Coordinate renumeration employees

Answer

Remuneration Strategies and Plan for Aldi Australia’s Retail Sales Assistants

Assessment Task 1: Remuneration Structures

Remuneration model/strategies in the retail industry

The retail industry in which Aldi operates has been traditionally a low-wage industry. Remuneration strategies and models in this industry focus largely on keeping labor costs low because these costs are the largest, and perhaps easiest, controllable expenses. Moreover, many retailers often see labor as a cost driver as opposed to a sales driver, meaning it is usually the first target in decisions and efforts to reduce operational costs. However, developing a remuneration model that follows the traditional total reward strategy and other low-cost strategies that are bordered around cost management limits a company’s ability to attract and retain top-tier employees. It is, therefore, imperative that Aldi, as a retailer, departs from this approach, and instead design a remuneration strategy that focuses more on engaging and motivating casual retail assistants. With such a remuneration strategy in place, Aldi will be uniquely positioned to attract and retain qualified and high-caliber employees who will offer satisfactory customer service needed to keep the retailer at the competitive edge. The two remuneration models or strategies that Aldi will adopt for its casual retail assistants are the value-based (commission) model and the gain (profit) sharing model.

1. Value-based model (commission strategy)

The value-based remuneration model rewards employees depending on the achievement of given targets such as added value. In the retail sector, where Aldi operates, added value can be in the form of increased sales or improved level of customer satisfaction. The fact that the value-based model compensates employees based on the extent to which they achieve set targets qualifies it as a variable pay structure that uses the commission strategy to incentivize both service excellence and sales. This model engages employees and encourages them to work towards surpassing the organization’s established target because they know their efforts will be rewarded through a higher commission. According to Payscale (2021), a casual retail assistant earns a commission of AU$252 to AU$12,000 on average, meaning value-based or commission remuneration is widely used in the retail sector in Australia    

1. Gain-sharing model (profit sharing strategy).

The gain or profit-sharing plan, as the name suggests, is a remuneration strategy, where proceeds from a company’s operations (profits) are shared with individual or team of employees to motivate them to continue working towards meeting the company’s goals (Radermacher, 2015). For casual retail assistants in the retail industry, this remuneration strategy can be implemented in the form of share purchase plans. Under this plan, retail assistants will be rewarded through monetary incentives based on customer satisfaction as the key performance indicator. According to the strategic compensation theory, the monetary incentives and other rewards involved in profit sharing encourage employee activities, such as service excellence, needed to support organizational goals (Howard & Dougherty, 2004).

Salary structures

Companies pay employees salaries for the services they offer. The salaries encompass various components including basic salary, commission, allowances, and perquisites among other components. These components constitute compensation and are all captured in a salary structure (also known as pay scale).

1. Salary Structure for part-time employees

This salary structure is designed to help Aldi effectively compensate part-time casual retail assistants. The employees are divided into three salary categories based on the guidelines outlined below.

Minimum

This category includes entry-level casual retail assistants who meet the minimum requirements for the job. 

Level A

Casual retail assistants in this category have the skills and experience needed to perform most of the assigned duties with minimal or no supervision.

Level B

This category comprises high-experienced retail assistants whose performance and productivity surpass their job requirements.

1. Salary Structure for full-time employees

This salary structure is designed to help Aldi effectively compensate full-time employees in the retail assistant position. The employees are classified into four salary categories based on the guidelines outlined below.

Minimum

This category includes entry-level casual retail assistants who meet the minimum requirements for the job. 

Level A

Casual retail assistants in this category have the skills and experience needed to perform most of the assigned duties with minimal or no supervision.

Level B

This category comprises highly experienced retail assistants whose performance and productivity surpass their job requirements.

Experts

 This category includes retail assistants whose performance results are well above their job expectations. They have demonstrated strong commitment and loyalty to the company and are about to be promoted to retail store managers, receptionists, and marketing coordinators.  

