Internal And External Equity In Employee Compensation Program At McDonald's Canada

Types of Employment at McDonald's Canada

Your should examine a firm you are prepared to research.  The organization should be large enough (>100 staff) to have an established compensation & benefits program.

Function, Size, Type of employees (diverse occupations) and location

The company selected for the current study is the McDonald’s Restaurants of Canada that is the master franchise in Canada of the chain of fast food restaurants of McDonald’s owned by the American parent corporation McDonald’s Corporation. It being one of the largest chain of fast food restaurants, franchise markets food items, counting hamburgers, French fries, different soft drinks and chicken throughout the nation.

McDonald's Canada operates through 1,400 stores (counting locations in Canada) and this includes Canada, and over and above 85,000 Canadian workforces (Around the World McDonald’s 2018). There are different types of employment that can be observed in this case namely, permanent employment, contract employment, part time employment as well as other types of employment. McDonald’s has permanent employees who usually get base salary, different health benefits, bonuses, company stock option schemes along with other personal incentives among many others. Also, the employees of the company include part time employees who work in food as well as retail, stores and are mainly service jobs (Cascio, 2018). The locations in which the firm operates include North and South America, Europe, Africa as well as Asia & Oceania. However, the area served by McDonald’s Canada is the Canada.

Way internal equity is established

Management of McDonald’s makes certain preservation of internal equity that refers to comparison of different positions within the enterprise to ensure fair pay. Employees also need to perceive that they are paid fairly in comparison to their co-workers. In order to generate fair pay, there is need to compare different employees who undertake identical jobs for the business enterprise (Cascio, 2018). There is requirement to take into account different tasks that employees undertake. At the time when two different employees undertake identical tasks, there is need to earn identical wages (Bratton & Gold, 2017). Management of the firm does not base wages of the employees solely on titles of the job. Management of the firm ensures that in case when two different workforces possess diverse titles but undertake identical tasks need to have identical wages. Identical tasks can be considered to be main concern at the time of establishing wages of employees. Fundamentally, this includes educational qualification as well as experience of each and every employee (Bratton & Gold, 2017). In a bid to maintain and preservation of transparency as well as fairness within the payroll of the business and there is need to explicate decisions of compensation of employees. At the time of establishing wages of employees, management of the firm register different facets that help in framing the decision. In case if a specific employee ever question their wages, it is important to explicate the specific reasons for selecting the wage (Brewster, 2017).

Importance of Internal Equity in Ensuring Fair Pay

Pay for new hires determined and aligned with existing staff to ensure internal equity

Internal equity refers to an appropriate association between wages disbursed for diverse jobs within the business enterprise. For instance, when salary earned by a Sr. Manager is lesser than that of a manager; then there is short of internal equity. Again, pay differentials need to be associated openly to differential in job necessities. In case of fair pay differentials between different jobs can be instituted with the aid of analysis of job (Armstrong & Taylor, 2014).

Internal equity subsists at the time when different employees in a specific corporation observe that they are being rewarded fairly as per relative value of the jobs within a specific business enterprise. Management of the firm McDonald’s consider another method of mentioning this and this includes statement of perception of person regarding their accountabilities rewards along with work conditions that can be regarded to be fair else wise equitable when compared to diverse other employees in identical positions. Payment for new hires of the firm McDonald’s are also ascertained by using factors namely level of skill, degree of effort and the accountability of the specific role along with conditions of working (Brewster et al., 2016). Human resource management of the firm McDonald’s studies internal equity to ascertain in case if there is payment of equity between like-positions and in case if different roles in business concern are necessarily governed by the same compensation directives. Normally each and every role is mainly assigned a range of pay with corresponding criteria that sketches the way to ascertain where a specific employees need to be positioned in the range (Brewster et al., 2016).

Figure: Different factors of internal and external for compensation programs

(Source: Storey, 2014)

As per reports it can be said that average salaries of cashiers of McDonald’s stand at $11.53 every hour. Again, customer service associates of McDonald’s are known to receive average salary of $11.59 every hour and service crew receive average salary amounting to $12.12 every hour. In essence, external equity subsists at the time when rates of payment of business concern are at least equal to mean rates in the market of the organization or else sector. Different employees have the need to make certain that there have the capability to disburse what is necessary to find, maintain and motivate a sufficient number of qualified employees (Albrecht et al., 2015). For the purpose of maintaining external equity, management of firm McDonald’s formulate a structure of compensation that begins with competitive base payment that can be considered to be vital. Also, employees also compare roles as well as payment to role along with pay in different other business concerns. Regrettably, they necessarily do not always compare with identical categories of business concerns or even in the similar sector. In general, employee takes into account more than base payment in ascertainment of external equity (Purce, 2014). However, for emphasis can be laid on benefits of employees, security of job, different physical environment of work else wise opportunity for progression in deciding in case if external equity subsists. Administration of the firm uses different surveys of salary for determining if compensation as well as benefits is comparable to identical roles in other business concerns (Brewster et al., 2016). In essence, it is vital to ensure that the important accountabilities along with goals of different roles are identical since this is the segment where the corporation is aligned with (Jackson et al., 2014).

