Cost And Effectiveness Of Compensation Structure Of Employees For Small And Medium Enterprises

In face of harder and harder competitions in the times of rapid development, small and medium sized enterprises ("SME") rely greatly on the positiveness and self-initiation of their staff to secure their competitiveness and sustainable development. Wages play the biggest role in staff motivation and form part of the costs of SME. Most enterprises measure their cost-effectiveness by their total wage figure without analyzing the reasonableness of the underlying wage structure, which is composed of such ingredients as basic wages, auxilliary wages, overtime wages, incentives, year-end bonuses and other benefits. Wage structures of different proportion of components produce different levels of cost-effectiveness. In this thesis, an attempt is made to design an indexing system to analyze the cost-effectiveness of wage structure of enterprises taking into account the individual components of the wage structure.In this thesis, the wage structure of XYZ Company is referred to in formulating an indexing system to analyze the cost-effectiveness of wage structure. Cost indices used include ratio of wage structure composition, ratio of wage structure to direct cost, ratio of sales order to wage structure; Effectiveness indices used include coefficient of wage structure to net profit, coefficient of wage structure to sales. On analyzing the old wage structure, the cost-effectiveness of each individual components of the wage structure was computed. The data so obtained were used to redesign the new wage structure in line with the specific culture and business cycle of the enterprise. The data of the old and new wage structure were then examined to find out whether the new wage structure improves the cost-effectiveness of the enterprise. The result of the analysis shows that the proportion of components within the wage structure was improved, the wage structure becomes more reasonable and cost-effectiveness is improved. This shows that different types of wage structure will have different effect on not only the effectiveness of enterprise, but also staff motivation. An effective cost structure attracts staff, motivates staff, lowers cost and improves cost-effectiveness. In this way the enterprise becomes a magnet of elites and is able to develop itself sustainably.This thesis analyzed the cost-effectiveness of wage structure of enterprises mainly based on the data obtained from an indexing analysis of wage structure. It is hoped that this provides a reference for the cost-effectiveness of wage structure of enterprises.