Total wage cost

The total wage costs or pay for casual retail assistants at Aldi will combine the base monthly salary (hourly pay), commissions, bonuses, profit or gain sharing, allowances, perquisites, and other benefits applicable to different grades and employment types as shown in table 3. More details can be found in the excel file.

Table 3: Total Wage Cost

Salary and wage graph

Figure 1(a): Salary and Wage graph by wage type

                                                            Figure 1(b): Salary and combined total wage

Legislative references applicable to remuneration and benefits

The proposed remuneration strategies as well as salary structures and wage costs for casual retail assistants are all in line with the provisions of Australia’s federal Fair Work Act of 2009 that governs the relationships between employers and their employers. The remuneration also complies with regulations at the state and territory level that deal with such employment issues as equal opportunity, employee compensation, occupational health and safety, working hours, and anti-discrimination among other issues. Like in most countries, the Australian employment environment is more inclined to employees as seen in a number of standards, frameworks, and instruments such as the National Employment Standard (NES)and modern awards. NES, for example, defines the minimum entitlements for all workers including flexible work schedules, maximum weekly hours, and entitlement to leave.

Additional entitlements and provisions are set out by modern awards and other instruments that specify the minimum terms and conditions for covered employees including minimum wage. However, pertinent to the proposed remuneration strategy and salary structures are two main entitlements: working time and pay. Under the NES, employees are required to work a maximum of 38 hours a week. There are, however, some exceptions for employees who want to work additional hours and some industries if the extra hours are reasonable (Lewis Silkin, 2021). To operate within the confines of this provision, the proposed salary structure outlines that part-time employees will work a total of 35 hours a week whereas full-time employees will be required to cover a total of 48 hours a week. The reason for the additional hours is explained by the fact, as a business in the retail industry, Aldi will remain operational for most parts of the day to meet the needs of different shoppers. Regarding pay and social security provisions, the proposed average wage of AU$19 for entry-level casual retail assistants and AU$24 for highly experienced full-time employees is well within the federal minimum wage of AU$19.84 (Lewis Silkin, 2021).  

References

Henry, S., Perry, D., & Brennan, M. (2020). Employment and employee benefits in Australia: overview. Thomson Reuters Practical Law. Retrieved September 20, 2021, from https://content.next.westlaw.com/3-503-3758?__lrTS=20200712163855822&transitionType=Default&contextData=(sc.Default)&firstPage=true

Howard, L. W., & Dougherty, T. W. (2004). Alternative reward strategies and employee reactions. Compensation & Benefits Review, 36(1), 41-51.

Lewis Silkin. (2021). Employment law in

Australia – an overview.

Payscale. (2021). Retail sales assistant hourly pay in Australia. PayScale - Salary Comparison, Salary Survey, Search Wages. Retrieved September 19, 2021, from https://www.payscale.com/research/AU/Job=Retail_Sales_Assistant/Hourly_Rate

Radermacher, A. (2015). Remuneration models in outsourcing services. International Journal of Business and Management, 3(3), 40-57.

Assessment task 2: Develop an incentive plan

Incentives are an important component of a remuneration strategy. They offer employees both tangible, monetary, intangible, and non-monetary benefits or rewards based on their performance results. Incentives such as bonuses, gain sharing, salary increases, share options, career progression opportunities, and salary packages have been found to be proven strategies for activating employee motivation, commitment, and willingness to stay with the organization. In turn, such a committed and self-driven workforce performs at optimum levels, driving organizational productivity and goal attainment. It is, therefore, necessary for Aldi to have incentive plans in place for its part-time and full-time retail assistants.

1. Incentive plan for part-time casual retail assistant

Aldi Australia

Part-time employees Incentive plan

Purpose of the incentive plan

The purpose of this incentive plan is to enable Aldi Australia to provide incentives to part-time casual retail assistants who are tasked with restocking shelves, merchandising stock, serving and assisting customers, and operating tills. The plan will offer these employees an opportunity to earn compensation besides their base salaries in order to motivate them to meet the set targets and accomplish the established goals.

