The organisation has been hard at work trying to

The organisation has been hard at work trying to align its business structure and systems to support the new
changes. We had to look at our compensation programme to see what we could do to help it better support the
goals that the corporation is striving to achieve."
One change XYZ Power Utility made in 1996 was to introduce the compensation integration programme (CIP).
Part of CIP involved eliminating the company’s traditional salary grading system, which had 3 200 job titles,
and replacing it with a salary system with only 170 job titles. This system was organised in fewer but much
wider salary bands. The salary bands allow greater flexibility in paying employees.
Another compensation strategy they implemented was to begin a gain-sharing programme called results
sharing. In return for their agreement to return five percent of their base pay, employees had the opportunity to
earn as much as 10 percent of their annual pay if cost savings could be effected or profits made. In the first
year under the results sharing programme, XYZ Power Utility generated R96 million in savings. With a payout
of less than R40 million, Spry noted: "The way I see it, the company’s about R60 million ahead of the game."
QUESTIONS
3.1 The first step in the development of a total compensation strategy is to assess the total compensation
implications of the strategy. Briefly describe the five factors in the organisation’s business strategy that
contribute to its success. Use examples from the case study to illustrate the discussion. (20)
3.2 With broader salary bands, will salaries not rise greatly as employees move to the top of their respective
bands? Substantiate your answer by discussing the advantages and disadvantages of broad banding.
(12)
3.3 Differentiate between gain sharing and profit sharing as incentive systems. Explain what Denis Spry
should do to ensure that the results sharing programme will continue to motivate both managers and non-
management employees. (18)
Total [50]

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ASSIGNMENT 04
This assignment must NOT be sent to the University.
Read the following paragraph and then answer the questions.
WHAT’S THE USE OF NEGOTIATION IF YOU’RE GOING TO PAY US LESS?
A medium-sized business specialising in the manufacturing and distribution of corrugated cardboard gift boxes
and storage containers has just completed wage negotiations with the union representatives of their staff. The
wages settled upon are:
• A basic salary of R 30 000,00 per annum, excluding a 13
th
cheque.
• A 13
th
cheque equivalent to one month’s salary payable pro rata in the birthday month. A pension fund - 8%
of annual salary, half to be contributed by the employee, half by the employer.
• A hospital insurance fund - 10% of annual salary, half to be contributed by the employee, half by the
employer.