Compensation Practice

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Compensation practice is one of the important practices in the world of business. Organizations which want to keep good track of their business activities should make use of this practice. For any organization to thrive in today’s world of business where the market is highly competitive and for it to be able to retain its highly skilled and talented workers, is should have a better compensation practices. Failure to have better and effective compensation plans will result to poor output of the organization hence this will affect it negatively.

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Compensation helps in matching salaries and the job being done. Another importance of compensation is that it attracts many employees to the organization and these are the employees with top talents because of the benefits they will be able to get from the organization.

Organizations which tend to ignore this kind of practice end up employing the less talented employees hence getting no benefits for their business. The output in a business depends on how the workers are committed and how they are motivated to work and put extra efforts in whatever they do. There are two types compensation which include direct and indirect compensation. Direct compensation is very common and most of the people who are seeking for jobs prefer it.

To expound more on the compensation practice, I have researched on GEICO company which is an insurance company found in America. In this study, I will describe the company, say its compensation practice, and tell on the best practices which they are applying. I will also expound on the challenges the company faces while doing compensation. My paper will also talk about the GEICO Company applies compensation practices and also how some unions impact the organization.Briefly describe the company researched, its compensation strategy, best practices they are applying, and compensation-related challenges they are facing.

Description of the company researched

The company that I researched on is GEICO Corporation. GEICO is an insurance company which stands for Government Employees Insurance Company. The company provides jobs to the majority of the people, it has more than 27897 employees. Initially the company used to provide insurance to a certain group of people who were believed to be low-risk demographic but nowadays to sells to all the people. This has made it have more than 12 million customers who buy services and goods from the company. The company offers motorcycle, RV insurance and other services for road emergency. It’s CEO and the president is called Olza M. Nicely. The competitors of GEICO include Farmers Group Inc., The Allstate Corporation and also Nationwide Mutual Insurance Company (Fowler & Glenn, 2015). Its compensation practice GEICO Company, pertaining its executive summary it has the best compensation practice and it makes its employees proud and exploit their potentials for the sake of the company.

Its practices include:

Pay for performance: GEICO appreciates the best performance and this helps create a long term value for shareholders.

Practicing the best compensation: the company considers the competitiveness of the trends of the market and also considers the views raised by the shareholders.

Between Compensation and Risk Taking and Shareholder Outreach Program, GEICO applies Evaluation of Potential Linkage in compensation practice. The GEICO identifies some loopholes in its services and bridges them. The customers who have lost their properties like vehicles or they have lost lives on the roads and they had insured for the compensation in the case of the loss they are compensated. The company has set very tough rules regarding the compensation process. If a loss happened accidentally, the company is liable and can compensate but if the cause of the loss was intentionally, the company is not liable for the compensation. These rules have made the customers to be more conservative when driving or when using the roads.

Best practices they are applyingCurrently, most of best practices the GEICO is engaging in are all incentive practices which are short term. They include 401k savings plans, adoption expense assistance, best in class health and insurance benefits. The company has also introduced work life practices and this practice is helping the workers who have families to engage with their and have enough time for their families instead of spending all the time working. GEICO offers paid personal and vacation days and holiday pay.

They also reward the employees who are doing well and this encourages the other employees to follow the same example and be rewarded next time. There is tuition provided by the company to some worker to assist the employees who are in vacations so that their positions can be well occupied and the service at the company run as usual. This training is aimed at increasing the productivity of the organization and helps the employees to build on their talents, careers and skills. This can help them in future when undertaking the roes of the company (Jones & William, 1978). Compensation-related challenges they are facing.

The most challenges facing GEICO is high payment being received by the executive not considering the fact that the company is facing a lot of financial deficits? According to report released in 2016, GEICO executive pocketed $9.6 million which is not even part of their salary worthy $1.6 million making pay raise of 18% comparing with that of the previous year. (Amore Law Group, 2017) says “With these type of executive salaries being on the rise, the Company provider has cut jobs consecutively for the last 3 years offering buyouts for call center, technician, and customer facing positions.”

