Factors that Inform Reward Decisions

3900 words (16 pages) Essay

4th Sep 2017 General Studies Reference this

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Assess the context of the reward environment and the key perspectives that inform reward decisions. In this section, you should:

  • Use an appropriate analysis tool to identify the internal and external factors.
  • Analyse the impact of business drivers and related factors on reward decisions.
  • Give examples of different ways of gathering and presenting reward intelligence.

An Introduction to the Company of B & W Plant Hire and Sales Ltd

B & W Plant Hire and Sales Ltd was founded in 1994 by Bill Whitwell; Bill has over 40 years’ experience in the plant hire industry. His son Will, who is also from a plant hire background, joined him in the business in 1998. The company has grown steadily since then by supplying clients with a service they believe cannot be beaten. B & W pride themselves in being readily available for advice and help when problems arise on site. Bill and Will now have in place a management team and workforce that mirrors their values, but still lead from the front line.

B & W are a plant hire company which hires plant (Excavators, Dumpers, Rollers, trenching)

B & W have 4 depots across the country Blackburn is head office where it all started, in 2004 B & W started Bingley Depot – now Keighley Depot, in 2006 B & W started Southampton Depot, then in 2012 they bought Northwich Depot

B &W have been trading over 20 years in which time the company has grown and downsized because of the recession in 2008 now they are growing again.

From a personal point I, have been with the company since Jan 2002 when there were on 6 employees they now have 73 employees and 30 subcontractors. Turnover is growing year on year. The purpose and goals of the Company is to make Profit and become one of the largest privately owned (Ltd) plant hire companies in the Northwest of England. The Company offers the service of Plant hire self-drive and operated plant along with sales of plant. The Company`s main customers are Civil Engineers, house builders, councils and general builders.

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External and Internal Environmental Analysis
This environmental analysis will provide a complete external environmental image designed to provide B & W with the tools needed to identify the Company`s strength and weaknesses. This is including an assessment of the company resources. This analysis will assess the company`s competitive position and possibilities of growth. An explanation of how the external environment affects B & W structure and company performance.

A PESTLE analysis is a framework used to monitor the external marketing environment of which provides an overview of the main external factors currently having an impact on the Company

PESTLE see appendices 1

Auto enrolment – the company `s staging date was 1st January 2016. It is a compulsory requirement of all companies to automatically enrol employees who are eligible by 2018 This is a saving scheme for when employee`s retire and has tax relief. Employers must either have one of their own (stakeholder pension) or a government back one or have a specialist pension provider. We have a government backed pension scheme called “The Pension People” (Thepensionsregulator.gov.uk. (2016). Stakeholder pensions |)

This became law in October 2012 by 2018 all employed people should be in a workplace pension. This came about as people are living longer than the 3 score years and ten (70). the retirement age is going to go up between December 2018 and October 2020, the retirement age for both men and women will rise to 66. From 2018 to 2020 the state pension age for both men and women will start rising to 67. The government’s pot of National insurance has been depleted so when the younger generation come to retire there will be no monies left in the pot (Social).

The government decided to push people into saving for retirement by making it law for companies to compulsory join an auto enrolment scheme where by employee`s put 1% of their annual earning with tax relief and the company pays 1% eventually growing too minimum of 5% – (political social and legal).

The influence on the company and impact on reward strategy is Bonuses and pay rises have been effected by the company, by not increasing remuneration the 1% the company must pay into the pension scheme is a pay rise to the employee. This in turn also influences company growth as the employer must find this from somewhere i.e. profits (Economic) it is also seen by most companies as another tax but beneficial to the employee.

Kiddie vouchers – (Social and economic) We as a company have a young workforce at present, to help keep them we have introduced kiddie vouchers. This is a benefit that lets parents make substantial savings against the cost of their childcare.

This works by Parents can receive up to £55pw or £243pm of childcare vouchers from their employer, free of tax and National Insurance. Compared to receiving earnings as salary or dividends, using childcare vouchers can save parents hundreds of pounds each year.

Swapping taxable pay for tax-free childcare vouchers typically saves basic-rate taxpayers up to £933 a year. At the same time, this simple swap saves employers up to £402 a year per scheme member in employer National Insurance contributions.

The impact on the company and the strategy – the company has lower PAYE to pay to the HMRC – this also helps the employee as they are not taxed as much. The cost of putting this in place is 2% so the company and the employee win.

The employee sees this as an extra reward – hopefully it will help to keep them employed with the company.

