Assignment 2 – Compensation Plan Outline
Ginger Renee Wigglesworth
Dr. Anthony Jacob
December 2, 2012
Evaluation of Coca Cola ‘s Compensation Plan
Coca Cola uses a market-based compensation plan in which employees receive compensation that is comparable to the market rate. The market-based system is used for hourly employees and for entry level managers that receive a salary. The company also uses a merit pay system for increases, with employees able to earn a rate of compensation above the market rate based on their performance as evaluated in standardized reviews (Coca Cola, 2012). Managers holding positions above a specified level as well as employees in certain critical areas …show more content…
It also provides the firm with the ability to expand into new geographic areas at the current market compensation rates, which may be lower than the compensation rates of existing employees in other geographic areas (Bamberger & Meshoulam, 2000, p. 43).
Current Pay Structure and Recognition The current pay structure at Coca Cola with its emphasis on market-based compensation with merit increases based on performance is reasonably successful for achieving the objective of attracting and retaining labor. The pay structure, however, creates as a substantial differential between the pay received by employees and managers. The general strategy used by the firm is to initially hire employees at a compensation rate that is relatively low and comparable to the low-end of the market, then offer them opportunities to increase their pay based on their performance. The approach theoretically creates an incentive to improve performance while allowing the firm to identify employees that make an extraordinary contribution to the organization. Coca Cola prefers to hire from within, which creates opportunities for advancement that can lead to higher compensation levels for employees. To some degree, this policy blurs the boundary between hourly employees and salaried management in the organization, and functions as an additional deterrent to unionization. The firm selects internal applicants .