Introduction
Compensation is the one of the most important functions of human resource management. Compensation is basically the reward in monetary terms that an employee receives from the organization where he or she works (Salaman, Storey, and Billsberry, 2005). Compensation is also termed as remuneration and it not only includes the basic salary or wages but also includes bonuses, executive compensation, stock options, commission, performance related incentives etc. Therefore compensation is not just the salary but all the monetary benefits that an employee receives (Redman, & Wilkinson, 2009).
Compensation is the most important factor that encourages an employee to do the job as well as to retain the same job once he has joined the organization. Organizations around the world focus a lot on giving fair compensation as too high compensation would reduce the profits of the organization and too low compensation would demoralize the employee and therefore he or she may switch to another organization. Therefore compensation is an important part of the overall human resource management. This report highlights the compensation practices at one of the leading organizations of the world, Johnson and Johnson. The report analyses the compensation practices at Johnson and Johnson and impact of these practices to the company and its stakeholders. Moreover, the report analyses the impact of laws and regulation along with labor union and market factors on the compensation practice of the company. The last part of the report discusses about the overall effectiveness of traditional bases for compensation at Johnson and Johnson.
Johnson and Johnson offers an average salary and compensation to its employees. The management of Johnson and Johnson realizes the importance of its human resource and therefore it has been offering market competitive salary to its employees (J&J, 2012c). The salary of employees at Johnson and Johnson varies on different factors and some of these factors include; job designation, experience, qualification of the individual, location, and other factors. However the average salary of an individual working at Johnson and Johnson is $49,000. The following graph shows the average salary of employees working at Johnson and Johnson as well as other leading pharmaceutical companies of the world:
(Simply Hired, 2013a)
More than 115,000 employees work at Johnson and Johnson at three different divisions; pharmaceutical, consumer and medical devices. The following graph shows the salary of employees with different designation at Johnson and Johnson
(Simply Hired, 2013b)
The company has recently implemented a global compensation strategy and according to this strategy, the company would be allowing the development of single career models across different businesses. Moreover, the strategy focuses on improving succession planning and to integrate the companies that J&J have recently acquired in a better way (O'Donovan, 2011).
The company in order to continuously motivate the employees increases the salary as well (J&J, 2012c). The compensation of Chief Executive of Johnson and Johnson, William Weldon, has been increased by 8% from last year and it has reached up to $23.4 million in the year 2011 from $21.6 million in 2010. The total compensation of CEO includes salary of $1.91 million along with $20 million as stock awards, option awards and for the performance bonuses (Boston Globe, 2012).
Different stakeholders are also considered in formulating compensation strategy. The compensation offered by Johnson and Johnson ensures the organization to achieve sufficient level of profits and thus, it allows the shareholders to earn sufficient level of returns on their investment. Employees are another important stakeholders. Johnson and Johnson has been awarded as one of the companies that have been awarded as the best company to work for Latinas in United States by LATINA Style Magazine. Moreover, Humanitarian of the Year Award has also been received by J&J from United Nations in 2011. J&J has also been among the Top 100 companies for Working Mothers since the list was published 26 years ago by Working Mother magazine. There a lot more of awards of J&J and compensation practice has played an important role that encourages different stakeholders of the company including its employees (J&J, 2012a)
The company also makes sure that its consumers are satisfied by not charging too much from the products offered. By offering a great workplace the overall society and governmental agencies are satisfied as well. Moreover, the company spends large funds for corporate social responsibility as well. Thus, the company considers its stakeholders as well and it has positively.
Impact of laws, LABOR union and market factors
Different factors influence the compensation practices of organizations. J&J also has to follow the laws and practices of labor unions. J&J cannot offer salaries below the competitive market rate and it cannot reduce the wage rate up a certain level because of laws in different countries where it operates. (J&J, 2012b) . Moreover, the company discourages child labor even if it is available at a lower wage rate in different third world countries where it is operating (J&J, 2012a)
The company uses the concept of diversity and recruits and offers salary to employees without any kind of discrimination on the basis of gender, race, color, religion, culture, national origin, disability etc. (J&J, n.d.). Therefore, the laws and labor union practices influence the compensation practices because the company makes sure that it obeys the laws and labor union policies and do not offer salary below the specified level. Even though the company can take advantage of hire labors at lower wage rate or by employing child labor at a lower wage rate, still J&J does not do it.