Guidelines

Administration

The incentive plan will be approved by the CEO of Aldi in conjunction with the compensation committee of the BOD. The human resource manager will then administer the incentive plan, where he will oversee and verify the amount payable to participants. The amount and timing of the payable incentives will then be approved by the CEO, and further reviewed and approved by the compensation committee of the B.O.D before the payments are finally made. 

Eligibility

To qualify for the incentives, participants will be required to be part-time employees classified as casual retail assistants at either entry-level, experienced level or expert level. Key employees hired on or before August 30, 2021, will be added as participants in the plan. Moreover, an employee must be an active employee of

Aldi on the date the incentives are paid to qualify for the payment. 

Plan year

The incentive plan will be effective from October 1, 2021, through September 30, 2022.

Plan Components

Payment of bonuses and other incentives will depend on the achievement of performance targets, including sales volume and customer satisfaction. These performance targets/indicators will be set by the CEO, together with the compensation committee of the BOD, and will be subject to minor adjustments.

Performance expectation

Employees will earn incentive awards if they achieve their goals or the company’s set targets, including increased sales and improved customer satisfaction. The amount of the incentive to be awarded will range between 0% and 110% of the target and will be decided on by the immediate line manager or supervisor based on the actual performance relative to the employee’s targets.     

Career path based on performance results

Employees who consistently offer superior customer service that drives the company’s goals of achieving a high level of customer satisfaction will be awarded training opportunities to support their career growth. Depending on the training outcomes and the number of years worked in the company, they will be promoted to fill the positions of retail receptionists, retail store managers, marketing coordinators, retail managers, operations managers, and area manager, retail.  

Salary increases

Employees who demonstrate excellence in the area of customer service, gain comprehensive experience, and acquire new skills through training will be awarded pay rise ranging from 5% to 9% according to the regulations set by the employment laws. 

Fringe benefits and perks

High performers will also be awarded non-wage compensation and extra rewards in the form of health insurance, medical leave, paid time off, bonuses, and meal subsidization.

Termination and/exit benefits

If the employee no longer qualifies for the incentive plan due to demotion or transfer will be entitled to a prorated award that will be determined by the period of participation in the plan. However, a participant whose employment is terminated whether voluntary or involuntary before the set payout date will not be eligible for bonus awards.

1. Incentive plan for full-time retail assistant

The incentive plan for Aldi’s full-time retail assistants follows the same conditions and provisions as those for the part-time retail assistants. However, unlike part-time employees, they are eligible for differing their incentive awards to up to 10 years during which the awards will earn interest.

Aldi Australia

Full-time employees Incentive plan

Purpose of the incentive plan

The purpose of this incentive plan is to enable Aldi Australia to provide incentives to full-time retail assistants who are tasked with restocking shelves, merchandising stock, serving and assisting customers, and operating tills. The plan will offer these employees an opportunity to earn compensation besides their base salaries in order to motivate them to meet the set targets and accomplish the established goals.

Guidelines

Administration

The incentive plan will be approved by the CEO of Aldi in conjunction with the compensation committee of the BOD. The human resource manager will then administer the incentive plan, where he will oversee and verify the amount payable to participants. The amount and timing of the payable incentives will then be approved by the CEO, and further reviewed and approved by the compensation committee of the B.O.D before the payments are finally made. 

Eligibility

To qualify for the incentives, participants will be required to be full-time employees classified as retail assistants at an either entry-level or experienced level. Key employees hired on or before August 30, 2021, will be added as participants in the plan. Moreover, an employee must be an active employee of Aldi on the date the incentives are paid to qualify for the payment. 

Plan year

The incentive plan will be effective from October 1, 2021, through September 30, 2022.

Plan Components

Payment of bonuses and other incentives will depend on the achievement of performance targets, including sales volume and customer satisfaction. These performance targets/indicators will be set by the CEO, together with the compensation committee of the BOD, and will be subject to minor adjustments.

