for an employee evaluation process for each of the four jobs describe above, as it relates to determining compensation adjustment. The proposal must include a review of motivational aspects, and provide support for the compensation plan that is grounded in literature and theory. In addition, your proposal should provide compensation guidelines for those employees that do not meet minimum performance expectations.