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compensation and reward management
Human Resources » Case Studies

Chrm Message From: diligent Total Posts: 5 Join Date: 31/03/2010
Rank: Beginner Post Date: 21/08/2010 04:38:05 Points: 25 Location: India
Compensation and Reward Management
Case Study – 3
You have been asked to give advice to a friend of the family about her business. The business
employs thirty people in three teams in a workshop, which manufactures self-assembly furniture.
These packs are sold to a larger manufacturer, which supplies to retail and trade outlets. The
business is growing rapidly and the main limit to what it can sell is how much product it can
make. The basic rate of pay for all of the staff is the Minimum Wage, but each person can earn a
team-based bonus, based on the productivity improvement for the team as a whole compared to
that of last year. This bonus is shared out, taking into account the amount of product each
individual makes and his or her level of attendance. The bonus has worked so well in the panel
assembly department that production has increased by 50 per cent and members of the team now
earn, on average, an extra 50 per cent of their basic pay on top. They have asked if some of this
can be converted into an increase in basic pay. The extra volume has meant that the machining
department has more work to do, but has had to take an extra staff as well as undertaking as lot of
overtime, because its productivity has only increased by 10 per cent. The parts department, which
has experienced no significant increase in productivity mainly due to the layout of the department
and poor supervision, is worried that its wages will fall behind. To complicate matters, this
department employs mostly women, while the other two departments employ mostly men.

1. Which wage theory is highlighted in the case?
2. What factors should the owner take into consideration when deciding what new bonus
schemes to put into place?
3. What are the pros and cons associated with the owner’s option?
4. Considering all variables, what advice you would give to the family friend?
5. How should the owner handle the change?
6. Can a uniform compensation policy suffice in the present scenario? Justify your answer
quoting relevant concepts.
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