GEICO faces a challenge of competition from its competitors who are doing all that they can to ensure that they overtake it. They spent a lot of money trying to improve their systems and match with the digital systems so that they can compete favorably. GEICO also faces problems when creating shareholder value. Analyze how the company applies compensation practice to determine the positive or negative impact to the company and its stakeholders.

Application of the compensation practice gives the GEICO Corporation a positive impact and also its shareholders. Over the past year, the insurance provider has expanded its services to cover over 90% of the United States. This forced the company to look for brand ambassadors to market themselves and also to have a good networking so that they could reach many people at a time. They have been able to achieve a lot through the efforts put forward by the employees. GEICO also began building around developing other products that would contribute to their success creating partnerships.

Collaborating with other companies to broaden its horizon. GEICO partners with nation’s major insurance companies to enhance compensation solutions. They also give more cover options through companies such as Redbox and Netflix to keep mobile video service powerful over the network by encouraging the companies to be part of their cover and to insure their employees with emergency road services. GEICO commits to growing shareholder value and taking advantage of opportunities to grow innovate over the years to come. 2016 annual report shows GEICO is driving growth in the insurance industry and continue to pave the way for innovation and growth (Jones & William, 1978). Examine the ways in which laws, labor unions, and market factors impact the company’s compensation practices.

Provide specific examples in support

Over the decades, this insurance company has managed to keep all the profit it got inside it and had not utilized unions funds till June 2015. Retail employees wanted to join landline workers and so they voted for them to be allowed to join landline workers in CWA. They had seen patterns on their job duties expanding without any fair compensation. Customers were keen on whatever they were doing and did not incur a lot of loss thus making the company to make much profit. The workers need a good working area, a conducive environment which accommodates everyone and they also want their needs and grievances to hard and be solved. Apart from Allstate Corporation being one of the greatest competitors of this company, it also has jurisdiction over GEICO insurance interstate services.

These regulations have contributed a lot in the market, some providing opportunities and others challenges. This has enabled GEICO spread many products to the buyers and this has made it be known than when it just sold motorcycles alone to their consumers. A challenge being faced by GEICO is now the competitive nature of other service providers. They include emergency service providers, vehicles utility companies, and other major services. Allstate Corporation also controls other service proposals including customer bills, termination fees, and advertising. Another challenge facing GEICO currently is the problem of cooperation among the market careers. This is because they don’t come into a consensus and share equal contribution for the required fees and also the services which need to be paid for.

Evaluate the effectiveness of traditional bases for pay at the company

For the employees with monetary rewards, the traditional basis for pay has been structured to compensate them and with the exception of vacation pay. An employee newly hired receives 2 weeks of paid vacation verses a ten year employee receiving four weeks. In the case an employee has lost life while working for the company, he/she is fully compensated and his/her family given a certain token to keep live moving. This shows how the company minds about its employees by taking care of them all the times. For the workers whose performance has been seen to be excellent, they are rewarded ad this rewarding helps in encouraging the other workers to do the same and be rewarded next time. Traditional basis for pay is the best used in GEICO to reward employees with exemplary performance and this acts as a way of motivating them.


GEICO is a powerful insurance provider and a revolutionary company. It has made progress from providing insurance to only government employees to all the people who need to be covered. It has stopped selling for a certain group of low-risk demography and expanded it to reach as many people as possible. GEICO’s success would continue to grow partnerships and value to all customers. Its principles and values have changed the way other competitors do business. Future efforts to improve the fairness in compensation from an executive standpoint still need to be addressed.


Fowler, Glenn. (May, 2015). “David Lloyd Kreeger Dead at 81 Insurance Official and Arts Patron”.

D’Amore Law Group (Jan, 2017). “GEICO’s $9.6 million-dollar lesson in bad faith”.

Jones, William H. (June 8, 1978). “Investors May Get Geico Settlement” Leo Goodwin, Financier, Son of Founder of Geico”. The Washington Post. January 18, 1978

Yerak, Becky (June 13, 2013). Geico tops Allstate as nation’s No. 2 auto insurer in 1Q

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Compensation Practice. (2019, Nov 15). Retrieved from