Strategic Compensation: Case Study of Plastec Company


The compensation of employees is an integral function of human resource managers. Mathis and Jackson (2013) hold that the development of compensation strategy is a rigorous exercise because it requires consideration of numerous factors in the workplace and the professional expertise of employees. In this view, human resource managers have to balance diverse interests without placing a huge burden on an organization or exploiting employees.

Plastec is a company in the case study that seeks to develop an appropriate compensation strategy to motivate employees, reduce turnover, and increase retention. In this view, this essay prepares a compensation strategy by comparing compensation packages, motivating employees using variable pay, increasing productivity, and identifying appropriate benefits for employees.

Wages and Benefits

Since workers are machine operators, Paul should develop a compensation strategy by comparing their wages and benefits with those of other employers of machine operators. Companies that have similar machine operations and require the same professional qualification need similar wages and benefits. According to Madhani (2012), human resource managers need to compare the wages and benefits of their respective companies with that of similar companies so that they can offer competitive packages. The nature of wages and benefits that companies offer in the labor market determine their ability to attract and retain competent employees for a long period (Berger & Berger, 2008).

The wages that machine operators require should be commensurate to their professional level, the nature of their job, and the duration of the work. Comparative analysis of these variables in various companies would provide valuable information that is essential in the development of a competitive compensation package in terms of salaries.

Moreover, Paul should also compare the benefits that machine operators get in diverse organizations. The amount of benefits is dependent on the nature of the job, the duration of the work, and predisposition to risk. Some of the employee benefits that Paul should compare with those of other companies are unemployment insurance, social security, workers’ compensation, minimum wage, and overtime pay (Ju, Kong, Hussin, & Jusoff, 2008).

Comparative analysis of these benefits would enable Paul to develop a fair compensation strategy that satisfies employees and supports organizational growth. Evidently, critical analysis and comparison of both the wages and benefits are critical in the development of a compensation strategy for Plastec. Therefore, Paul should compare and contrast the wages and benefits of various companies, which have machine operators, and come up with a compensation strategy that suits the requirements of employees and the company.

Variable Pay and Retention of Employees

In the competitive labor markets, the retention of employees is a serious issue that has the capacity to cripple organizations in the modern world. Many organizations usually employ diverse methods in attracting and retaining employees. Since Plastec experienced the challenge of retaining employees, it should employ variable pay to motivate its machine operators and retain them. Ang, Chen, and Lin (2005) state that variable pay rewards employees because it recognizes their hard work and performance. In this view, Paul should motivate his employees by paying them according to their performance in the workplace.

As performance correlates with the wages and benefits, employees would work hard to attain the compensation. If employees always perform well, Plastec would reward them accordingly, and thus, motivate employees to stay and earn more than they could in other companies. Hence, the use of variable pay, such as performance contracts, would motivate employees and retain them for a long period.

Since variable pay is a very important strategy for attracting and retaining employees, Paul needs to utilize it effectively. The payment of a bonus motivates employees in their workplace and makes them continue working in Plastec because it offers appropriate rewards in terms of the bonus. Essentially, a bonus acts as a gesture of recognizing and appreciating the great work that employees have done in an organization.

Variable pay is a unique method of motivating employees because it is fair and just for it does not discriminate against employees. What employees perform is commensurate to the number of bonuses that they receive over a given period. Ang, Chen, and Lin (2005) argue that bonuses are long-term rewards, which accumulate the performance of employees, and thus, retain employees owing to their motivation. Hence, Paul needs to use bonuses as a strategy of motivating and retaining employees in Plastec.

Variable Pay and Productivity

Variable pay provides an effective way of increasing productivity in organizations. Paul can effectively use variable pay in promoting organizational performance among employees by setting targets that each machine operator must achieve. By setting targets, Paul would enable employees to perform optimally and boost organizational performance. The proponent of variable pay holds that rewarding employees based on their performance enhance productivity because employees work hard to achieve or even surpass set targets, increase efficiency, and deter poor performance among employees.

