Compensation Practice At HP Business Essay


Hewlett-Packard (HP) is a well-known technology company which primarily provides technology products and provides services to its customers. The company is operating in more than 170 countries around the world. The organization is into the production of electronic gadgets like mobile phones, computers and tablet PC's. The company is a mid-sized and adequately financed one that is capable of sustaining the expenses by its own business. The creation of different compensation strategies and policies and the rejuvenation of the same are done at regular levels and times. The need for such a refreshed system is to create an organization that compensates and works for the benefit of the employees keeping in mind its own development. Meanwhile the necessity that pushes HP for reforms in policies is the law enforcement agencies and the regular laws that are created. But one extra policy demarcates and proves HP to be worthwhile and it is that the internal rules are more stringent when compared to that of federal law. Thus maintaining its own business and work culture the company flourishes under the supervision of a board of directors. (Balkin, 1987)

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Good compensation decisions are those that are clear, transparent and simply justified. A good compensation is indicative of a healthy, committed and beneficial support system of the organization. The creation of such a compensation policy is highly recommended for good working environment in the organization. Conversant compensation decisions can be created only when the top executives create policies with comfortable mind.

If the compensation decisions are well organized and managed, then it will promote the work environment and well-being of the employees. But if the same is not organized it will result in unnecessary stress. While stress is a normal part of life, excessive stress interferes with productivity. Stress occurs when there is too much pressure with no adequate pay back. (Guide, 2005)

Application of compensation practice:

Organization's compensation policy aims at the relationship between organization-level compensation decisions and organizational performance. Specifically, the policy is capable of examining how pay structures and pay levels relate to resource efficiency, employee care outcomes, and financial performance. The expected behavior is both nonlinear and interactive effects that results from a large organizational database to support predictions.

Hewlett-Packard did not wait for dire circumstances, such as a pay inequity lawsuit, to write down or update their employee compensation policy, which is generally seen in the sector and other companies. Hewlett-Packard leaders have created a transparent and written policy document that is refreshed regularly to curtail the existing one for legal protection, and as a guideline or framework for the company's compensation program. (Milkovich, 1987)

The factors that determine the compensation policy are:

• Place in the market.

• The types of compensation

• Process of compensation

• Company's commitment

• Approval of compensation

HP has a compensation policy that considers the following:

Compensation is determined in base salary that increases by evaluating individual performance only against the assigned job standards. Market value of the position and position in range is not considered to offer compensation. The organization doesn't give out general increase; rather it offers specific increment to the employees. HP, at regular intervals gives out promotional and merit increase.

Factors that impact the compensation practices:

Further the compensation shall be such that the employees should be treated as individuals with distinct personal goals and needs, and should not be treated as basic business resources. The compensation policies shall take a positive view of workers and assumes that all the employees wish to contribute to the organization productively and best to their capability. The compensation policy of the organization is responsible to take care that employees have sufficient knowledge about savings, taxes and liabilities.

Labor relations are the set of relations between the corporation's upper administration and rest of its employees. Its impact on organizations is varied. Due to the formation of formal unions, and established norms and other sets of code of conduct or rules of business, or the defining of concrete labor policies, the work of organizations has become more or less streamlined and transparent. The presence of organization's labor relations, training, diversity practices, and other HR areas are very varied. Keeping in mind the compensation policy and the labor unions, the unions serve as a readdress medium and can be stated as: Worker grievances and compensation flaws can be addressed by recourse to top management through "authorized" channels. This reduces labor disputes but it should it interfere with the normal working process of the company it is not desired. The company has legislated labor relations acts thereby formalizing such things as minimum wage, maximum working hours, in house facilities for workers etc. The compensation has improved and become more or less standardized due to legislations. Organizational efficiency has improved over the period of time due to the union. Worker stress has reduced and worker safety has improved. (Milkman, 2004)

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Further when the labor relations, training, diversity practices, and other HR areas are examined, the impact of compensation and policies there under are impacted by the following:

(a) The Innovation and the regularly improvement in products.

(b) The Quality of work and its improvement.

(c) The Costs and productivity.

(d) Job security.

(e) The Investment climate for the stakeholders.

(f) The worker training facilities.

(g) Morale of the work force regardless of the level or designation.

(h) The entire Turnover.

Effectiveness of traditional bases for pay:

Effective compensation, selection and hiring procedures based on the pay are critical in the compensation satisfaction of employees. The effectiveness in pay is essentially required when the assignment of the right functionality is done at the right place. This is done in order to create the association that is equally beneficial for the employer and the employee. However there are many instances that can deviate from the normal process of compensation. The deviations need to be dealt with and the actual process plays an important role in the functioning of the organization.

The traditional basis of pay is an internal process that is fine-tuned by the top executives of HP. The main highlight of the traditional basis of pay that is followed in HP is enumerated in the following lines. In this type of pay system the employees are rewarded with increase in base pay that in turn is dependent to the length of service. This is gratitude of the employer for loyalty. The traditional basis of pay rewards the employees that are ahead for acquiring and refining their skills. In this system it is assumed that employees become valuable with time. During a promotion or a transfer the seniority is considered and this is the only criteria for such decisions. At HP seniority is automatically provides pay increase and performance valuation leans towards subjective indicators rather than objective ones.

The traditional basis of pay in HP is far better than others in the same sector. A good compensation attracts employees from far of lands. Therefore at HP there is one person from at least each corner of the world. A satisfactory compensation can make the difference in retention of the job or even quitting. So when employs quit jobs and join HP there is a sure indication of good compensation. The individuals from far of lands have join HP just for the reason of good pay. Such is the pay of the company and the fact that the company is famous for its compensation cannot be denied. (Core, 2008)


All principles of compensation, the policies and the amendments that are discussed above have been set forth with deep thinking and after applying the practical knowledge of the senior executives in Hewlett-Packard. The creation of a stable organization is an arduous process and it demands many provisional changes especially in the field of compensation. However Hewlett-Packard has successfully accomplished all levels of matured and grown processes. It is now on the path to refine to become a giant in the financial jungle and even the corporate jungle. Hewlett-Packard believes in the motto of raising its self in all directions essentially with the development of the employees. So that the employees find themselves capable enough to literally run the company.