The business SWOT see appendices 2

Mission statement – this links in with how the company is driven and reward

Mission Statement

  • The aim of B & W is to provide a service which goes beyond the expectations of their customers through the exceptional service of the staff accordingly who are highly equipped, motivated, trained and competent.
  • B & W support their customers with whatever the application, with market leading products and knowledge.
  • The comprehensive fleet of modern machinery they provide is compliant with up to date legislation and regulations.

Vision

  • B & W are committed to continually improving and aim to provide their customers with a reliable service.
  • B & W`s aim is to always satisfy the demand and become the customers only hire/sales supplier of quality

Values

  • The work practices and methods are undertaken and managed safely and cost effectively.
  • B & W are seeking to be an excellent employer, service provider, and customer.
  • The directors recognise that B & W`s staff are one of the most important assets to the company. To that end the company endeavours to reward staff who perform well and prove to be a good advert for the company.
  • B & W expect the best and so should B & W`s customers and clients.
  • The values of the company indicate the training and development for all employees, the employees are the most important asset to the company, this can be a motivator to the employees (the company is only as good as its staff)
  • The rewards are a bonus paid half yearly to the senior management team this is if the net profit is over 10% of turnover then 1% of the net profit is divided by 5 (a substantial amount of money).

B & W pay over the national minimum wage.

The employees are based on experience and the value they bring to the company if the company employ a fitter the average wage is £12.00 per hour, B & W start them on £10.00 with 3 months’ probation after which time their pay will increase (they need to prove their worth) this is the same for HGV drivers but a different rate. The company also have a depot in Southampton the employees in the south are paid 2% more than in the north as the standard of living is more in the south.

The driver of the business is growth while B & W are tendering for operated plant they also need skilled plant drivers that hold a CSCS card – (Construction Skills Certification Scheme) (legal obligation) this provides proof that the card holder has had training and is qualified to carry out the work intended. this could potentially be a large cost to the company – CSCS card holders must complete training every 3 years. This is a reward to the employee the card belongs to the employee and can take it with them if they leave.

The demand for plant is high now -the company are investing heavily the latest new kit/ plant to promote growth. B & W will procced this way until there is a downturn in the economy.

There is a healthy competition around now. B & W offer customers the latest kit/plant along with competitive costs and good customer service, so they can plan their work.

Theories for reward management – see appendices 3

Economic theory, this considers wage rates that are determined by the supply of labour and the demand of this labour from employers, if there is a shortness of labour, there is an increase in wages for that sector

A shortage of skills is a source of aggravation to companies and, when acute, it is likely to hinder the quality and quantity of their output. Companies can be accustomed to being limited by their capacity to find buyers for their products, not by their capacity to produce products. When companies have, buyers waiting, but cannot produce enough to satisfy the demand because they cannot recruit sufficient skilled workers, they interpret this as a failure of the skills development system.

Skill shortages, the cause can be a general under-investment in skills development; rapid structural changes to be combined with low levels of overall unemployment; a recurrent surge in employment in a part of the economy; and spots of weakness in the training system. Employers could find that they are unable to attract the workers they want because the pay and working conditions on offer are unattractive.

The supply of workers with a skill is difficult to measure for several of the following reasons.

  • What is important is not just the number of people, but also the number of hours they are willing to work. While some people work long hours, many others work part-time.
  • Within an occupation, there may be specialised sub-sets of skills or locations having difficulty recruiting, while other areas are not.
  • As noted above, vacancies may go unfilled, not because there is no one available who can do the job, but because the wages and conditions on offer are unattractive.
  • Within every skill group, there is a range of ability-from exceptional to ordinary. This variation in quality is important to employers, but not observable in measures of labour supply.
  • Many people work in jobs that do not directly use their formal qualifications; alternatively, they may be of working age but are not seeking employment.

(files.eric.ed.gov/fulltext/ED495918.pdf)

B & W have a shortage of plant fitters and HGV drivers.

Tight Labour market

This is an area of economic exchange in which workers seek jobs and employers seek workers. A “tight” labour market has more jobs than workers. In a “loose” labour market, has more workers than jobs.

While parts of the construction and manufacturing sectors have been suffering from skills shortages leading to recruitment difficulties and higher pay, there is growing evidence that this is becoming a more widespread issue.

Institutional theories of reward – open system approach to setting wage levels – environmental factors influence wage levels – employers influence employee’s attitudes and behaviours by way of offering a wage premium to attract labour.

Human capital theory. The workers invest in themselves by education and training. – the higher the individual capital the higher the return in terms of pay and the benefits for the company

Benchmark

The need to benchmark the company`s benefits and allowances against those of other employers could be for several different reasons, from conducting an annual pay review to recruiting to a new position. B & W rely on other local plant hire companies for information on the hourly rate of fitters and drivers, this can be an unreliable source. Thus, so by pushing rates up to attract potential employees moving around the industry

Examples of different ways of gathering and presenting reward intelligence

Exit Interviews this is by having a meeting with the departing employee and HR. the advantages are to establish trends within the company Sample size may be small. Thedisadvantages are the employee may not always give the full and accurate reason why they are leaving.