Variable pay is an effective modern strategy that employers use in motivating their employees in working conditions, which are very harsh and demanding (Haessler, 2007). Hence, continuous assessment of employees to determine the extent of their performance provides a view of understanding their performance and contribution to organizational performance. Thus, Paul should set targets of various tasks in the operations of machines and reward employees, who perform their duties in an exemplary manner.

A good compensation package in terms of bonuses plays a central role in the promotion of organizational performance or productivity among employees. Usually, organizations that register high rates of employee turnover do not use variable pay effectively. Bryant (2013) acknowledges that the use of variable pay, such as a bonus, is very important in augmenting the performance of employees in various organizations.

Increased productivity is only possible if human resource managers could apportion bonuses to each employee according to performance. The nature of bonuses that each employee receives has a motivational impact, which is enduring, and hence, central in the improvement of organizational performance (Rosenbloom, 2005). When employees realize that high and mediocre performance does not attract equal bonuses, they would strive to work hard and increase their production to the optimum level where they could receive considerable benefits. Therefore, variable pay, such as bonuses, plays a central role in enhancing the productivity of employees.

Types of Benefits

The appropriate type of benefit that the machine operators require is social security because most of them are adults, who are about to retire. The machine operators are almost reaching their retirement ages, and thus, they need social security benefits so that they could plan for their retirement well. According to Kaplan (2008), employees, who have advanced ages, require social security benefits because they enable them to plan for their retirement and live quality life just like in their employment status. Governments have made it compulsory for employers and employees to contribute to the social security fund since it helps retirees to live decent lifestyles during their retirement period.

Workers’ compensation is another form of benefit that machine operators require since they are susceptible to injuries and accidents in the workplace. When an employee sustains injuries or encounters an accident in the workplace, workers’ compensation benefits cover the medical costs incurred and provide cover for time off in some instances, where employees are unable to recover quickly. Babitsky and Mangraviti (2011) note that workers’ compensation benefit differs from one state to another for the federal and local governments offer a unique compensation to their workers. Therefore, workers’ compensation benefit is appropriate for the machine operators since they work in a risky environment.


Compensation strategy forms a critical component of the contract that exists between employers and employees for it defines wages and benefits. Human resource managers usually develop compensation strategies by rules and regulations that labor organizations and governments have formulated. In the case study of Plastec, the development of compensation strategy should ensure that employees receive appropriate wages and benefits, which are commensurate with professional expertise and work. For managers who employ a number of strategies in attracting and retaining employees, variable pay offers an effective approach to retaining employees.

The use of variable pay in terms of retention of employees and enhancing their organizational performance is essential. Regarding the nature of the benefits that the machine operators require, it is evident that they need social security and workers’ compensation benefits. These two benefits are appropriate because the machine operators are approaching their retirement ages and are prone to accidents and injuries. Therefore, human resource managers should consider a myriad of factors that influence employee attraction and retention when formulating compensation strategy for Plastec.


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Bryant, P. (2013). Compensation, benefits, and employee turnover: HR strategies for retaining top talent. Compensation & Benefits Review, 46(3), 171-175.

Haessler, S. (2007). Incentives and Outcomes: An Empirical Analysis of Variable Pay for Performance and Advanced Placement Results in Texas. Milwaukee: The University of Wisconsin.

Ju, S., Kong, L., Hussin, Z., & Jusoff, K. (2008). The influence of employee benefits towards organizational commitment. Asian Social Science, 4(8), 1-12.

Kaplan, R. (2008). A guide to starting social security benefits. Journal of Retirement Planning, 1(1), 1-9.

Madhani, P. (2012). Matching compensation strategies: Enhancing competitiveness. Journal of Indian Management, 9(1), 5-22.

Mathis, R.L., & Jackson, J. H. (2013). Human Resource Management (14th ed.). Thompson Publishing.

Rosenbloom, J. (2005). The Handbook of Employee Benefits. New York: McGraw Hill.

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