HRM 5003 Module 4 Total Rewards Plan Example

Paying at the 60th Percentile for the Jobs That Carry the Strategy: Pay Bands, a Market Reference and a Stated Philosophy for a Two-Track Cleaning Workforce

Student Name

American College of Education

HRM5003: High-Performance Human Resource Management

Module 4 Assignment

Instructor Name

October 9, 2028

The Pay Philosophy

Nobody at Brightline, the invented Ohio cleaning firm followed through this course, has ever written down how pay is decided. In practice, it starts cleaners at $14.25 an hour, about the 26th percentile of its local market, adds 25 cents after a year and sets supervisor pay case by case. That approach fits a business that competes only on price, but Module 1 showed that the healthcare strategy depends on keeping trained people.

The proposed philosophy is: Brightline pays its office cleaning staff at about the 40th percentile of the local market for commercial cleaning, with a faster first raise to reduce early departures, and pays its Healthcare Services technicians, lead technicians and supervisors at about the 60th percentile of the market for healthcare environmental services work, because those jobs carry the strategy and their skills take time to build. Pay progresses within each band by time and by meeting attendance and inspection standards, not by negotiation. A pay philosophy is a statement of which jobs a company is willing to overpay for, and why.

The Market Reference

The market data come from a regional wage survey of commercial cleaning and healthcare support employers, purchased through Brightline's trade association and covering 64 employers in the metropolitan area. For commercial cleaners, the survey shows a 25th percentile of $14.10 an hour, a median of $15.60 and a 75th percentile of $17.30. For environmental services technicians in hospitals and outpatient facilities, it shows a median of $16.80 and a 60th percentile of about $17.35. Hospitals are the most relevant competitors for the healthcare track's labor, since a trained clinic technician can apply there.

Gerhart and Rynes (2003), reviewing research on compensation, concluded that pay level affects both who applies and who stays, and that pay above the market tends to attract larger applicant pools and reduce voluntary turnover. Cappelli and Chauvin (1991), studying plants of one manufacturer across local labor markets, found that where the company's wage premium over local wages was larger, disciplinary dismissals were lower, consistent with the view that workers who would lose more by being fired work more carefully. Both findings support paying above the median where careful work and retention matter most.

The Bands

Four bands follow from the philosophy. Office Cleaner runs from $14.60 to $16.20, with the minimum near the 40th percentile of the commercial market. Healthcare Technician runs from $16.25 to $18.50, the minimum carrying the $2.00 premium over the old office start and the midpoint near the 60th percentile of the healthcare market. Lead Technician runs from $17.50 to $19.75, preserving the $1.25 lead premium from Module 3 at entry. Supervisor, which remains hourly and eligible for overtime, runs from $19.75 to $23.75.

Movement through each band follows three steps rather than open-ended merit decisions. After six months, a cleaner or technician who meets the attendance standard and has no failed inspection attributable to their work receives a step of 40 cents; further steps of 40 cents follow at 12 and 24 months on the same conditions. The office step at six months replaces the current 25-cent raise at a year, which arrives after most early departures have already happened.

The bands overlap on purpose, but only slightly. A healthcare technician at the top step earns $18.50 and a newly promoted lead technician $17.50, so a senior technician who becomes a lead could in principle take a pay cut. The rule is that a promotion always brings at least a 5 percent increase or the new band's minimum, whichever is higher, so the path from Module 3 always pays. The same rule applies from lead technician to supervisor. Without it, the most experienced technicians, the people the development path most needs to attract, would have a financial reason to stay where they are.

What the Plan Does Not Pay For

An incentive paid for each room that passes inspection was considered and rejected. Lazear (2000) found that when an auto glass installer moved from hourly pay to piece rates, output per worker rose by about 44 percent, roughly half from existing workers producing more and half from the company attracting and keeping more productive workers. But the installer's output was easy to count and its quality easy to check. In clinic cleaning, the most important quality, whether a surface stayed wet for its full contact time, is not visible after the fact, and a per-room incentive would reward speed at exactly the step the job analysis in Module 2 found most often skipped. The steps above reward consistent standards instead of volume.

Benefits are extended in one way, in two phases. Paid time off will accrue at one hour for every 40 hours worked, available after 90 days, because the job analysis found that unpaid absence for illness or family needs was a common reason for missed shifts and early departures. In the first year, accrual applies to the healthcare track, where a missed shift can cost a clinic inspection. It extends to office cleaners in the second year if office 60-day departures have fallen by a quarter from this year's level, which lets the company learn what the benefit does before paying for it everywhere.

Cost

Module 1 already counted the healthcare track's $2.00 premium, which reaches roughly $418,000 a year once the track is fully staffed. The new costs in this module are three. Raising the office minimum from $14.25 to $14.60 and replacing the one-year raise with the six-month step adds an average of about 20 cents an hour across roughly 506,000 office hours a year, about $111,000 including payroll taxes. Paid time off in the healthcare track, at one hour per 40 worked across about 209,000 technician hours at full size and assuming about 70 percent of accrued time is used, costs about $70,000 a year in wages and payroll taxes; extending it to office staff in year two would add about $150,000. Moving the 48 supervisors onto the band adds about $58,000, since about a third are paid below its minimum. The new rewards costs total about $239,000 in the first year, on top of the premium already counted, and about $389,000 once time off extends to office staff.

Legal Checks and Measures

The Equal Pay Act requires equal pay for equal work regardless of sex, where equal work means substantially equal skill, effort and responsibility under similar working conditions. The office and healthcare tracks differ in all four, as the job analysis documents, which supports the difference in pay. Within each band, Brightline will run an annual review of pay by sex and by race and ethnicity, controlling for step and tenure, to confirm that no unexplained gap appears. Supervisors stay hourly and eligible for overtime under the Fair Labor Standards Act, since their pay is well below the salary level that would allow exempt status. The plan will be judged by offer acceptance rates, applicants per opening, 60-day and one-year retention in each band and the share of technicians reaching the 12-month step.

References

Cappelli, P., & Chauvin, K. (1991). An interplant test of the efficiency wage hypothesis. The Quarterly Journal of Economics, 106(3), 769-787. https://doi.org/10.2307/2937926

Gerhart, B., & Rynes, S. L. (2003). Compensation: Theory, evidence, and strategic implications. Sage.

Lazear, E. P. (2000). Performance pay and productivity. American Economic Review, 90(5), 1346-1361. https://doi.org/10.1257/aer.90.5.1346