Compensation and Benefits Running head: COMPENSATION AND BENEFITS PLAN

Compensation and Benefits Plan Tia Conley, Tangela Calhoun, Pepper Price, Christopher R. Melton, Noh Park University of Phoenix Human Capital Management HRM 531 Ginny McMinn October 17, 2011

Compensation and Benefits Plan Developing a compensation and benefits plan is a complicated task with many variables and components that require thoughtful consideration by an organization. Creating a package which is cost effective for the business and also meets the needs of the employee can lead to a well qualified applicant accepting a position. If a compensation and benefits plan is not well suited for the employee, he or she may decline the offer, forcing the company to move to a less favorable candidate or even start the recruitment process again. The following proposal will provide a compensation and benefits plan for an insurance agent at Heritage Insurance Agency, including components that align with current industry standards, justification for the approach taken, and potential obstacles the plan may face upon implementation. Heritage Insurance Agency provides comprehensive insurance coverage offering life, health, property and casualty, commercial, and auto insurance to the local community of Atlanta, Texas, and surrounding rural areas. With significant business growth in the last 10 years, the owner has developed a job description for a licensed insurance agent in the event a second agent is necessary to meet the increasing demands of business growth or in the event the owner cannot work. A compensation and benefits plan is another section of preparation that will give the owner piece of mind, because hiring may need to occur quickly, and also provides an opportunity to evaluate when it may be feasible and optimal to hire a new employee from a financial standpoint. Insurance sales agents are sometimes offered a job right out of high school or college, some companies may offer tuition reimbursement for an employee who chooses to continue his or her education through certification and training. Working in the insurance industry, sales agents have to prove their worth and when they do, each will notice a rise in their pay compensation.

The normal insurance sales agent receives compensation based on commission only, especially when working for an independent broker. Salary and wages are based on years of experience, compensation, and the skills an individual has to sell. According to the national average in the United States from Career Infonet (2010), the highest paid yearly wage for a fulltime employee is $115,300 and the lowest paid yearly wage for full-time employee is $25,900. When considering a part-time employee, hourly wages are the norm and range from $12.47 an hour to $55.45 an hour. One will find hourly wages when working for a smaller insurance agency such as a bank or auto insurance company. Insurance sales agents receive another pay compensation; bonuses. Bonuses are paid according to the sales an agent produces. Most companys offer health care insurance or with the new health care reform, companys will offer health care coverage in the near future. Based on past health care compensations, an insurance sales agent may not receive any from an employer. Based off of Career Infonet and Bureau of Labor Statistics, health care is not a document of compensation. If an individual does research, one can find an agent job that offers health care insurance. At Sterling Life Insurance Company (2011), which has an opening for insurance agent in Nashville Tennessee, offers medical, dental, and vision insurance if selected for the job. Basically, an individual looking for a job in the insurance industry must conduct research to find the most desired benefit package. Other perks as an insurance sales agent is the special compensations such as the organization paying for the agents automobile or company car and transportation expenses, attendance at conventions and meetings, promotion and marketing expenses, and retirement plans (Bureau of Labor Statistics, 2010-11). However, when working for an independent company selling insurance, an agent will most likely receive fewer benefits but can be paid more to compensate for such expenses and perks.

The recommendation for Heritage Insurance Agency is to offer compensation and benefits that includes a competitive salary, health care coverage, a retirement plan, and paid vacation. The salary range should be between $30,000 and $40,000 per year and although this is at the low end for insurance agents nationally, this range takes into consideration the low cost of living in a rural area. The recommendations for health care coverage and retirement are similar; the costs of both are shared between employer and employee with percentages dependent on the point system for salary determination discussed later. Finally, three weeks paid vacation plus four days of sick leave provides a generous amount of time off allowing cost efficiency for the organization because it does not add to the monetary cost of the new employee. To select a system of compensation, a potential employee needs a current job description, an evaluation of the job that ranks importance in the company structure, salary or pay surveys to ensure appropriateness to the marketplace, and develop a pay structure that works for Heritage Insurance Agency. Assigning levels to each job responsibility is an approach that will help determine pay within the range previously specified. From this, a total can be determined and hierarchies achieved by ranking the jobs total level or points from lowest to highest and provide ranges for that responsibility. Next points can be assigned to other factors such as education, years of experience, past jobs, etc. Combining this with the responsibility can give points for that particular candidate and a pay range can be adjusted to meet the value of that candidate. This approach is equitable because it makes this an equal playing field for the factual elements of the job. The approach is not overly time consuming as it develops the grade of pay on trends of what something is worth, rather than flailing trying to customize each job process for each new hire. Jobs with the same general value should be clustered into the same pay grade (Cascio, 2010, p. 431). This approach is justifiable because .the determination of each

individuals pay (based on experience, seniority, and performance) becomes a more systematic, orderly procedure (Cascio, 2010, p. 431). This point system method if implemented can be seen as not comprehensive and lacking insight. Other important elements of an individual may not be addressed and value added traits left uncompensated. These may include character traits such as easy going, fun, and optimist. These traits may add significant value to a particular job and may be overlooked when solely focused on experience, seniority, and performance. Additionally, prior to hire when the pay level is established, the aptitude of an individual to do a task may vary, as one person may be much better at doing a particular task than another. As an example, two candidates may sell something, but how well they sell insurance products and services may vary greatly. Every item sold can be very different and not easy to define until hired. It would be important to take the past track record into consideration prior to setting a clear number but also keep in mind the individuality of that competence. Developing the compensation and benefit package for the company is very important because failure of doing that can damage the company on losing a good candidate to hire. When candidates look for a job, they look at the job description to see if they fit in that category. Next they look at the compensation and benefit package. The pay is important but pay will be around the same range because most companies will try to match the market. The point system method to develop compensation and benefits package will help Heritage Insurance Agency. It is suited for this company because it is based on how well the agent sells the insurance. First thing they need to think about is to have the right job description, which can help determine the level of the job; it will help the organization develop a better compensation and benefits package.

References Bureau of Labor Statistics. (2010-2011). Occupational outlook handbook. Ed. 2010-11. Retrieved from http://www.bls.gov/oco/ocos118.htm

Career Infonet. (2010). Wage information: insurance sales agent. Retrieved from http://www.careeronestop.org/SalariesBenefits/Salary_Report.aspx? soccode=413021&stfips=&zip=&mode= Cascio, W. (2010). Managing human resources: Productivity, Quality of Work Life, Profits (8th ed.). New York: McGraw-Hill. Sterling Life. (2011). Sterling life insurance company. Job posting. Retrieved from https://www.sterlinglife.apply2jobs.com/ProfExt/index.cfm? fuseaction=mExternal.showJob&RID=684&CurrentPage=11