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    Designing a Compensation Package and Incentive and Benefits Plan

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    Question: James Richards has an electrical engineering degree from a United States' accredited university. Upon graduation he was offered, and he accepted, an entry-level engineering position at a firm in San Antonio, Texas. He has been gainfully employed with this firm for the last five years. Recently he interviewed with your firm which is located in Chicago, Illinois. You, working for the human resources department, want to employ James. Working in conjunction with your supervisor you are drafting three items; (1) a compensation package, (2) an incentive plan, and (3) a benefits plan in order to successfully employ James Richards with your organization.

    Using the Internet and Library, locate all necessary information for constructing these three packages. This will include designing plans that are specific to James and this situation, including the pay rate that will be offered, and the specific benefit and incentive plans this offer will include. Along with these packages you will include a one page cover letter that outlines what you propose to offer. The cover letter should be addressed to your supervisor and should explain and justify the compensation package, incentive plan, and benefits plan. Your detailed plans will then follow that cover page.

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    Compensation Package

    A good thing to do when starting an assignment is to be sure 'your' definition is the same as what is being requested, no matter how trivial it actually may seem at the time. This assignment is a good example of that very statement. According to Answers.com it had several definitions of the word 'compensation'. http://www.answers.com/topic/compensation

    I also provided the 2006 Employee Compensation Guide - it might give you some useful tips on how to expand on your own ideas. http://www.mheda.org/files/public/06EmployeeCompArticleInsert.pdf#search='example%20of%20a%20compensation%20package'

    This is a small article from Kansas State University on how to design a creative compensation - http://www.cnr.berkeley.edu/ucce50/ag-labor/7article/article33.htm

    Incentive Plan

    Long term incentive plan - (I assume this would be the obvious choice considering you want to keep this employee around for quite some time) - Any plan that provides compensation intended to serve as an incentive for performance to occur over a period longer than one year (where performance is measured by reference to financial performance of the company, the company's stock price or some other measure), but not including restricted stock, stock option or stock appreciation rights plans. http://www.investordictionary.com/definition/Long-Term+Incentive+Plan.aspx

    I really liked how 'HPS - High Performance Solutions' web site went over what an incentive plan is. It gives you the definition, how to develop a ..., strategy, performance, etc. Really covers it all. http://www.highperformancesolutionsinc.com/store/incentiveplanguide.asp

    ERI Distance Learning Center web site - if you had any kind of question about incentive plans- I believe this is the site that would answer them all - http://www.eridlc.com/onlinetextbook/index.cfm?fuseaction=textbook.chpt18

    Benefits Plan (Retirement Plan)

    Retirement benefits are - pre-determined by an arranged formula under this plan. Workers do not necessarily own the proceeds from defined benefits plans, so vesting procedures are required. Today, vesting is determined according to ERISA rules. Defined benefits plans have traditionally been used in larger organizations with more employees. A defined benefits retirement plan is one where the employer contributes a set amount into the account; however, benefits are pre-determined by a plan formula based on years of service and earnings in relevant years. Vesting is 100 % after 5 years with the employer or there is 20% vesting in each year from year 3 to year 7 with the employer. Larger organizations are the common users.

    Basic Example of Benefits Plan

    20 days (for full-time employees) Up to 35 days (i.e. 15 additional days in 1 day increments)

    Money Purchase Pension
    Under age 25, 6% of pensionable salary; from ages 25 to 29, 8% of pensionable salary; from ages 30 to 34, 10% of pensionable salary; age 35 and over, 12% of pensionable salary; Additional contributions can be paid in increments of 1% up to the limit prescribed in the Flexible Benefits Plan (bearing in mind you can exceed the prescribed limits by a further 40% of your salary)

    Life Assurance
    2x pensionable salary 3x or 4x pensionable salary

    Cover Letter

    American Heritage defines it as - A letter sent with other documents to explain more fully or provides more information; also called covering letter.

    Example of a Cover Letter

    Follow this detailed and step by step process when writing your cover letter. http://owl.english.purdue.edu/handouts/pw/p_basicbusletter.html#formats

    Here are a few ideas for you to develop your own paper. However, please be sure not to simply copy and paste without proper citations. If you would like to use any of the examples I have provided please feel free to do so but be sure to use the format below:

    [BrainMass Online TA Name], Online TA [OTA ID#], Posting Code [Posting Code], http://BrainMass.com (hyperlinked if submitted electronically), [Month], [Year].

    eg. Cherie J. Hetland, M.Ed, Online TA# 105280, Posting Code #####, ...

    Solution Summary

    This solution discusses incentive and benefit plans as well as an example cover letter in 2,300 words with references.