Performance expectation

Employees will earn incentive awards if they achieve their goals or the company’s set targets, including increased sales and improved customer satisfaction. The amount of the incentive to be awarded will range between 0% and 110% of the target and will be decided on by the immediate line manager or supervisor based on the actual performance relative to the employee’s targets.    

Career path based on performance results

Employees who consistently offer superior customer service that drives the company’s goals of achieving a high level of customer satisfaction will be awarded training opportunities to support their career growth. Depending on the training outcomes and the number of years worked in the company, they will be promoted to fill the positions of retail receptionists, retail store managers, marketing coordinators, retail managers, operations managers, and area manager, retail.  

Salary increases

Employees who demonstrate excellence in the area of customer service, gain comprehensive experience, and acquire new skills through training will be awarded pay rise ranging from 6% to 10% according to the regulations set by the employment laws. 

Fringe benefits and perks

High performers will also be awarded non-wage compensation and extra rewards in the form of health insurance, medical leave, paid time off, bonuses, and meal subsidization.

Differed awards

Employees are allowed to differ the payment of their incentive awards (or a percentage of the awards in increments of 25%). Employees who choose to differ their awards must do so in writing before the plan year begins. Differed awards will earn interest based on the recommendations from the finance department. 

Termination and/exit benefits

If the employee no longer qualifies for the incentive plan due to demotion or transfer will be entitled to a prorated award that will be determined by the period of participation in the plan. However, a participant whose employment is terminated whether voluntary or involuntary before the set payout date will not be eligible for bonus awards.

Assessment 3: Develop and implement a remuneration strategy

Part A: Remuneration Policy

Remuneration Policy

Introduction

In the context of this policy, remuneration includes all forms of payment (both fixed and variable) or benefits that are made directly, or directly by Aldi Australia in exchange for services rendered by casual retail assistants. It comprises monetary payments or benefits, including cash, options, commissions, bonuses, and profit-sharing, as well as non-monetary benefits such as special allowances, discounts on purchases, and health insurance.

Scope and Objective

This remuneration policy provides guidelines for the remuneration of casual retail assistants of Aldi Australia. The policy complies with Australia’s Fair Work Act (2009) and related regulatory instruments and frameworks such as the National Employment Standard (NES), and modern awards that address employment relationships and issues. The policy has a primary objective to ensure that Aldi has a total remuneration package that puts it in a strategic position to attract and retain talented and highly-experienced retail assistants. As one of the leading retail stores in Australia, Aldi focuses on providing attractive terms of employment that are organized around personal development and growth, competitive remuneration, training, and a conducive working environment that supports knowledge sharing and creativity to stimulate high performance and productivity. This policy, therefore, aims at accelerating the company’s attainment of these strategic goals. It applies to both part-time and full-time retail assistants responsible for performing various shop floor functions such as responding to and assisting shoppers, operating tills, and ensuring timely replenishment of merchandise. Adli reserves the right to amend and update the policy based on the prevailing circumstances. Any changes made will be appropriately communicated to the employees.

Remuneration principles

The remuneration policy is anchored on the principles outlined below.

• The remuneration schemes or strategy is designed to enable Aldi Australia to attract and retain top-tier employees to fill the position of casual retail assistants.
• The remuneration strategy attempts to strike a balance between fixed and variable payment to not only attract high-caliber talents but also motivate, engage, and retain them.
• Variable remuneration is subject to regular amendments as determined by performance and attainment of goals at both individual, team, and organization levels.
• The staff involved in control functions, including retail assistants and other shop floor employees, have adequate autonomy and are compensated based on the achievement of objectives related to their roles and functions.
• Variable remuneration will be paid in such a way that it does not jeopardize the company’s financial situation in terms of liquidity and profitability.
• Retail assistants who quit their job or whose services are terminated before variable remuneration is made will not be eligible for the payment.

