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Institutional Affiliation

COMPENSATION PACKAGE
Crossfit Gym is a fitness club company located in the United States that offers members a
place they can relax, get in shape, and enjoy. It has a Spa and Bistro with 300 fulltime
employees. Its mission statement is to provide an exclusive environment that anyone can be
comfortable and build a lasting and active lifestyle. All it seeks is to serve the member, who is
the customer. It looks to perfect the safe, friendly, and energetic environment, where all feel
respected, valued, and accepted.
There is a need to balance the interests and costs of the employers with the needs and
expectations of employees. Employee payroll and benefits represent a large portion of total
operating costs. However, there is also need to establish total reward programs effectively to
obtain good talent in the organization, and communicating clearly to employees. Effective
management of total rewards can be achieved by evaluating expenses and determining the value
of compensation.
Total rewards emphasize both direct and indirect compensation, which strengthen the
ability of the company to motivate employees. It is also important to emphasize nonmonetary
rewards such as training and development, work-life programs, employee recognition, and career
management to enable the organization remains competitive even with declining profitability.
The competitive gym industry makes it difficult to acquire and retain qualified
experienced and productive talent. The key to human resources empowerment lies in finding,
motivating, developing, and keeping key employees to avoid costs from employees leaving and
hiring other new employees. The gym must also ensure it acquires the required skills,
knowledge, experienced employees to retain them. It also helps to measure return on investment.
The reward system for the employees includes pay, benefits, and career progression. Pay
includes base pay plus extra compensation in the form of incentives, overtime pay, short-term

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incentives, other lump sums, cash profit sharing. The secret of the reward system includes
determining the right equation in how to pay the right people, the right amount, and for the right
reasons at the right time.
The compensation schedule is as follows:

Initial Entry employee

Base pay
Bonus

Middle Management

$41,017
0.0%

Senior Management

$47,017

$55,017

0.0%

0.0%

Benefits
Social security

$3,138

$5138

$8138

401K/403B

$1,477

$2,477

$5477

Disability

$369

$369

$1,369

Healthcare

$6592

$6592

$10592

Pension

$2584

$4584

$10584

Time off

$5048

$7048

$11048

Supplementary benefits 0

$60,225

$70225

Annual leave
Years of service completed

Annual leave

1-3

10days

4-6

16days

7+yrs

25days

5,000
$104,225

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Market competitiveness of compensation has a significant impact on how equitably

employees view compensation. The gym will use a market pricing strategy where it decides to
choose to position itself in the second quartile (median) in the middle of the market, as identified
by pay data from surveys of other employers compensation plans. Data obtained from
salary.com, payscale.com, and other competitors show the base pay with a median of $41,017 for
entry level gym instructors. The gym will give this pay for its entry level employees. The gym
will review market-based pay policies every 2 to 3 years to verify that compensation is
adequately matched to market conditions.
The reason for the use of this strategy is that it allows the gym to pay employees what
relates to the market pay (Bamberger, Biron, & Meshoulam, 2014). It is also not distorted by
internal job evaluation. The market pricing strategy is also important so that the compensation
program is seen as fair by the employees. A compensation program should be fair in its treatment
of all categories of employees. Equity theory helps to understand and evaluate the extent to
which employees will judge the fairness of their compensation. According to this, employees
will compare what they give with what they receive. This will be based on their evaluation of
their value, that is, the level of work and the input they provide, or what was promised to them.
Such a comparison will be made in a social setting, by taking other employees as referents for
comparisons. On occasion, the referents will be employees who are considered to be similar,
either regarding their age, seniority in the firm, or any other relevant variable. They may also
choose different people with whom to compare with themselves. If an employer does not provide
pay that employees view as equitable compared to other employees performing similar jobs in
other organizations, that employer is likely to experience higher turnover. Another drawback is

