The short term lending industry has been one of great scrutiny for many years. It has been well known the controversy of whether these businesses hurt or help the middle class. But what no one ever talks about are the employees that work in this industry. When these businesses are shut down state to state, it is not just the borrowers that are affected and left with no way to pay their bills, but also the lives and financial security of employees that are lost as well. Current Compensation Philosophy Advance America is a leader in the payday loan and short term lending industry.
Let’s look at the compensation philosophy for different levels of employment, nonexempt hourly, non exempt salary and officers and executives. Nonexempt hourly employees are nonunion and are paid above market, nonexempt salaried employees are paid at market and officers and executives are paid above market. At Advance America, all employees that are center level managers and lower are hourly employees. The Average wage for center managers is between $10. 08 and $20. 73 per hour (www. payscale. com). The average wage for customer service representatives is between $7. 83 and $13. 91 per hour (www. ayscale. com). Advance America is not known for hiring part time employees due to scheduling.
Advance America requires center level employees to be available from 8am-8pm everyday and provide their own reliable transportation (www. advanceamerica. net). The hourly employees have a variety of benefits, health, dental, vision, 401k, Paid time off, The next level of employment is the divisional and regional directors of operations. These employees are salaried and receive an average salary of $49,000 to $60,000 for Divisional Director and $118,000 to $126,000 for Regional Director (glassdoor. om). The executives, like many organizations, see the biggest increase in wage, CEO, John Patrick O’Shaughnessy for 2011, received a total compensation package of $2,992,791, $1,080,673 of which as core and bonus compensation (www. businessweek. com). Mr. O’Shaughnessy also received stock options, legally required benefits and discretionary benefits. “At the core of our compensation philosophy, our programs were designed to attract, motivate, reward, and retain management talent in order to achieve increased stockholder value within a highly competitive industry.
Our compensation philosophy was also focused on aligning the financial interests of management with our stockholders” (Advance America, SEC, 2012). Ways to Enhance Current Philosophy (Key Factors- Internal and External; mission and strategic focus, financial and cultural resources) The Primary principle of a well defined compensation philosophy is the objective of “compensation plans that enhance shareholder value” (Hodak, 2011). “The specific goals that satisfy this basic objective are essentially the same for every company:” (Hodak, 2011) 1. ) “To attract and retain the talent needed by the company to create value” (Hodak, 2011); 2. “To reward, and thereby motivate, that talent for sustainable value creation; and” (Hodak, 2011) 3. ) “To meet the company’s attraction and alignment objectives at the lowest reasonable cost to the shareholders” (Hodak, 2011). Advance America can meet these goals through conducting a strategic analysis and compensation survey (Martocchio, 2011). External key factors “include industry profile, information about competitors, and long-term growth prospects” (Martocchio, 2011). Internal key factors include “financial condition and functional capabilities” through marketing and human resources (Martocchio, 2011).
All core compensation plans and bonus compensation plans are performance based (Advance America, SEC, 2012). “Compensation at all levels within Advance America is based primarily on a qualitative assessment of performance and long term variables, such as title and associated responsibilities, tenure with us, compliance with our Code of Business Conduct and Ethics, maintaining regulatory compliance objectives, maintaining and upholding our commitment to responsible industry practices and customer satisfaction, and management’s assessment of market levels of ompensation. Our incentive programs had maximum incentive opportunities that were consistent with competitive market practices” (Advance America, SEC, 2012). Conclusion Advance America operates on a performance based commission and bonus plan structure. Advance America does not sell customer accounts or customer information to 3rd parties unless the account is severly overdue, because of this, the majority of originated customer advances result in a performance based compensation.
More specifically for the center level hourly employees, their performance based compensation is tied to the center volume for which to operate, this compensation results in their base pay and multiple bonus opportunities. This performance based compensation plan allows Advance America to attract, motivate, reward, and maintain valuable employees.