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Compensation Plan
Mindy Isaac
March 22, 2010

Compensation Plan

The merger of InterClean and EnviroTech creates a new direction of service that will make InterClean a leader in the cleaning and sanitation industry. Achieving new strategic initiatives requires the development of a compensation plan to attract, motivate, and retain an intellectual and exemplary sales team. The new compensation plan is a total rewards package for employees consisting of three components, a fixed salary and traditional benefits package, an incentives package, and a work-life balance package reviewed annually as the company expands. The following paragraphs explain the success, components, and benefits of this plan.
Before InterClean can implement a compensation plan, the company must consider areas of fairness, assign a monetary value to each job, and create a procedure for increasing the employee??™s base pay rate. The objective when instituting the new pay system is to update job descriptions, create a job evaluation method, conduct pay surveys, and develop a pay structure (Cascio, 2006). The plan will contain a variable pay structure based on either a market-based, or competency-based pay system. The fixed salary component is based on a market-based pay system whereas the incentives package is based on a competency-based pay system. Companies providing variable pay to their best workers are 68% more likely than other firms to report outstanding financial performance (Cascio, 2006).

Success of the compensation plan

To be successful, a compensation plan will be designed to increase motivation and recognition thereby improving the performance of the sales team. Properly designed incentive programs work because they are based on two well-accepted psychological principles: (1) increased motivation improves performance and (2) recognition is a major factor in motivation (Cascio, 2006, p. 437). Management is committed to the implementation of the plan and furthers its success through communication, monitoring, and incentives. According to Santone, Sigler, and Britt (1993), influencing behavior and performance requires a commitment from senior management to manage performance through compensation. Our policy must reflect the actions and beliefs of management to influence employee performance. In addition, the policy will demonstrate that each employee has the opportunity and encouragement to perform.
The plan will be simple because the rules are brief, clear, and specific therefore employees will know exactly what is expected. The objectives on which the compensation plan is built will be attainable and every employee will have an opportunity to gain something.
According to Cascio (2006), effective employee incentive plans are specific, measurable, attainable, and simple.
Compensation plans such as the incentives package must have specific accomplishments or money is wasted. For the plan to work and challenge competitors, salary ranges must be competitive. Raising salary ranges allows InterClean to maintain competitive hiring processes.

Compensation plan components

The three components of the compensation plan are designed to motivate employees and integrate salary, benefits and work-life balance with training, career and personal growth opportunities. Total monetary compensation is made up of base pay and incentives. Work-life balance offers employee growth and career opportunities by providing flexibility in scheduling, childcare, insurance benefits, and tuition reimbursement.
The fixed competitive salary and traditional benefits component is available for new employees and is based on a market-based pay system. The fixed salary will be based on the salaries of other employees in the same market. According to Cascio (2006), ???this type of pay structure is feasible if all jobs are benchmark jobs and direct matches can be found in the market??? (p. 431). Sales positions can be matched easily with the market rates in sales. Fixed competitive salary for the sales team provides a consistent income that is not impacted by diminished sales or economic downturn. Additionally, we must include a traditional benefits package to the sales team that include 401K plans and other retirement benefits, health benefits (HMO, PPO, Optical, Dental), compensatory time for travel, and paid time off (vacations, holidays, sick days, and others). Salary and traditional benefits are necessary as part of the total rewards to acquire and retain key talent. Many employers use a cafeteria-style plan allowing employees to choose desired benefits to control cost (Duchon, 2007).
The incentives component is available to more experience employees and is based upon a competency-based pay system for individual sales, and company performance. Employees are awarded pay increases on the basis of their skills, depth of knowledge, and competencies in their jobs, products, and services. The pay rates will encourage and develop employees??™ behaviors and abilities. According to Cascio (2006), compensation linked directly to individual contributions allows companies to ???maintain the highest caliber of workers, regardless of their particular specialty or role??? (p. 432).
The sales team is shouldering the company??™s new directive, establishing new leads, and building long-term customer relationships. Therefore, InterClean has a responsibility to provide incentive programs to increase morale and provide employees with a vested interest in the company.
The final component is work-life balance. This component allows the employee the opportunity for growth and career development. Work-life balance benefits provide flexible scheduling, childcare, technology training, seminar attendance, self-improvement and leadership training, educational opportunities, and tuition reimbursement. By offering the work-life balance of the total rewards package, InterClean shows appreciation to employees for improving his or her quality of life. Employee loyalty and motivation prompt an increase in productivity and profit and uncovers an understanding of benefit cost and service (Duchon, 2007.).

Benefits of the plan

Benefits of the compensation plan to the individual is the realization that InterClean values his or her employment with the organization, and offers compensation as a means of reward. These benefits offer chances for higher education, career development, and recognition.
The benefits to InterClean will be retaining top talent thereby creating employees able to focus on job performance with minimal worries of personal and professional struggles. According to Santone, Sigler, and Britt (1993), compensation plans provide a ???format to measure and reward achievement of both operational and value goals and thereby help ensure the success of the organization (p. 93).
In conclusion, it is clearly in the best interest of InterClean and its strategic initiative that we implement this program to ensure the success and growth of our company and its people. Our compensation plan coupled with an excellent incentives package will enable InterClean to attract the best people in this industry, motivate our team to achieve success for personal and company gain while placing an emphasis on ???the family??? with respect to our work-life balance plan.


Cascio, W. (2006). Managing human resources: Productivity, quality of work life, profits (7th
ed.). New York: McGraw-Hill
Duchon, M. (2007). Compensation: Total reward plans that attract, retain and motivate.
Construction Business Owner Magazine. July 6th, 2007. Retrieved from
Santone, T. J., Sigler, K. J., & Britt, R. (1993, Fourth Quarter). The strategic
compensation planning process. Benefits Quarterly, 9(4), 85-96.