MHRM 6601 Week 11 Total Rewards Plan Example

Stone Arch's Total Rewards Plan for 2027: Every Element of Pay and Benefits Built This Term, Its Cost and Its Purpose, and the Longer Account of What the Credit Union Chose Not to Buy

Student Name

Walden University

MHRM 6601: Benefits, Compensation, and Resource Allocation

Instructor Name

Month Day, Year

Stone Arch's Total Rewards Plan for 2027: Every Element of Pay and Benefits Built This Term, Its Cost and Its Purpose, and the Longer Account of What the Credit Union Chose Not to Buy

Purpose of the Plan

This plan gathers, for the board compensation committee at Stone Arch, every reward element the term produced for the credit union. It is organized under the WorldatWork total rewards model, which groups rewards into compensation, benefits, well-being, development and recognition (WorldatWork, n.d.). One problem runs through the whole plan: Stone Arch pays its front line below the market, loses tellers in their first two years and has given everyone the same raise regardless of what they contribute. Each element below states what it costs in 2027 and which part of that problem it addresses.

The Elements

Table 1

2027 Total Rewards Elements, Cost and Purpose

Composite organization. Total about $1,011,000, inside the $1.2 million envelope.

How the Elements Work Together

Compensation carries most of the cost, as it does in most plans, but the other categories address what pay cannot. The structure and market adjustments fix the pay gap. The merit budget, now spent within ranges based on performance, changes what pay rewards; Gerhart and Fang (2014) note that pay linked to performance shapes who stays as much as how hard people work. The pathway gives a new teller a reason to stay past the first year: a defined route to member service work, with training and a raise attached. Recognition costs little and can be given weekly, filling the long gaps between annual raises. The assistance program and steady premium share protect employees' finances and well-being during a year of change.

What Stone Arch Chose Not to Buy

Every plan is also a set of refusals. The committee should know what was considered and why it was declined, because each option has advocates and some will return.

The first and largest was leading the market for front-line staff by paying tellers and member service representatives at the 75th percentile. Priced in Week 6, that move would have cost about $795,000 a year, more than the entire merit budget, and it would have compressed the senior representative range. It was declined because the evidence pointed to a narrower problem. Tellers leave most often in their first two years, and the pay gap is largest for those hired before the market adjustment. Targeted adjustments, the pathway and the compression fix in the equity review address that problem for a fraction of the cost.

The second was individual sales commissions for lenders. Commissions would raise loan volume, but they would reward exactly the behavior the credit union's members do not want: pressure to borrow. The incentive literature has long cautioned that people deliver what is paid for, not what is hoped for (Kerr, 1975). Stone Arch once paid lenders this way, and the four red-circled lenders are the plan's leftover cost. The team incentive's referral measure, which counts only loans that stay current and forfeits payment after a substantiated complaint, was chosen instead.

The third was reducing the employer share of health premiums by 5 percentage points. It would have saved about $180,000, but every enrolled employee would have absorbed it, and a teller with family coverage would have lost about 3 percent of pay. That would have undone the market adjustments for the very employees they were meant to help.

The fourth was dropping the employee assistance program. Its use is low, which made it a tempting cut, but it costs under $6,000 and the review by Joseph et al. (2018) found modest benefits for those who use it. Promoting it was judged a better use of attention than removing it.

The fifth was a credit-union-wide incentive based on overall financial results. It would have been simple to administer but would have given a teller in one branch no line of sight to the outcome. The branch team design was chosen because each person can see how their branch is doing, and Garbers and Konradt (2014) found that the effects of team incentives depend on how they are designed.

Risks

The merit budget now requires managers to rate performance consistently, which many have not done before; calibration sessions are scheduled for November. The incentive pilot may produce results that do not generalize to the other branches. And the equity review's grade 5 finding may require further adjustments once each case is reviewed.

Measures for the Committee

The committee should expect a report each quarter on four figures: first-year teller turnover, the share of employees within their ranges, member experience scores in the pilot branches against the others and the cost of the plan against the envelope. If first-year teller turnover has not fallen by the end of 2027, the plan's central assumption, that the pay gap and the lack of a path are what drive tellers out, should be revisited.

Conclusion

The plan spends about $1.01 million, inside the envelope, and directs it at a single problem. Most of the spending fixes pay that had fallen behind. The rest gives employees reasons to stay that pay alone cannot provide (Milkovich et al., 2020). The declined options are not wrong in every circumstance; they are wrong for Stone Arch in 2027.

References

Garbers, Y., & Konradt, U. (2014). The effect of financial incentives on performance: A quantitative review of individual and team-based financial incentives. Journal of Occupational and Organizational Psychology, 87(1), 102-137. https://doi.org/10.1111/joop.12039

Gerhart, B., & Fang, M. (2014). Pay for (individual) performance: Issues, claims, evidence and the role of sorting effects. Human Resource Management Review, 24(1), 41-52. https://doi.org/10.1016/j.hrmr.2013.08.010

Joseph, B., Walker, A., & Fuller-Tyszkiewicz, M. (2018). Evaluating the effectiveness of employee assistance programmes: A systematic review. European Journal of Work and Organizational Psychology, 27(1), 1-15. https://doi.org/10.1080/1359432X.2017.1374245

Kerr, S. (1975). On the folly of rewarding A, while hoping for B. Academy of Management Journal, 18(4), 769-783. https://doi.org/10.2307/255378

Milkovich, G. T., Newman, J. M., & Gerhart, B. (2020). Compensation (13th ed.). McGraw-Hill Education.

WorldatWork. (n.d.). Total rewards model. https://worldatwork.org/resources/total-rewards-model