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Absence, this monitors sickness absence the advantages are it could highlight problem areas where by an employee feels they do want to come to work, rather than there is actual sickness. Disadvantages. This is not always an indicator of issues as may be seasonal (flu)

Recruitment Difficulties, the company can find it difficult to recruit what should be available skills in the market. The advantages are it highlights potential short fall in company reward in comparison with local competitors. The disadvantages are a Poor reward is not the only reason people do not want to work for a company.

Attitude Surveys this is normally an annual confidential survey for all employees
Advantages: this highlights several issues including reward.  It Samples the whole company. It can monitor changes in attitude. The disadvantages are none

Retention Figures
Data on company leavers the advantages are changes in retention can indicate possible reward issues. The disadvantages are leavers are not always reward related.

Salary survey this provides the necessary market data to build competitive pay structures for the company, the two most commonly referenced are:

  1. Ensuring the plans are internally equitable, and
  2. Ensuring the plans are externally competitive.

The advantages are to determine if employees are receiving a fair and competitive wage. The survey output is data on the average or median salary for a specific position, taking into consideration the region, industry, company size, etc. Input data is aggregated directly from an employer or employee these companies are well-established on the market and have already created a reputation. Brands such as PayWell (PricewaterhouseCoopers/PwC), AON Hewitt, Mercer and the Hay Group are recognised by nearly all human resources and remuneration specialists.

The disadvantages are Non-current data salary surveys based on data from employers aggregate input information over a matter of months. The standard data aggregation period is 3 to 4 months. Processing follows, which may take another 2 months. Companies may only receive the data they need after a half-year delay. The labour market changes over this time, in times of economic growth, and the data is no longer up-to-date after aggregation, processing and evaluation.

(hr-guide.com/Compensation/Salary_Surveys.htm)

Internal Business Factors
By looking at company profit, sales and forecasts, what the business can afford. The advantages are job security – keeps the company profitable the disadvantages are poor performance the company may not be able to afford the best candidates for the jobs- (“Good work ain`t cheap, cheap work ain`t good”).

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Assess the context of the reward environment and the key perspectives that inform reward decisions. In this section, you should:

  • Use an appropriate analysis tool to identify the internal and external factors.
  • Analyse the impact of business drivers and related factors on reward decisions.
  • Give examples of different ways of gathering and presenting reward intelligence.

An Introduction to the Company of B & W Plant Hire and Sales Ltd

B & W Plant Hire and Sales Ltd was founded in 1994 by Bill Whitwell; Bill has over 40 years’ experience in the plant hire industry. His son Will, who is also from a plant hire background, joined him in the business in 1998. The company has grown steadily since then by supplying clients with a service they believe cannot be beaten. B & W pride themselves in being readily available for advice and help when problems arise on site. Bill and Will now have in place a management team and workforce that mirrors their values, but still lead from the front line.

B & W are a plant hire company which hires plant (Excavators, Dumpers, Rollers, trenching)

B & W have 4 depots across the country Blackburn is head office where it all started, in 2004 B & W started Bingley Depot – now Keighley Depot, in 2006 B & W started Southampton Depot, then in 2012 they bought Northwich Depot

B &W have been trading over 20 years in which time the company has grown and downsized because of the recession in 2008 now they are growing again.

From a personal point I, have been with the company since Jan 2002 when there were on 6 employees they now have 73 employees and 30 subcontractors. Turnover is growing year on year. The purpose and goals of the Company is to make Profit and become one of the largest privately owned (Ltd) plant hire companies in the Northwest of England. The Company offers the service of Plant hire self-drive and operated plant along with sales of plant. The Company`s main customers are Civil Engineers, house builders, councils and general builders.

External and Internal Environmental Analysis
This environmental analysis will provide a complete external environmental image designed to provide B & W with the tools needed to identify the Company`s strength and weaknesses. This is including an assessment of the company resources. This analysis will assess the company`s competitive position and possibilities of growth. An explanation of how the external environment affects B & W structure and company performance.

