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A compensation plan is a complete package that details an employees’ wages, salaries, benefits and terms of payment. Compensation plans include details about bonuses, incentives, and commissions that may be paid to employees. Simply put, it is the plan of how to compensate employees for their work efforts. A compensation plan must be compatible to the employee demographic and the organization’s budgetary constraints. Most importantly, the compensation plan plays a critical role in aligning employee behavior with business objectives to drive success. An organization’s human resource department is directly involved in researching, creating, disbursing, and regularly examining the compensation plan. This paper seeks to provide an example of a compensation plan for francesca’s© including, the organization description, organizational strategies and purpose of the compensation plan, and the justification components of the compensation plan.
francesca’s© is a growing specialty retailer which operates a nationwide chain of boutiques providing customers a unique, fun and personalized shopping experience. The merchandise assortment is a diverse and balanced mix of apparel, jewelry, accessories and gifts. As of February 3, 2018, francesca’s© operated 721 boutiques in 47 states and the District of Columbia and also served its customers through www.francescas.com, our ecommerce website (Ann, 18, p. 4). The philosophy behind francesca’s© compensation program is to create a compensation program that supports the company’s mission and values. francesca’s© strives to deliver Our francesca’s© Promise: Delight Every Guest, Every Time (fra 16, p. 4)!
Organizational Strategies and Purpose of the Compensation Plan
francesca’s© organizational strategies and goals are to work towards long-term sustainable growth in the women’s fashion retail industry. Our vision is to invigorate merchandising, optimize real estate, cultivate and expand branding and marketing, and differentiate and personalize the in-boutique guest experience. We must develop highly talented employees and continue to invest in people and processes across the organization to achieve these goals.
We believe delighted employees lead to delighted guests. francesca’s© compensation plan is designed to attract and retain talented employees who are engaged and motivated to delight our guests and drive our success. In alignment with our company culture, we will strive to communicate openly about the goals of the company and design of the compensation plan. The compensation plan is intended to be fair and simple so that all employees understand the goals and the outcomes of the process.
francesca’s© will benchmark the Houston, Texas metro area and target women’s fashion retail as our industry and an organization size of 7,000 employees. We believe that this definition of competitive set is most representative of our market. francesca’s© will use the 50th percentile of base salary as the target for full-time employee base pay. Individual placement against that target will be based on experience and performance. francesca’s© will use variable pay as a financial incentive for performance-based goals. These targets are used to establish the amount of incentive an employee is eligible to receive for outstanding performance. francesca’s© will use variable pay as a financial incentive for rewarding individuals for individual and company goal attainment based on the level within the organization.
Base Pay and Variable Pay Components
When employees are meeting expectations, we strive to provide our full-time employees a base salary that meets the market and to also provide our part-time employees with an hourly rate 20% above minimum wage. We believe that employees consistently performing above expectations and are proficient in the role should be rewarded with a higher base pay. Additionally, full-time managers who meet their monthly goal will be rewarded with a $300 bonus. An additional $200 will be rewarded if goal is exceeded by 10% or more. These items will be awarded monthly. Employees who are new to their role would be paid below the target. Employees who are not meeting expectations will see no change to their base pay. Earned rewards will be delivered after a yearly performance review has been completed.
Additional Benefits Components
We know sought-after and current employees are not attracted and motivated solely by the offered market-level base pay. In addition to base salary, francesca’s© will utilize attractive and unique benefits to acquire talented employees and retain high-performing employees. We will provide all employees with a paid day off on their birthday, paid time off for volunteering, childcare assistance, and a 30% employee discount. francesca’s© will also provide each boutique team with a once-a-month paid lunch and quarterly team bonding events. Full-time employees will be offered these benefits plus, employer paid health benefits and partially paid vision and dental benefits, 16 weeks of paid maternity and paternity leave, two weeks of paid vacation time, one week of paid sick time, one week of paid personal time, a 401(k) match of 5%, and a 50% employee discount.
In every organization, it is essential to understand the importance of compensation and properly designing a compensation plan that can attract, retain, and develop a quality talent pool. It must also align with the organization’s long-term business strategies and organizational culture. The compensation plan objectives should be well-defined, fair, and simple for employees to understand. The most important objective is fairness, or to achieve internal and external equity. Overall, the compensation plan should maintain a balance in relationships between monetary and non-monetary forms of compensation, and the pay rates of full-time and part-time employees. When the organization creates a compensation plan that inspires employees to excel and attracts top talent, as a result of the compensation, benefits, and incentives offered to them, everyone wins!
- (2018). Annual Report for francesca’s Holdings Corporation. Washington: United States Securities and Exchange Commission.
- francesca’s ICR Investors’ Conference. (2016, January 13). Houston, Texas, United States.
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