Market factors influence the salaries the company is paying to its employees. The supply and demand of labor is the main factor that can be considered as the market factors affecting the company. The company operates in different countries and therefore the supply and demand of skilled labor may vary, therefore this can influence the salary the company is offering. however with recently introduced strategy, the company would like to have a uniform strategy across the globe.
effectiveness of traditional bases for pay at Johnson and Johnson
J&J focuses on high quality staff for its company and for this reason; it encourages and motivates employees that are more qualified than others and offer salaries to such employees more than employees that have more experience but not enough expertise and skills. Although there are still organizations that have been focusing on paying more to employees on the basis of seniority (Price, 2007) however at J&J, employees that are more skilled are paid more and this strategy has worked.
In addition to this, the company also focuses on retaining employees and for this reason it increases the salaries of the employees working at the company on a regular basis. The company offers bonuses and commissions as well to its employees. Therefore, considering the overall effectiveness of J&J and its success, it can be said that the compensation strategy adapted by J&J is highly effective and it is yielding rewards for the management of the company.
conclusion
Human resource is the most important assets of the company and J&J realizes this fact. The company focuses a lot on maintaining its human resource and to motivate them. Compensation strategy adapted by the company has played an important role in this regard and company has been able to successfully use its human resource to ensure success over the years.
References
Boston Globe. (2012). Johnson & Johnson CEO’s compensation up 8 percent, despite recalls. Retrieved 28 January, 2013 from http://www.bostonglobe.com/business/2012/03/14/johnson-johnson-ceo-compensation-percent-despite-recalls/V5EZtT3cW5aG6R9plKAI7M/story.html
J&J. (2012a). Awards & Recognitions. Retrieved 28 January, 2013 from http://www.jnj.com/wps/wcm/connect/af53fd804f5563a89dfebd1bb31559c7/awards-and-recognitions-new.pdf?MOD=AJPERES
J&J. (2012b). Employment and Labor Laws and Policies. Retrieved 28 January, 2013 from http://www.jnj.com/wps/wcm/connect/56e24c004d9ee6b0aa57ea104f0179c3/Employment-Labor-Laws-Policies-2.pdf?MOD=AJPERES
J&J. (2012c). Annual Report. Retrieved 28 January, 2013 from http://www.investor.jnj.com/2011annualreport/pdf/2011-annual-report.pdf
J&J. (n.d.). Global Labor & Employment Guidelines. Retrieved 28 January, 2013 from http://www.jnj.com/wps/wcm/connect/808fba004f5567e29f6cbf1bb31559c7/global-labor-employment-guidelines.pdf?MOD=AJPERES
Price, A. (2007). Human Resource Management in a Business Context, 3rd edition. London: Cengage.
Redman, T. & Wilkinson, A. (2009). Contemporary Human Resource Management: Texts and Cases. Harlow: Financial Times Prentice Hall.
Salaman, G., Storey, J., and Billsberry, J. (2005). Strategic Human Resource Management: theory and practice. London: Sage Publications Ltd.
Simply Hired. (2013a). Average Salary of Jobs with Titles Matching Your Search. Retrieved 28 January, 2013 from http://www.simplyhired.com/a/salary/search/q-Johnson+%26+Johnson/q_1-sanofi/q_2-pfizer/q_3-glaxosmithkline/q_4-merck+%26+co.
Simply Hired. (2013b). Average Johnson & Johnson Salaries. Retrieved 28 January, 2013 from http://www.simplyhired.com/a/salary/search/q-Johnson+%26+Johnson