Maintaining External Equity in Employee Compensation Program

The plan of the company is essentially maintained for US based members of the staff and contains a 401 (k) facet along with match with the employer. Also, this 401 (k) facet permits different participants to make pre-tax contributions that are aligned to each period of payment from company shares that are released under mainly leveraged Employee Stock Ownership Plan as well as cash contributions of employees. Different balances of current account, varied future contributions as well as associated earnings can be invested in 8 investment alternatives along with stock of McDonald’s as per investment elections of each of the partakers. As mentioned in the annual report, future contributions by different participants are restricted to mainly 20% of investment in the stock of the company McDonald’s (Wilton, 2016). Also, participants also select to make distinguished choices of investment for different current account balances as well as future contributions. Furthermore, the company also maintains specific non-qualified supplemental benefit schemes that permit participants to present tax deferred contributions and accept company offered allocations that necessarily cannot be carried out under 401k plan owing to limitations of particularly IRS. The investment alternatives as well as returns are founded on specific market-rate investment substitution under 401k scheme (Albrecht et al., 2015). Again, the company has entered into derivative agreements to hedge market driven issues in case of the liabilities (Banfield et al., 2018). Alterations in liabilities for different non-qualified plans and in different fair value of different derivatives are registered in income assertion as the agreement deliver the counterparty with a choice to make settlements in cash else wise shares.

Is their compensation program effective on the whole?

Ratings are assigned to each and every component of compensation program of McDonald’s

Management of the firm can consider the following facets for enhancement of compensation program system:

Promotions that are based on Performance: The only way to earn higher is mainly to perform at superior standards. These employees are generally more inspired to deliver generous payment for performance with regular meetings on performance (Tyson, 2014).

Establishment of recognition awards: Employees of the company McDonald’s can thrive in a specific environment in which they can accept frequent feedback as well as praise from superiors. In essence, this is mainly true when it is about generation X and generation Y.

Employees of the company McDonald’s who are inspired to be permanent learners frequently can become top actors. Delivering members of the staff diverse tools as well as resources can help in attaining specific industry certifications as well as degrees that can aid in evaluating overall quality of work produced, whilst delivering a meaningful career incentive that is acknowledged by all (Rothenberg et al., 2017).

Effectiveness of Compensation Program

Management of the firm can introduce corporate wellness programs. In essence, a healthy environment of work implies a productive environment. At the time when different employees are provided resources to preserve on-site health, different employees have the inclination to put effort to become more aware regarding personal health (Tyson, 2014). In particular, there are multiple studies that reflect that corporate wellness program can be utilized to promote compensation schemes and finally lessen diverse costs related to health.

Management of the firm can present supple as well as collaborative options of work that can help in enhancement of compensation reward program. Employees have the need to find out ways to augment work-life balance, thus delivering overall capability to operate a flexible schedule else wise collaborative work environment can be observed as a major plus. At the time when offered as a part of the compensation stratagem, this necessarily can aid in the process of recruitment as well as rates of retention a great deal.

References

Albrecht, S. L., Bakker, A. B., Gruman, J. A., Macey, W. H., & Saks, A. M. (2015). Employee engagement, human resource management practices and competitive advantage: An integrated approach. Journal of Organizational Effectiveness: People and Performance, 2(1), 7-35.

Armstrong, M., & Taylor, S. (2014). Armstrong's handbook of human resource management practice. Kogan Page Publishers.

Around the World | McDonald's. 2018. Retrieved from https://corporate.mcdonalds.com/content/corpmcd/about-us/around-the-world.html

Banfield, P., Kay, R., & Royles, D. (2018). Introduction to human resource management. Oxford University Press.

Bratton, J., & Gold, J. (2017). Human resource management: theory and practice. Palgrave.

Brewster, C. (2017). The integration of human resource management and corporate strategy. In Policy and practice in European human resource management (pp. 22-35). Routledge.

Brewster, C., Chung, C., & Sparrow, P. (2016). Globalizing human resource management. Routledge.

Brewster, C., Houldsworth, E., Sparrow, P., & Vernon, G. (2016). International human resource management. Kogan Page Publishers.

Cascio, W. (2018). Managing human resources. McGraw-Hill Education.

Jackson, S. E., Schuler, R. S., & Jiang, K. (2014). An aspirational framework for strategic human resource management. The Academy of Management Annals, 8(1), 1-56.

Purce, J. (2014). The impact of corporate strategy on human resource management. New Perspectives on Human Resource Management (Routledge Revivals), 67.

Rothenberg, S., Hull, C. E., & Tang, Z. (2017). The impact of human resource management on corporate social performance strengths and concerns. Business & Society, 56(3), 391-418.

Storey, J. (2014). New Perspectives on Human Resource Management (Routledge Revivals). Routledge.

Tyson, S. (2014). Essentials of human resource management. Routledge.

Wilton, N. (2016). An introduction to human resource management. Sage.