COMPENSATION POLICY OF TOYOTA
COMPENSATION MANAGEMENT
Abhishek Singh
B.Com(hons)
Semester VI
ROLL NO. 151
SUBMITTED TO: Richa Verma
CONTENTS
TOYOTA’S OVERVIEW
WHAT IS COMPENSATION MANAGEMENT?
IMPORTANCE OF COMPENSATION MANAGEMENT
WHAT IS COMPENSATION POLICY?
Why is it important to apply a salary policy?
COMPENSATION POLICY OF TOYOTA
OTHER PERKS AND ALLOWANCES BY TOYOTA
CONCLUSION
TOYOTA’S Overview
Company name
Toyota Motor Corporation
President, Member of the Board of Directors (Representative Director)
Koji Sato
Date founded
August 28, 1937
Capital (as of March 31, 2023)
635 billion yen
Shareholders
Shareholder composition
Main business activities
Motor vehicle production and sales
Number of employees (as of March 31, 2023)
70,056 (Consolidated 375,235)
Toyota Motor Corporation is a Japanese multinational automotive manufacturer
headquartered in Toyota City, Aichi, Japan. It was founded by Kiichiro Toyoda and
incorporated on August 28, 1937. Toyota is the largest automobile manufacturer in
the world, producing about 10 million vehicles per year.
The company was originally founded as a spinoff of Toyota Industries, a machine
maker started by Sakichi Toyoda, Kiichiro's father. Both companies are now part of
the Toyota Group, one of the largest conglomerates in the world. While still a
department of Toyota Industries, the company developed its first product, the Type A
engine, in 1934 and its first passenger car in 1936, the Toyota AA.
After World War II, Toyota benefited from Japan's alliance with the United States to
learn from American automakers and other companies, which gave rise to The
Toyota Way (a management philosophy) and the Toyota Production System (a lean
manufacturing practice) that transformed the small company into a leader in the
industry and was the subject of many academic studies.
In the 1960s, Toyota took advantage of the rapidly growing Japanese economy to
sell cars to a growing middle-class, leading to the development of the Toyota
Corolla, which became the world's all-time best-selling automobile. The booming
economy also funded an international expansion that allowed Toyota to grow into
one of the largest automakers in the world, the largest company in Japan and
the ninth-largest company in the world by revenue, as of December 2020. Toyota
was the world's first automobile manufacturer to produce more than 10 million
vehicles per year, a record set in 2012, when it also reported the production of its
200 millionth vehicle. By September 2023, total production reached 300 million
vehicles.[3]
Toyota was praised for being a leader in the development and sales of more fuel-
efficient hybrid electric vehicles, starting with the introduction of the XW10 Toyota
Prius in 1997. The company now sells more than 40 hybrid vehicle models around
the world. More recently, the company has also been criticized for being slow to
adopt all-electric vehicles and focusing on the development of hydrogen fuel cell
vehicles, like the Toyota Mirai, a technology that is costlier and has fallen far behind
electric batteries.
As of 2022, the Toyota Motor Corporation produces vehicles under four
brands: Daihatsu, Hino, Lexus and the namesake Toyota. The company also holds a
20% stake in Subaru Corporation, a 5.1% stake in Mazda, a 4.9% stake in Suzuki, a
4.6% stake in Isuzu, a 3.8% stake in Yamaha Motor Corporation, and a 2.8% stake
in Panasonic, as well as stakes in vehicle manufacturing joint-ventures in China
(FAW Toyota and GAC Toyota), the Czech Republic (TPCA), India (Toyota
Kirloskar) and the United States (MTMUS).
Toyota is listed on the London Stock Exchange, Nagoya Stock Exchange, New York
Stock Exchange and on the Tokyo Stock Exchange, where its stock is a component
of the Nikkei 225 and TOPIX Core30 indices.
What is compensation management?
Compensation management is the process of managing, analyzing, and
determining the salary, incentives, and benefits each employee receives.
Compensation management is a crucial part of any talent management
and retention strategy. Creative compensation includes monetary and
non-monetary benefits companies can employ to boost engagement and
productivity, reduce attrition, and attract top talent.
Compensation managers aim to attract, retain, and engage employees
by offering broad and competitive compensation plans within the
company budget.
Compensation management ensures that people get paid a fair salary
based on:
Work performance
Position
Responsibilities
Experience
Job market
Company budget
IMPORTANCE OF COMPENSATION MANAGEMENT
Employee satisfaction
As we mentioned earlier, employees come to work expecting to be compensated
fairly for their time and effort. If they feel that they are not being paid enough, or that
their compensation is not in line with the value they are providing to the organization,
this can quickly lead to dissatisfaction.
