Implications of unionization on Wal-Mart’s compensation plans in China

It was seen that Wal-Mart Stores had to forcefully acknowledge unionization in China. The American firms are making various efforts to revise or prevent a restrictive law which would hamper the functioning of the company. There by the cost have increased and also the compensation plans have become rigid. Compensation Plan With the advent of globalization it is becoming increasingly difficult to retain and attract human resource high on talent. Human resource which was much more steady in the years ahead are now very mobile and inconsistent in nature.

There by maintain a good morale among the employees is an essential criterion to attract and retain the right kind of people into the organization (Carlson et al, 2006). Rationale behind Basic elements of Plan The hierarchy of needs by Maslow states that a person would look to satisfy his basic needs first; consequently he would want to satisfy higher needs. The five needs of a person according to Maslow are “physiological, safety, social, esteem and self-actualization” (Robbins, 2009). The theory also states that every employee would want to satisfy his basic needs before he attempts to satisfy the other needs.

Thereby every compensation plan must have few basic features such as:

1. The Basic salary
2. Variable incentive plan: this may be directly variable with the performance
3. Performance appraisal policy: the policy should be transparent in nature and should be well communicated to all employees.
4. Other benefits: they should be according to the organizational rules and strategies.

They must also comply with the Chinese law. The benefits may be Maternity Leave, Annual Leave, Medical Leave, Marriage Leave, Child Sick Leave, Paternity Leave etc.

Objective

The primary motive of planning a fair and apt compensation plan is to hire and retain the motivated and skilled workforce in the organization. The designing and implementation will be over seen by the Head of the Human resources department.

Compensation philosophy: The Compensation committee shall have the chief executive officer, The Head of Human Resources and also the managerial heads from each department. Different managerial and staff level will be provided different grades, which are as follows:

1. Grade A: Top Management (Senior management)
2. Grade B: Middle Management
3. Grade C : Junior Management
4. Grade D: Administrative staff
5. Grade E: Hourly based employees

The compensation plan is structured such that the pay decreases as the grade lowers, so a Grade A employee receives the highest salary while grade E receives the lowest. The basic pay part should be fixed while the variable part will vary according to the performance demonstrated by each employee. The Expatriate employee will be paid relocation allowance. The compensation plan should be in accordance with the Chinese national standard for the local human resources and International standards for Expatriate.

Type of Compensation to be included As mentioned prior the basic pay shall be fixed in nature and paid to each employee. Therefore it forms a vital part of the compensation. The non monetary incentives shall be allocated according to the Law and the guidelines stipulated by Wal-Mart. It will vary from 5% to 25% of the compensation, keeping in accordance with the level or grade each employee belongs to. Monetary incentives are an essential element to motivate the employees to perform better and reach higher targets (Miller, 2006). This should depend on both individual as well as profit sharing method.

The group incentive and individual efforts will be two separate components. The individualistic bonus which is achieved by each employee is dependent on the actual performance demonstrated by each set against a benchmarked level. The group bonus will be allocated according to the performance of the entire Wal Mart China group (Johnsons, 2006). Any noteworthy suggestion or increase in productivity shall be awarded by cash rewards. The Chinese culture does not advocate penalties, so low performers will not be penalized in any form.

Summation In today’s corporate field, when a large amount of organization’s worth is accredited to its human resources capital, workforce management is the way to gain competitive advantage. The plan will help to attract, motivate and retain the right human resource which is the most vital factor to become successful. A direct relation to the Maslow’s law and morale will help support the plan further. The compensation should help satisfy the employee’s basic needs or he will be low on morale and not work efficiently.

The differentiation of the bonus allocated to individual and group performance measures will help demarcate a good performer from a weak employee. The company’s performance is also segregated from the employees. Also flexibility will be maintained to award one time lump sum to extraordinary performance shown by any employee. The Chinese culture, legal and environmental issues are also noted and incorporated in the plan so that the people working in the company feel like they are not losing on any grounds to the pay awarded in other Chinese companies.

References:

1. Wal-mart. com, (2010), http://www. walmart.com/cp/An-Introduction-to-Walmart. com/542413 [Online] [accessed 27th May 2010]
2. Carlson, D. S. , Upton, N. , & Seaman, S. (2006). The impact of human resource practices and compensation design on performance: An analysis of family-owned SMEs. Journal of Small Business Management, 44(4), 531-543.
3. Hulme, V. A. (2006, Mar/Apr). Short staffed. The China Business Review, 33(2), pp. 18-23
4. Johnson, T. (2006, Aug 16). Wal-Mart unions in China to be controlled by government. Knight Ridder Tribune Business News. Washington: p. 1. Retrieved 02/25/09 • Miller, J. (2006, Jan/Feb). What’s good for Wal-Mart. Dollars ; Sense. Somerville: pp. 12-15