GB520 Unit 8 Compensation Strategy Example

Lead the Market Where It Counts: A Unit 8 Compensation Strategy for a Refrigeration Contractor

[Student Name]

Purdue University Global

GB520: Strategic Human Resource Management

Unit 8 Compensation Strategy

[Instructor Name]

[Date]

The contractor, its pay rates and every figure are composite and illustrative; the statutes and sources cited are real.

Compensation Philosophy

Kestrel Refrigeration Services pays to attract and keep the people its growth depends on. We pay licensed technicians and CO2 lead technicians above the regional market because they are scarce and because the work we promise grocers depends on them. We pay other roles fairly at the market, with variable pay where results can be measured. We pay apprentices for skills they have proved, so that every step up is earned and visible. We publish our ranges, explain how pay is set, and review it each year against the market and for fairness.

Exhibit 1: Market Positioning by Job Family

Market data come from two regional construction and mechanical trades surveys and the published wage rates of the area's refrigeration contractors.

CO2 lead technicians: 75th percentile, about $49 an hour against a market median near $45. Strategic weight: the binding constraint on the growth plan.

Licensed journeyman technicians: 75th percentile, about $41.50 an hour against a median near $38. Strategic weight: high; the lateral hiring plan in Unit 4 competes for them.

Apprentices: skill-based steps from about 50 percent to 90 percent of the journeyman rate. Strategic weight: the long-term pipeline.

Project managers: median salary, about $105,000, with a project bonus. Strategic weight: important, but the market supply is adequate.

Sales, estimating and administrative staff: median, with variable pay for sales tied to gross margin booked.

Milkovich et al. (2020) describe this as a differentiated pay policy, in which an employer leads the market for jobs critical to its strategy and matches it elsewhere. Leading for everyone would add well over $1 million a year at Kestrel's size; leading only where it counts costs roughly half as much.

Pay Structure

Apprentices: skill-based steps. Each of eight steps requires logged on-the-job hours and a passed exam or practical check. An apprentice who completes steps faster earns faster. This rewards learning directly and makes progress visible, which matters because most apprentice departures happen in the first eighteen months.

Technicians: a structured range. Journeymen move through a range on two criteria: certifications held, such as manufacturer CO2 training, and performance rating. A journeyman who completes the CO2 Lead Academy and qualifies moves to the lead range, about $7.50 an hour higher.

Salaried roles: broad ranges. Project managers and other salaried staff sit in broad ranges set around the market median, with movement based on performance and scope.

A journeyman who qualifies as a CO2 lead gains about $15,600 a year, which makes the academy a visible career route as well as a training program.

Variable Pay

The crew quality bonus replaces the injury-free bonus retired in Unit 7. Its three crew measures and its reporting condition are set out in the Unit 7 design; this strategy fixes its size and timing. The bonus pool is about 2 percent of crew wages, roughly $145,000 a year. Gerhart and Rynes (2003) note that group incentives work best when the group can see and influence the results that drive them, which is why the measures are crew results rather than company profit.

Project managers receive a bonus of up to 10 percent of salary tied to project margin, schedule and customer ratings. Sales staff receive commission on gross margin booked, not revenue, so that discounting does not raise pay.

Benefits

Benefits address what scarce technicians say matters: a $1,200 annual tool allowance, per diem and paid travel time for crews working away from home, on-call pay for after-hours service, and paid time for manufacturer certifications. Health and retirement benefits stay at the market median, where the surveys show Kestrel is already competitive.

Compliance

Overtime. Hourly technicians and apprentices are nonexempt, so every hour past forty in a workweek is paid at time and a half (29 U.S.C. § 207, 2024). Per diem paid as a reasonable travel reimbursement is generally excluded from the regular rate, but bonuses such as the crew quality bonus generally must be included in overtime calculations.

Exempt status. Project managers can be treated as exempt only if they meet both the salary and the duties requirements; the classification should be reviewed for each salaried role.

Equal pay. Federal equal pay law requires that men and women doing equal work at the same site be paid alike, with exceptions only for a seniority, merit or production system or another reason unrelated to sex (29 U.S.C. § 206, 2024). The annual review should compare pay by sex and race within each range.

Pay transparency. Several states, including some where Kestrel operates or plans to, now require pay ranges in job postings. Kestrel's ranges should be ready to publish in every state where it hires.

Cost and Justification

Moving 64 journeymen from the median to the 75th percentile adds about $465,900 a year, and moving 9 leads adds about $74,900, for about $540,800 before payroll taxes and benefits, or about $595,000 in all.

The cost should be compared with the work it protects. A single installation crew's year of work is worth roughly $693,000 of gross margin. If the positioning keeps or attracts the lead and journeymen for one crew that would otherwise be missing, it pays for itself. It also lowers turnover, which the retention analysis in Unit 9 prices at about $38,000 per departure.

Review

The strategy should be reviewed each year against market data, turnover by job family and the number of offers declined for pay. If the 75th percentile no longer attracts technicians, the positioning, not only the rates, should be reconsidered.

References

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

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

29 U.S.C. § 206 (2024). https://www.law.cornell.edu/uscode/text/29/206

29 U.S.C. § 207 (2024). https://www.law.cornell.edu/uscode/text/29/207