Attracting and retaining top talent
In order to be successful, organizations need to attract and retain the best
employees. This is becoming increasingly difficult in today’s competitive job
market.One of the key ways to differentiate your organization from others is by
offering a competitive compensation package.If you can’t offer a high salary, there
are other benefits and perks that you can offer which will make your organization
more attractive to prospective employees.
Improved performance
Employees who feel they are being fairly compensated are more likely to be
motivated and perform at a higher level. This is because they feel valued by the
organization and are therefore more invested in its success.On the other hand,
employees who feel undervalued or that their compensation is not fair are more likely
to be disengaged and less productive.
Reduced turnover
Employee turnover can be costly for organizations. Not only do you have to find and
train replacements, but you also lose the knowledge, skills and experience of your
departing employees.By offering a competitive compensation package, you can
reduce turnover and keep your best employees happy and engaged.
Enhanced reputation
An organization’s reputation is important for a number of reasons. It can influence
everything from customer satisfaction to employee recruitment.If your organization
has a reputation for being fair and generous with compensation, this will only
enhance your reputation further.There are a number of other benefits that can be
gained from effective compensation management, but we feel these five are the
most important. As you can see, getting it right is essential for organizational
success.
What is a compensation policy?
A compensation policy is a set of principles, guidelines and strategies established by
a company or organization to determine how it will remunerate its
employees based on their work, skills, experience and contribution to the company.
The aim of this policy is to establish a fair and coherent compensation system
that attracts, motivates and retains talent within the organization. It can also
help maintain the company’s competitiveness in the job market , and align
employees’ interests with the company’s overall objectives and performance.
The compensation policy first determines the relative value of each position within
the organization, using job evaluation methods. It then establishes salary ranges
for each job level, based on the job market, required skills and performance.
The key elements of a compensation system can also include various forms of
benefits, such as bonuses, commissions, shares, fringe benefits (insurance, paid
leave, etc.), and their allocation according to individual and/or collective results.
An attractive, well-designed compensation policy helps to create a motivating
and fair working environment, while supporting the organization’s overall
objectives. It must be in tune with the company’s culture, and evolve in line with
internal and external changes that may affect the organization’s dynamics.
Why is it important to apply a salary policy?
Reason 1: Social justice
A salary policy establishes a fair framework for employee remuneration. This
ensures that salaries are determined consistently and based on objective
criteria such as experience, skills and contribution to the job. A fair pay policy helps
to prevent pay discrimination and promote a culture of equality within the
organization.
Reason 2: Attracting talent
A competitive wage policy helps attract qualified and experienced talent. When
salaries are aligned with the labor market and offer competitive advantages, the
company is more likely to recruit the best candidates for vacant positions.
Reason 3: Employee loyalty
An appropriate compensation policy can contribute to employee retention. Fair and
competitive salaries are incentives for employees to stay with the
organization rather than seek opportunities elsewhere.
Reason 4: Motivation and commitment
A transparent, performance-related pay policy can motivate employees to give
their best. Knowing that their efforts will be rewarded, employees are more likely to
invest themselves fully in their work and improve their productivity.
Reason 5: Confidence
A clear pay policy establishes a climate of trust between employer and
employee. When employees understand how their compensation is determined,
they are more likely to feel valued and respected by the organization.
What steps should you take to create an
attractive compensation policy for your
company?
Creating an attractive compensation policy within a company requires a
well thought-out, strategic approach.
Step 1: Analyze the job market
Start by conducting an in-depth study of the job market to understand salary
trends and compensation levels for similar positions in your sector and region. This
will help you determine where your company stands in relation to the market.
Step 2: Evaluate job categories
Identify the different positions within your company and carry out a job evaluation
to determine their relative value in terms of the responsibilities, skills and
experience required.
Step 3: Setting salary scales
Based on market data and job evaluations, establish salary ranges for each job
level. These scales must be competitive, while taking into account the company’s
budgetary constraints.
Step 4: Define performance criteria
Identify the individual and/or collective performance criteria that will be used
to determine salary increases, bonuses and bonuses. Make sure that these
criteria are clear, measurable and aligned with the company’s objectives.
Step 5: Integrate employee benefits
Include fringe benefits (insurance, paid leave, retirement, etc.) in your
compensation policy. Benefits can be an attractive element in attracting and retaining
talent.