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greater difficulty in recruiting qualified and high-demand individuals (Larkin, Pierce, & Gino,
2012). .
The gym also uses the individual versus team rewards to build on the team concepts. It is
used to compensate the individuals whose performance may be evaluated on team achievements.
For base pay, employers often compensate individuals by competencies, experience, and other
job factors. Then many organizations use team incentive rewards on top of base pay. Variable
pay rewards for teams are most frequently distributed annually as specified dollar amounts.
Pay increases
The gym will use a targeting high performer strategy where it focuses on providing the
top performing employees with higher pay raises. It will target average raises for the best
performers in 1 year with 10%, satisfactory performers with 3.5%, and low performers get 0% to
1.2%. The primary reason for having such significant differentials focuses on rewarding and
retaining the critical high-performing individuals (Van De Voorde, Paauwe, & Van Veldhoven,
2012). The key to rewarding exceptional performers is identifying how much their
accomplishments have been above the normal work expectations. The more standard increases
for the average performers are usually aligned with labor market pay adjustments so that those
individuals are kept competitive. The lower performers are given less because of their
performance issues, which encourages them to leave their organizations.
The pay increases will also be based on individual performance, team performance, and
the gym performance. Individual performance includes giving individual incentives such as
individual bonuses. The team performance includes rewarding employees for the performance of
the team and including meeting certain goals. They focus on quality improvement and cost

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reduction. Team performance includes the performance of the gym. They include profit sharing
of a certain percentage of the profits made by the gym in a year.
The gym will also give special awards that include performance awards and service
awards. Performance awards include cash, merchandise, gift certificates, and travel. Service
awards recognize the length of service (e.g., 1, 3, 5, or 10 years) more than employees actual
performance. The desired goal of these awards is to give appreciation to employees for service.
Profit sharing distributes some portion of organizational profits to employees. They help
to enhance employee commitment and increase job-related performances of individuals. The
primary objectives of profit-sharing increase productivity and organizational performance, attract
or retain employees, improve product/service quality, and enhance employee morale (Poole &
Jenkins, 2013). The percentage of the profits is set by the end of the year before distribution.
Senior management level
Executive Benefits. The senior managers are covered by regular benefits plans that are
also available to nonexecutive employees, including traditional retirement, health insurance, and
vacation plans. In addition, executives may receive supplemental benefits that other employees
do not receive. One supplemental benefit that has grown in popularity is company-paid financial
planning for executives
Executive Perquisites (Perks) In addition to the regular benefits received by all
employees, perquisites often are received by executives. Perquisites perks are special benefits
usually noncash itemsfor executives. Many executives value the status enhancement of these
visible symbols, which allow the executives to be seen as very important people both inside
and outside their organizations. Perks also can offer substantial tax savings because some of

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them are not taxed as income. Some commonly used executive perks are gym cars, first-class air
travel, stress counseling, and chauffeur services.
Benefits
Benefits are used to help create and maintain a competitive advantage. Gym benefits are
linked to individual job satisfaction in the United States. The gym will offer benefits to aid
recruiting and retention, impact organizational performance, and meet legal requirements. The
primary reasons for offering benefits are to attract and retain talent and meet responsibilities to
employees.
Benefits can influence employees decisions about which particular employer to work for,
whether to stay with or leave an employer, and when to retire. What benefits are offered, the
competitive level of benefits, and how those benefits are viewed by individuals all affect
employee attraction and retention efforts of employers. A major advantage of benefits is that they
are not taxed as income to employees. For this reason, benefits represent a somewhat more
valuable reward to employees than an equivalent cash payment.
Voluntary Benefits. The gym voluntarily offers other types of benefits to help them
compete for and retain employees. By offering additional benefits, organizations are assuming a
need to provide greater security and benefits support to workers with widely varied personal
circumstances.
Health care benefits. The gym provides a variety of health care and medical benefits,
usually through insurance coverage. Health plans are considered by employees to be the most
important benefit that companies offer. The healthcare benefits covers medical, dental,
prescription drug, and vision care expenses for employees and their dependents.

