Compensation and Benefits (Starbucks)

Compensation and benefits programs differ in different organizations depending on the values and culture of the organization. At Starbucks, employees are considered as partners because the company values the growth and professional development of their employees (Starbucks, n.d.). As such, the compensation and benefits program is inclusive of several entities. The total package involves salary (compensation) benefits, stock as well as savings programs, which are available for both part time and full-time employees. The formal pay structure at Starbucks is dependent on the level of an employee with the lowest level employees earning a maximum of $9.5 hourly while senior employees earn up to $16 in an hour (Starbucks, n.d.). Full-time employees earn monthly salaries while those who work on shifts are paid hourly. In addition to the salary is a set of benefits including health insurance, income protection as well as commuter and adoption assistance programs. Part-time employees become eligible for these benefits after working for at least 160 hours in two consecutive months (Tornikoski, Vesa, & Marion 2014).

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Benchmarking Activities

Some of the benchmarking activities include financial analysis where the organization compares its financial results to ensure they remain competitive in the beverage industry. As well, the company uses the process to assess and analyze its productivity for every year. Additionally, the company also performs internal benchmarking where different production units are compared to assess the ones that are performing and those that are lagging behind. As a result, the company offers competitive compensation to reward the most hardworking and performing groups (Hua, 2014). As well, the competitive incentives are also available for individual employees who display exemplary performance.

Stock Ownership Program

Among the benefits offered to employees is the stock investment plan where Starbucks employees are given an opportunity to purchase the stock at discounted prices. As such, employees willing to purchase register for regular salary deductions. Before one can become eligible for this program, they must have worked for at least three months and after receiving payment for at least 20 hours every week of the three months (Starbucks, n.d.). Bean stock is the main stock open to purchase by employees who in return earn shares and hence are eligible in sharing the company’s returns. Employees are in a position to accumulate their bean stock depending on their pay as well as work commitment to the company (Ahmad, 2015).

Types of Benefits Offered

Starbucks employees become eligible for the legally mandated benefits package after working for 160 hours for two consecutive months. Legally mandated employee benefits are the ones the law requires employers to give their employees. The difference between them and voluntary benefits is that legally mandated benefits are prescribed by the law and are available to all employees while voluntary benefits are under the company’s initiative and could be based on employee loyalty and performance (Madhani, 2014). Among the legally mandated packages at Starbucks is the medical package, which covers general health procedures including hospitalization for dental, mental, and vision complications as well as social security tax, Medicare tax, and employee compensation. Voluntary benefits include life insurance cover, death and accident insurance as well as employee assistance package, which offer assistance to employees with trauma and emotional issues (Madhani, 2014). Other voluntary benefits include the sick pay where employees get paid sick leaves and adoption assistance where employees willing to adopt children are given financial assistance. As well, the company also offers paid leave to its permanent employees and observes the major holidays in the country.

Cost of Benefits and Compensation

Since the benefits are offered depending on the level and employee commitment, they vary from one employee to another. As such, the company uses 10% of its returns on benefits while the salary of the employees accounts for 15% of the overall returns (Scott, 2016). Consequently, Starbucks uses 25 % of its annual returns for employee benefits and compensation. The amount of money used for benefits is dependent on the profits and therefore not fixed (Sengupta et al., 2012). Therefore, higher annual returns means higher benefits and vice versa.

How Benefits are Communicated

Brochures are the major sources of information concerning employee benefits at Starbucks. As such, communication about benefits is done through the use of brochures which may be online or printed and handed to employees. Apart from that, benefits are also communicated during annual meetings and during special celebrations for the company (Sardelli, 2014). As well, employees can also learn about the benefits through organizations website, which is open to all of them. As such, the executives communicate about the benefits as they highlight other issues and instructions to the employees. Benefits are also communicated during the recruiting process where new employees are advised on how to increase their chances of becoming eligible for the company’s benefits and how to apply and register for the benefits (Sardelli, 2014).

Factors Influencing Compensation and Benefits

Some of the environmental factors that influence compensation and benefits at Starbucks include the competition in the beverage industry. Recently, the company has been facing stiff competition from competitors such as Dunkin doughnuts and McDonald. As such, to remain competent, the company has enhanced its incentives to maintain their best employees as well as boost their morale hence increase production. Legal requirements such as minimum wage is another factor that affects the compensation program at Starbucks. Starbucks employees are compensated differently depending on the legal requirements of the country in which the Starbucks branch is located. Employee relations also affect the benefits and compensation process where good employee relations result in higher benefits and vice versa (Madhani, 2014).

Problems Associated with the Program

Some of the problems associated with compensation and benefits at Starbucks is decreased profits for the company thus the lack of development for the company. The competition in the beverage industry has forced employers to highly compensate their employees for them to maintain the best employees. As such, the benefits package at Starbucks is, therefore, resulting in low returns and hence the overall profit. Therefore, the company’s investments have been negatively affected (Madhani, 2014). Another problem associated with benefits and compensation is enmity and lack of coordination between employees. Starbucks has different packages for its part-time and permanent employees. As such, the part-time employees feel under compensated and hence their full-time counterparts since they consider this program as a way of discrimination. As such, there lacks unity between employees, a situation that affects overall services to their customer.

Issues Related to Compensation and Benefits

In conclusion, compensation and benefits programs in different companies where some face issues, which may negatively affect the organization. For instance, Starbucks is facing employee issues where some employees have quit their jobs due to the reduction in the number of hours an employee has to work. As such, some employees felt they were not making enough money and hence opt to seek employment elsewhere. As well, some of the employees have also resulted in working more than one job due to under compensation (Madhani, 2014). Other issues include numerous requirements that are attached to the benefits. For example, Starbucks employees must work for 160 consecutive hours to become eligible for the company’s benefits.



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Madhani, M. (2014) “Aligning compensation systems with organization culture.” Compensation & Benefits Review, 46(2), 103-115.

Sengupta, I., Baldwin, M.L., & Reno, V. (2014). “Workers’ compensation: Benefits, coverage, and costs 2012.” National Academy of Social Insurance. Retrieved from’_Compensation_Benefits_Coverage_and_Costs_and_Costs_2012

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Tornikoski, C. Vesa S., & Marion F. (2014) “Compensation package of international assignees.” In Collings, D., Wood, G.T., Caligiuri, P.M., The Routledge companion to international human resource management, 289-307.