A PESTLE analysis is a framework used to monitor the external marketing environment of which provides an overview of the main external factors currently having an impact on the Company

PESTLE see appendices 1

Auto enrolment – the company `s staging date was 1st January 2016. It is a compulsory requirement of all companies to automatically enrol employees who are eligible by 2018 This is a saving scheme for when employee`s retire and has tax relief. Employers must either have one of their own (stakeholder pension) or a government back one or have a specialist pension provider. We have a government backed pension scheme called “The Pension People” (Thepensionsregulator.gov.uk. (2016). Stakeholder pensions |)

This became law in October 2012 by 2018 all employed people should be in a workplace pension. This came about as people are living longer than the 3 score years and ten (70). the retirement age is going to go up between December 2018 and October 2020, the retirement age for both men and women will rise to 66. From 2018 to 2020 the state pension age for both men and women will start rising to 67. The government’s pot of National insurance has been depleted so when the younger generation come to retire there will be no monies left in the pot (Social).

The government decided to push people into saving for retirement by making it law for companies to compulsory join an auto enrolment scheme where by employee`s put 1% of their annual earning with tax relief and the company pays 1% eventually growing too minimum of 5% – (political social and legal).

The influence on the company and impact on reward strategy is Bonuses and pay rises have been effected by the company, by not increasing remuneration the 1% the company must pay into the pension scheme is a pay rise to the employee. This in turn also influences company growth as the employer must find this from somewhere i.e. profits (Economic) it is also seen by most companies as another tax but beneficial to the employee.

Kiddie vouchers – (Social and economic) We as a company have a young workforce at present, to help keep them we have introduced kiddie vouchers. This is a benefit that lets parents make substantial savings against the cost of their childcare.

This works by Parents can receive up to £55pw or £243pm of childcare vouchers from their employer, free of tax and National Insurance. Compared to receiving earnings as salary or dividends, using childcare vouchers can save parents hundreds of pounds each year.

Swapping taxable pay for tax-free childcare vouchers typically saves basic-rate taxpayers up to £933 a year. At the same time, this simple swap saves employers up to £402 a year per scheme member in employer National Insurance contributions.

The impact on the company and the strategy – the company has lower PAYE to pay to the HMRC – this also helps the employee as they are not taxed as much. The cost of putting this in place is 2% so the company and the employee win.

The employee sees this as an extra reward – hopefully it will help to keep them employed with the company.

The business SWOT see appendices 2

Mission statement – this links in with how the company is driven and reward

Mission Statement

  • The aim of B & W is to provide a service which goes beyond the expectations of their customers through the exceptional service of the staff accordingly who are highly equipped, motivated, trained and competent.
  • B & W support their customers with whatever the application, with market leading products and knowledge.
  • The comprehensive fleet of modern machinery they provide is compliant with up to date legislation and regulations.

Vision

  • B & W are committed to continually improving and aim to provide their customers with a reliable service.
  • B & W`s aim is to always satisfy the demand and become the customers only hire/sales supplier of quality

Values

  • The work practices and methods are undertaken and managed safely and cost effectively.
  • B & W are seeking to be an excellent employer, service provider, and customer.
  • The directors recognise that B & W`s staff are one of the most important assets to the company. To that end the company endeavours to reward staff who perform well and prove to be a good advert for the company.
  • B & W expect the best and so should B & W`s customers and clients.
  • The values of the company indicate the training and development for all employees, the employees are the most important asset to the company, this can be a motivator to the employees (the company is only as good as its staff)
  • The rewards are a bonus paid half yearly to the senior management team this is if the net profit is over 10% of turnover then 1% of the net profit is divided by 5 (a substantial amount of money).

B & W pay over the national minimum wage.

The employees are based on experience and the value they bring to the company if the company employ a fitter the average wage is £12.00 per hour, B & W start them on £10.00 with 3 months’ probation after which time their pay will increase (they need to prove their worth) this is the same for HGV drivers but a different rate. The company also have a depot in Southampton the employees in the south are paid 2% more than in the north as the standard of living is more in the south.

The driver of the business is growth while B & W are tendering for operated plant they also need skilled plant drivers that hold a CSCS card – (Construction Skills Certification Scheme) (legal obligation) this provides proof that the card holder has had training and is qualified to carry out the work intended. this could potentially be a large cost to the company – CSCS card holders must complete training every 3 years. This is a reward to the employee the card belongs to the employee and can take it with them if they leave.

The demand for plant is high now -the company are investing heavily the latest new kit/ plant to promote growth. B & W will procced this way until there is a downturn in the economy.

There is a healthy competition around now. B & W offer customers the latest kit/plant along with competitive costs and good customer service, so they can plan their work.

