compensation plan student s name grade course tutor s name date the term compensatio 2920970

Compensation plan

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The term compensation means the combination of salaries, benefits, and wages stall get in exchange for work. “Compensation may include hourly wages or an annual salary, plus bonus payments, incentives and benefits, such as group health care coverage, short-term disability insurance and contributions to a retirement savings account” (Chung, Steenburgh & Sudhir, 2013). Several components may be combined together to form the compensation plan of employees. The compensation plan of an employee collectively refers to all components included in the plan, the strategy applied in paying the compensation, and the reason why the employee receives the salary increase, bonus, and incentive.

The International Business Machine Corporation (IBM) is an American company. IBM Company deals with data technology, computing technology, software applications, consulting services and the hardware. The company’s compensation plan is characterized by the following: market-based adjusted salary, contributor reward, growth driven profit-sharing program, retirement saving and group health benefit (Blazovich, Huston & Huston, 2014).

This compensation plan has been very effective because the company’s objective is also directed towards investing on the employees. This package attracts new staff and it has helped retain the current staff. The introduction of market-based adjusted salary has acted as a draw to new talent. Through this method, the staff will be given a competitive pay. The pay will be rising in comparison with the market conditions. “Market-based adjusted pay will be used to increase base salary for employees in eligible job roles and countries where pay is lagging the market” (Blazovich et al, 2014, p. 101). The company has also Growth Driven Profit-sharing program that is going to replace the Performance Bonus program. This program allows the employees to directly enjoy the profits of the company fully.

The company should consider introducing 401k retirement plan. A 401k retirement plan is an account created for the employee and funded using pre-tax payroll deductions. “The funds in the account can be invested in a number of different stocks, bonds, mutual funds or other assets, and are not taxed on any capital gains, dividends, or interest until they are withdrawn” (Blazovich et al, 2014, p. 103). This strategy allows money to compound itself and eventually increasing the wealth of the employee.


Blazovich, J. L., Huston, G. R., & Huston, J. M. (2014). Creating an Executive Compensation

Plan: A Corporate Tax Planning Case. Issues in Accounting Education.

Chung, D. J., Steenburgh, T., & Sudhir, K. (2013). Do bonuses enhance sales productivity? A

dynamic structural analysis of bonus-based compensation plans. Marketing Science, 33(2), 165-187.

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