COMPENSATION PROJECT
The Living Waters Nursing Home Inc. is a not-for-profit dedicated to providing quality care to the residents. The organization was founded by J.P. Edwards in 1970. Mr. Edwards managed the organization until his retirement in 2005. At that time his son, Bob Edwards, was named President/CEO. The organization has a budget of $50 million for 2011.
Eighteen months ago, the family decided to hire Frank Jones as the new President/CEO. After evaluating the current operations, Mr. Jones decided that the Nursing Home was in fairly good shape except for the lack of standardized Human Resource policies. Very little information existed to support any of the past employment decisions, especially in the area of compensation. The organization does not have a formal compensation plan of any kind. The employees’ pay was based on Bob’s general perceptions and the input of a few other executives.
The organization did not give pay raises in 2009 or 2010 due to budgetary constraints. In addition, executives and employees have expressed rather strong concerns about some obvious favoritism in hiring and compensation.
In the last eighteen months, Mr. Jones has encountered several problems.
The desk clerks have been complaining that their pay is the same as the cooks’ pay, and the cooks are complaining that their pay is less than that of the accounting clerks.
Two former employees filed pay discrimination cases against the resort. Claiming that they did not get paid as much as men doing the same work. The two employees also complained that their performance increases were less than they deserved.
Several clerical employees have been keeping track of their overtime for the past two years. They have asked about why they don’t get overtime when other organizations pay overtime to their friends in similar positions.
Some managers recently became upset with the lack of pay increases in 2009 and 2010. They decided to inflate the performance scores to get their employees more money.
Some managers are using money from other budget items that have a surplus of funds to provide bonuses to exceptional employees.
Several employees have complained about their wages to their managers. The employees are using data from the internet, specifically salary.com, as a basis for their complaints.
Employees receive pay increases on their anniversary date. Mr. Jones wants to go to a common review date to match the organization’s business cycle, which starts on January 1 but most of the executives are against the change.
Three weeks ago, when Mr. Jones came to work, there was a note on the bulletin board listing everyone’s pay. This has led to complaints from several long-term employees. In addition, it is obvious that several employees are receiving substantially more money than other similar employees in the same job.
An employee was caught after stealing $300.00. The employee was terminated and the manager wants to deduct the $300.00 from the employee’s last pay check. The employee worked 40 during the last week at an hourly rate of $8.00. Please advise the manager.
Mr. Jones finally convinced the family to hire a group of knowledgeable consultant to address the problems and to develop a pay system for the organization. Mr. Jones would like the group to:
1. Evaluate the current pay practices and make some general recommendations.
2. An audit of legal issues, especially with respect to the pay discrimination case and overtime.
3. Evaluate the employees’ current pay relative to the marketplace and between employees in similar jobs.
4. Establish a stated overall compensation policy, including a pay level policy.
5. Develop a structured process for developing a pay structure and determining the pay grade assignment for each job.
6. Present an overview of an individual pay model to assist managers in setting starting pay and correcting any inequities.
7. Design a merit increases process and provide information on the pros/cons of a common review date versus the current increase process.
8. Provide an analysis of the problems listed above, with specific recommendations to resolve the problems.
9. Conduct a cost analysis showing the impact of your recommendations.
10. Provide a written report outlining the objectives, logic for all decisions, limitations of the process, the pay system design process, and the outcomes.
11. Any other outcome that you think is necessary for a successful compensation plan.