Forms/elements of remuneration

Remuneration of Aldi’s retail casual assistants will comprise fixed salary, short and long-term variable remuneration, commission, allowances, and other non-wage benefits.

Fixed salary

The maximum and minimum salary base will be determined by current trends in the industry. This enables the setting of competitive salaries to attract and retain highly skilled and experienced employees. 

Commission

Commissions will reflect the sales linked services offered by an employee to encourage them to continue excelling in customer service. 

Short-term incentives

The short-term incentives of retail assistants will be contingent on Aldi’s performance; that, the extent to which the company targets are achieved. This will enable the company to drive its short-term strategy needed to support long-term strategy and attainment of performance priorities.

Long-term incentives

Long-term incentives of retail assistants will be determined by the company’s performance as shown by the balance statement, income statement, and profit indicators. The incentives will be set out by the board of directors in conjunction with the CEO to ensure that employees are appropriately rewarded for contributing positively to the delivery of long-term financial performance.

Other benefits

The company will offer additional benefits to eligible employees based on given circumstances.

Performance milestones/targets

Personal targets that are pertinent to variable remuneration will be set before the performance year commences. The targets or milestones will consist of both quantitative (monetary) and qualitative or intangible (non-monetary) targets. Quantitative targets will be in the form of sales volume and performance of assets whereas qualitative will include customer satisfaction, excellent customer services, and compliance with set rules.

Non-compliant behavior and other acts of misconduct will override the positive performance record kept by the employee, leading to the possible amendment of variable remuneration.

Pay-out process

The variable remuneration will be appropriately adjusted such that it is always a certain percentage of the fixed remuneration. Any payment made will be communicated to the concerned employee in writing.

Annual review

The company’s remuneration structure and strategy will be reviewed annually to establish if it’s covering all aspects of remuneration as intended and whether payouts made are appropriate. The review will also seek to determine whether the remuneration structure complies with the regulations and standards set at both the national and internal levels.

Deviation from the policy

The CEO and other key stakeholders involved in overseeing the implementation of the policy may temporarily deviate from its provisions and principles upon material changes in the relevant laws and regulations as well as changes in the company’s structure and ownership.

Part B: Remuneration Strategy and Implementation plan

Introduction

Having an actively engaged and self-motivated workforce is a critical factor in driving organizational performance and the attainment of both short-term and long-term goals. The importance of high-caliber and spirited employees becomes even more pronounced in the retail sector and other service industries where employees have increased contact with customers. In the retail sector, for example, it is through maintaining a talent pool of engaged and committed retail assistants and other shop floor employees that a retailer is able to offer superior customer service that provides shoppers with a unique shopping experience, thereby increasing their return intentions. So, how can a company maintain motivated and high-performing employees, who contribute positively to its performance and productivity? Indeed, one of the proven ways to attract and retain top-tier employees is through providing competitive remuneration that only surpasses the industry average but is also tailored to the specific needs of different employees.

For the purpose of this report, remuneration is understood as an umbrella term for both variable and fixed payment and all forms of benefits that are made directly, or directly by a business entity in exchange for services rendered by the employees. It comprises monetary/quantitative payments or benefits, including cash, options, commissions, bonuses, and profit-sharing, as well as non-monetary/intangible benefits such as health insurance, special allowances, discounts on purchases. To this end, the purpose of this report is to develop a remuneration strategy for Aldi Australia to enable it to appropriately remunerate its casual retail assistants. 

Aims and objectives

The primary aim of this report is to suggest and develop a remuneration strategy that Aldi Australia can use to competitively compensate its casual retail assistants. As such, the specific objectives are to:

1. Suggest an appropriate remuneration strategy for remunerating Aldi Australia’s retail assistants based on current industry trends.
2. Develop and prepare the proposed remuneration strategy for Aldi Australia

• Develop an action plan to implement the remuneration strategy.