Theories for reward management – see appendices 3

Economic theory, this considers wage rates that are determined by the supply of labour and the demand of this labour from employers, if there is a shortness of labour, there is an increase in wages for that sector

A shortage of skills is a source of aggravation to companies and, when acute, it is likely to hinder the quality and quantity of their output. Companies can be accustomed to being limited by their capacity to find buyers for their products, not by their capacity to produce products. When companies have, buyers waiting, but cannot produce enough to satisfy the demand because they cannot recruit sufficient skilled workers, they interpret this as a failure of the skills development system.

Skill shortages, the cause can be a general under-investment in skills development; rapid structural changes to be combined with low levels of overall unemployment; a recurrent surge in employment in a part of the economy; and spots of weakness in the training system. Employers could find that they are unable to attract the workers they want because the pay and working conditions on offer are unattractive.

The supply of workers with a skill is difficult to measure for several of the following reasons.

  • What is important is not just the number of people, but also the number of hours they are willing to work. While some people work long hours, many others work part-time.
  • Within an occupation, there may be specialised sub-sets of skills or locations having difficulty recruiting, while other areas are not.
  • As noted above, vacancies may go unfilled, not because there is no one available who can do the job, but because the wages and conditions on offer are unattractive.
  • Within every skill group, there is a range of ability-from exceptional to ordinary. This variation in quality is important to employers, but not observable in measures of labour supply.
  • Many people work in jobs that do not directly use their formal qualifications; alternatively, they may be of working age but are not seeking employment.

(files.eric.ed.gov/fulltext/ED495918.pdf)

B & W have a shortage of plant fitters and HGV drivers.

Tight Labour market

This is an area of economic exchange in which workers seek jobs and employers seek workers. A “tight” labour market has more jobs than workers. In a “loose” labour market, has more workers than jobs.

While parts of the construction and manufacturing sectors have been suffering from skills shortages leading to recruitment difficulties and higher pay, there is growing evidence that this is becoming a more widespread issue.

Institutional theories of reward – open system approach to setting wage levels – environmental factors influence wage levels – employers influence employee’s attitudes and behaviours by way of offering a wage premium to attract labour.

Human capital theory. The workers invest in themselves by education and training. – the higher the individual capital the higher the return in terms of pay and the benefits for the company

Benchmark

The need to benchmark the company`s benefits and allowances against those of other employers could be for several different reasons, from conducting an annual pay review to recruiting to a new position. B & W rely on other local plant hire companies for information on the hourly rate of fitters and drivers, this can be an unreliable source. Thus, so by pushing rates up to attract potential employees moving around the industry

Examples of different ways of gathering and presenting reward intelligence

Exit Interviews this is by having a meeting with the departing employee and HR. the advantages are to establish trends within the company Sample size may be small. Thedisadvantages are the employee may not always give the full and accurate reason why they are leaving.

Absence, this monitors sickness absence the advantages are it could highlight problem areas where by an employee feels they do want to come to work, rather than there is actual sickness. Disadvantages. This is not always an indicator of issues as may be seasonal (flu)

Recruitment Difficulties, the company can find it difficult to recruit what should be available skills in the market. The advantages are it highlights potential short fall in company reward in comparison with local competitors. The disadvantages are a Poor reward is not the only reason people do not want to work for a company.

Attitude Surveys this is normally an annual confidential survey for all employees
Advantages: this highlights several issues including reward.  It Samples the whole company. It can monitor changes in attitude. The disadvantages are none

Retention Figures
Data on company leavers the advantages are changes in retention can indicate possible reward issues. The disadvantages are leavers are not always reward related.

Salary survey this provides the necessary market data to build competitive pay structures for the company, the two most commonly referenced are:

  1. Ensuring the plans are internally equitable, and
  2. Ensuring the plans are externally competitive.

The advantages are to determine if employees are receiving a fair and competitive wage. The survey output is data on the average or median salary for a specific position, taking into consideration the region, industry, company size, etc. Input data is aggregated directly from an employer or employee these companies are well-established on the market and have already created a reputation. Brands such as PayWell (PricewaterhouseCoopers/PwC), AON Hewitt, Mercer and the Hay Group are recognised by nearly all human resources and remuneration specialists.

The disadvantages are Non-current data salary surveys based on data from employers aggregate input information over a matter of months. The standard data aggregation period is 3 to 4 months. Processing follows, which may take another 2 months. Companies may only receive the data they need after a half-year delay. The labour market changes over this time, in times of economic growth, and the data is no longer up-to-date after aggregation, processing and evaluation.

(hr-guide.com/Compensation/Salary_Surveys.htm)

Internal Business Factors
By looking at company profit, sales and forecasts, what the business can afford. The advantages are job security – keeps the company profitable the disadvantages are poor performance the company may not be able to afford the best candidates for the jobs- (“Good work ain`t cheap, cheap work ain`t good”).

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