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Social Security
The Social Security Act of 1935, with its later amendments, established a system
providing old-age, survivors, disability, and retirement benefits. Employees and the gym share
in the cost of Social Security through a tax on employees wages or salaries.
Pension Plans
The gym offers pension plans for its employees. Entry level employees receive $2,584,
while middle level management receive $4,584 and senior management $10,584.
Defined-Benefit Pension Plans Through a defined-benefit plan, employees are promised
pension amount calculations on the benefits to be received by the employees after retirement and
the methods used to determine such benefits. A defined-benefit plan gives employees greater
assurance of benefits and greater predictability in the amount of benefits that will be available for
retirement. Defined-benefit plans are often preferred by workers with longer service. High
effective commitment among employees led them to work beyond an age that was advantageous
financially in a defined-benefit pension plan, while high continuance commitment led individuals
to retire earlier within a time frame that was more financially beneficial.
Defined-Contribution Pension Plans. In a defined-contribution plan, the employer makes
an annual payment to an employees pension account. The key to this plan is the contribution
rate; employee retirement benefits depend on fixed contributions and employee earnings levels.
FINANCIAL BENEFITS
Employers find that such benefits can be useful in attracting and retaining employees.
Workers like receiving these benefits, which often are not taxed as income.
Insurance Benefits

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Life insurance: The gym buys life insurance as a group policy and pays the premiums.
The level of coverage is two times an employees annual salary.
TIME-OFF AND OTHER BENEFITS
Time-off benefits represent a significant portion of total benefits costs. Employers give
employees paid time off for a variety of circumstances. Holidays and vacations are common.
These time-off benefits also include various leaves of absence.
Leaves of Absence
The gym grants leave of absence, taken as time off with or without pay, fore variety of
reasons.. Leaves are given for a variety of purposes.
Sick Leave Medical and sick leave are closely related. Many employers allow employees
to miss a limited number of days because of illness without losing pay. The gym offers 10 days
as sick leave.
Paid-Time-Off Plans
The gym also makes use of a paid-time-off (PTO) plan, which combines all sick leaves,
vacation time, and holidays into a total number of hours or days that employees can take off with
pay. PTO plans to be more effective than other means of reducing absenteeism and in having
time off scheduled more efficiently. Other advantages ease of administration and as an aid for
recruiting and retention and for increasing employee understanding and use of leave policies.
Paid Time Off is based on the following schedule:

Completed Years of Employment: Paid Time Off:

Up to and including year 3

17 days (1.42 days per month)

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Beginning year 4

20 days (1.67 days per month)

Beginning year 8

25 days (2.08 days per month)

Beginning year 16

30 days (2.50 days per month)

Carryover of Paid Time Off

Earned, unused PTO may be carried over into the next year but the number of days carried over
may not exceed the entitlement for the current year.

Entitlement
Carryover

1st Year

Actual
Used

17

Unused

13

Carryover

2nd Year

17+4=21

15

3rd Year

17+6=23

10

13

13

4th Year

20+13=33

13

20

20

5th Year

20+20=40

19

21

20

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REFERENCES
Bamberger, P. A., Biron, M., & Meshoulam, I. (2014). Human resource strategy: Formulation,
implementation, and impact. Routledge.
Larkin, I., Pierce, L., & Gino, F. (2012). The psychological costs of payforperformance:
Implications for the strategic compensation of employees. Strategic Management
Journal, 33(10), 1194-1214.
Poole, M., & Jenkins, G. (2013). The impact of economic democracy: Profit-sharing and
employee-shareholding schemes. Routledge.
Van De Voorde, K., Paauwe, J., & Van Veldhoven, M. (2012). Employee wellbeing and the
HRMorganizational performance relationship: a review of quantitative studies.
International Journal of Management Reviews, 14(4), 391-407.