1. Current remuneration trends

The retail sector has been traditionally known as a low-wage industry, given the low-profit margins on fast-moving merchandise. Moreover, the competitive nature of the retail industry forces most of the leading retailers such as Walmart to implement low-cost leadership strategies, including selling at discounted prices, to attract customers. In turn, the retail sector offers relatively lower salaries and wages to compensate for the low-profit margins. For instance, the base hourly pay for retail sales assistant in Australia range from AU$16.49 to AU$26.11, meaning the industry-wide average hourly rate stands at AU$20.94 (PayScale, 2021). The hourly pay is determined by the level of experience, with the experienced sales assistants earning as high as AU$22.28 followed by late-career: AU$22.28, mid-career: AU$22.37, early career: AU$20.71, and entry-level: AU$19.82. The remuneration, however, includes variable payments, particularly bonuses, commissions, profit sharing, tips, overtime, and discount on purchases as shown in table 1. Overall, a retail sales assistant earns a total pay of between AU$34k and AU$55k.

Table 1: Remuneration across the retail industry (Based on data from PayScale, 2021)

Legislation parameters and contexts

The remuneration and employment relationships in Australia are governed by various institutions, laws, agencies, standards, legal frameworks, and regulations. Key among them is Australia’s Fair Work Act of 2009 that addresses various employment issues, including equal opportunity, appropriate employee compensation, occupational health and safety, working hours, and anti-discrimination. Another important legal framework is the National Employment Standard (NES), which is responsible for defining and specifying maximum weekly work hours, flexible work schedules, and other minimum entitlements for employees. Lastly, there is the Modern Awards instrument/framework that outlines the minimum terms and conditions for covered employees including a minimum wage of AU$19.84 and a maximum of 38 weekly working hours (Lewis Silkin, 2021). 

Organizational context and strategic alignment

Aldi Australia is one of the leading retailers in Australia by the number of customers and volume of store sales. To remain at the competitive edge in terms of superior shopping experience and excellent customer service, the retailer endeavors to attract and retain high-performing retail sales assistants through competitive remuneration and a work environment that complies with the relevant Australian employment laws. The retail assistants will be responsible for restocking shelves, cleaning and maintaining high store standards, replenishing merchandise storewide, operating tills at the point of sale, and above all, assisting shoppers and responding to their queries. By offering these services, the retail assistants will enable Aldi to excel in the area of customer service, and accordingly, meet its performance goals of high customer satisfaction and increased sales. 

Recommended Remuneration strategies and performance expectations.

Aldi Australia believes that “our people [employees] are key to our success”. However, the company’s ability to attract and retain high-performing employees needed to drive its success will depend largely on the remuneration strategies it adopts. Since Aldi operates in the low-wage retail industry, it is recommended that the company employs two key remuneration strategies to help it gain a competitive leap in attracting, motivating, and retaining highly qualified and experienced retail sales assistants. The strategies as discussed earlier in assessment 1 are the commission strategy and profit-sharing strategy. The commission strategy is based on the value-based remuneration model that rewards employees who achieve certain targets and performance expectations. Under this strategy, Aldi will reward retail sales assistants with a commission of up to AU$9,000 for their efforts in attaining increased sales and a high level of customer satisfaction. As would be expected, this strategy will activate superior performance at both individual and organizational levels by motivating and encouraging the employees to work towards attaining their performance targets.

The second recommended remuneration strategy – profit-sharing – is not very common in the retail sector, meaning its adoption will significantly contribute to Aldi’s competitiveness in remuneration. The strategy, as discussed in Radermacher (2015), involves sharing the company’s profits with individuals or a group of employees to make them feel they are part of the company, thereby incentivizing them to remain committed to attaining the company’s performance goals. Since Aldi’s performance is to excel in customer service, offer a unique and unparalleled shopping experience to shoppers, and attain higher merchandise turnover, retail sales assistants will receive monetary incentive awards under the profit-sharing plan (Howard & Dougherty, 2004) using sales volume and level of customer satisfaction as the key performance indicators.

art skills.