Step 6: Promote transparency
Communicate transparently with employees about compensation policy. Explain
how salaries are determined, what the performance criteria are, and what
opportunities there are for advancement within the company.
Step 7: Consult stakeholders
Involve managers, employees and human resources in the compensation policy
development process. Take their comments and needs into account to create a
more inclusive and relevant policy.
Step 8: Communicate
Once the compensation policy has been finalized, make sure it is implemented
consistently and fairly. Communicate clearly and effectively with employees
about the changes and benefits of the new policy.
Models of compensation systems used in
companies
Model 1: Fixed salary
This is the simplest and most common compensation model, where employees
receive a regular fixed salary, usually on a monthly basis. This model offers
financial stability to employees, especially if they have a permanent contract.
Model 2: Commission-based remuneration
This model employees on the basis of sales or sales targets
achieved. Employees receive a percentage of sales achieved or contracts signed,
which motivates them to increase their productivity and performance.
Model 3: Pay for performance
In this model, employees are compensated according to their individual or team
performance. Those Performance criteria are generally linked to company
objectives, and are used to determine salary increases, bonuses or bonuses.
Model 4: Premiums
In this model, bonuses are awarded on a discretionary basis by management or
managers for outstanding contribution or exceeding employee expectations.
Model 5: Profit sharing
More and more companies in France are introducing employee profit-sharing
schemes. Employees receive a share of the company’s profits, which
encourages them to contribute to the company’s profitability.
Model 6: Share purchase
This model is often used in start-ups or listed companies. Employees are offered
the opportunity to buy company shares at a preferential price , giving them an
incentive to contribute to the company’s long-term performance.
COMPENSATION POLICY OF TOYOTA
SALARY : At Toyota, the highest paid job is a Director of Sales at $232,148
annually and the lowest is an Admin Assistant at $35,000 annually. Average Toyota
salaries by department include: Communications at $235,916, Marketing at
$108,081, Operations at $97,440, and Sales at $150,304. Half of Toyota salaries are
above $132,825. 276 employees at Toyota rank their Compensation in the Top 40%
of similar sized companies on Comparably (based on 832 ratings) while 262
employees at Toyota rank their Perks And Benefits in the Top 35% of similar sized
companies on Comparably (based on 276 ratings). Salaries contributed from Toyota
employees include job titles like Engineering Manager, Operations Manager,
Inventory, and Admin Assistant. Comparably data has a total of 9 salary records
from Toyota employees.
Toyota Perks And Benefits At a Glance Employees at Toyota rank their Perks
and Benefits higher than most, ranking them in the Top 35% of all similar sized
companies with 10,000+ Employees on Comparably. Native American employees
and the Business Development department at Toyota rank their Perks and Benefits
the highest, while employees who have been at the company 2 to 5 Years and
employees who have been at the company 1 to 2 Years rank the Perks and Benefits
at Toyota the lowest against other demographic groups at the company.
OTHER PERKS AND ALLOWANCES
OFFICE PERKS
. Work from home facility:
. Unique office space
HEALTH AND WELLNESS
. Dental Insurance
. Vision insurance
. Health insurance
. Life insurance
PAID TIME OFF
. Vacation policy
. Paid holidays
. Maternity/Paternity leave
FINANCIAL BENEFITS
. Tuition Reimbursement
. 401K/Retirement Plan
. Employee Stock Purchase Plan
CONCLUSION
Toyota Motor Corporation has never faced an issue with their employee
compensation and benefits packages. Part of their philosophy has been
people are their greatest asset and they treat them as such by paying
them a good salary and empowering their employees. How can they
attract top talent? Well even the top executives at Toyota do not make a
seven figure salary. Wages are determined with a fair market value in
mind, but it is the "me" versus "we" attitude that drives Toyota's success.
Describe the formal pay structure within the organization. Toyota has
long marched to a different drummer when it comes to wages and
compensation. Now with the economy turning upside down, Toyota has
been forced into cost cutting measures to align hourly wages more
closely with state manufacturing wages of where the plant is located.
They have always followed the policy of pay your employees well and
they will perform better and be more productive, but also promote a
policy of equal payment for each job. Describe any benchmarking
activities undertaken by the organization. Include information as to
whether the organization offers a competitive compensation structure.
Describe incentives offered by the organization. You can take a page by
the introduction of the Toyota Way to employees in the Camry Plant of
Kentucky (Kentent, 2009). Initially high wages allowed Toyota to hire the
cream of the crop. Daily, monthly and yearly goals were outlined for
each department and offered a bonus system if goals were achieved.
