06: Formulating the Reward and Compensation Strategy

The Changing Times for Sick Time

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In the multitude of challenges facing employers in the midst of the COVID-19 pandemic comes the recognition that there is no ‘normal’ anymore. Existing business practices, such as the demand for a medical note from a doctor to justify an employee’s illness, are just not sustainable. When the public health authorities require that citizens stay at home and self-isolate if they have any symptoms of illness, the formality of requesting a doctor’s note seems ridiculous. As Human Resources professionals, we need to support and implement the changes for improved compensation practices.

Letting go of the old ways does not come quickly enough for some employers. The Tim Hortons fast-food chain made the news again for their unfortunate choices in compensation practices related to sick leave. As noted in this article, employees of the franchise continued to be required to provide a medical note to justify taking an unpaid sick leave day. After taking five days of unpaid sick leave, the employee would be fired. Needless to say, there was significant negative backlash when this practice hit the news and social media outlets.

It seems that the negative reaction pushed this particular employer into changing their sick leave and compensation practices. Five days after the first news article, the Tim Hortons franchise also announced a commitment of $40 million “to support employees” who are affected by COVID-19. As noted in this article, the company will pay employees who have the virus or are quarantined “up to 14 days.” The clear message from this updated policy was one of public safety, support, and recognition of the need for change in these unprecedented times.

Unfortunately, the journey on this new road did not last very long until once again, one of the franchise stores in Alberta hit the negative news cycle with this post. Fortunately, the note from the franchise owner was removed. The commitment to Tim Hortons’s new policy, including the removal of the requirement for sick notes, was re-posted in the public domain.

Change is hard. Forced change is even harder. These examples show how important it is to leave the old road behind us. Once this crisis is over, we must make the choice to stay on the new road as it leads to a safer, more sustainable future for us all.

Discussion Questions:

  1. In your opinion, how can a fast-food franchise implement improved compensation practices related to attendance management?
  2. Do you think the practice of termination after five unpaid sick days is fair? Explain your rationale.
  3. What types of HR-related supports should be in place for any fast-food franchise owner?

Compensating for Eldercare

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It is an undeniable truth that we all get a little bit older each and every day.

As we move along the aging path, so do our parents, at what seems to be an increasingly rapid rate. One day your parent is the way you have always perceived them to be – healthy, active, and independent. In the blink of an eye, that parent is suddenly not healthy, inactive and increasing dependent on others to get through the day. That other is usually a family member (you) who has to take on the role of caregiver to look after the physical and mental health of their aging parent.

While this is not a new trend for the Canadian workforce, the number of adult children who have taken on eldercare responsibilities continues to increase. According to a recent article published in The Globe & Mail, approximately thirty-five percent of Canada’s workforce have primary care responsibilities for one or both parents. There is no doubt that this percentage has a direct impact on organizational and employee productivity for those who have to take time off from work to care for their parents.

Click here to read the article.

While there are organizations that can offer a flexible work schedule or the ability for employees to work from home, many companies do not have a benefits strategy dedicated to workers with eldercare responsibilities. As noted in the article, eligible employees may be able access compassionate care benefits through federal employment insurance plans. The eligibility requirements, however may not be applicable in all cases. Most employees with eldercare responsibilities have to take time off from work without pay to attend medical appointments, emergency calls as well as attending to the day-to-day needs of their aging parent. From a compensation perspective, organizations should be looking at lost productivity costs balanced against the provision of both monetary and non-monetary eldercare benefits in order to reduce those losses.

This is a real compensation challenge for Canadian workplaces. With every challenge comes an opportunity to improve the situation. Hopefully effective compensation planning can provide increasing support to employees who have to care for parents who have spent their lives caring for them.

Discussion Questions:

  1. What would you include in an eldercare plan as part of a compensation strategy?
  2. If you had to take time away from work right now to care for an aging parent, what would you have to do? How would your pay and benefits be impacted?
  3. The article states that thirty-five percent of Canada’s workforce has eldercare responsibilities. How is this number reflected in your current (or most recent) work environment? What percentage of your current workforce has eldercare responsibilities?

‘Pawternity’ Leave Has Tails Wagging

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Your chief human resources officer (CHRO) comes up to you one day and asks: “Have you have seen the most recent HR KPIs? Our employee engagement score is dropping like a rock. Do you have any ideas how to turn that around?”

You respond confidently, “I have an idea that could improve employee engagement by up to 30% percent with very little costs. It is called ‘furternity’ (or pawternity) leave it is so new no one has settled for a common term yet.”

The CHRO looks at you funny and suggests, quite wryly, that you might be violating the company’s new cannabis policy.  “What the heck is ‘furternity’ leave?”

You state “it is part of a new benefit trend that seems to be catching on with employers and engaging employees.”  The CHRO says that it is nonsense and you hand them a copy of this study.

Click here to read the workplace wellness study.

Furternity leave is a paid leave so an employee can take time off or work from home if they have a new pet.  It is part of an even larger trend called the “pet effect” on workplace wellness.

To enlighten the CHRO, on some of this study’s findings about companies with pet friendly policies, you state the following list of statistics:

  • A significant positive increase in employee engagement from 65% to 91%
  • Employees feel their work is more rewarding from 46% to 83%
  • Retention: employees would decline a similar job offer from 44% to 72%
  • And the topper: improvement in the relationship with their bosses increased from 14% to 52%

Paid leave to take care of a new pet is just one possible benefits. Others include pet insurance as part of the company’s benefit package, stress reduction by having pets in the workplace, and some even say, better customer relations.

The CHRO says, “I had no idea. Prepare me a proposal of how we could implement pet friendly policies in our workplace and have it on my desk by next week. Don’t forget to include the research.”

And off you go back to your office wagging your tail behind you.

Discussion Questions:

Research two companies that have pet friendly workplace polices and create a list of the most common pet friendly policies.

From that list, create a 5-minute PowerPoint presentation, which you could present to your CHRO on the benefits and drawbacks of implementing pet-friendly policies.

When Changes Keep Changing

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Imagine that you have lived with that ugly, out-of-date bathroom in your house for the past 20 years.

The eyesore tiling from the ‘80s is chipped, the toilet overflows from time to time, and the bathtub drains keep clogging. So, you finally pull the plug, get your finances together, and hire a contractor to renovate it.

It eventually gets done. The new bathroom looks a lot better, although a few things did not get finished and the cost was much more than you had anticipated. Granted, it is finally an improvement from what you had before. Suddenly, the contractor you hired to do the work is replaced with a new contractor who tells you that the bulk of the completed work is wrong. The new contractor begins to rip out items that were just installed. The new contractor tells you that you have to re-renovate the bathroom by finding and putting back many of the broken items that you were happy to have removed. Also, the things that you had planned to keep working on to continue the bathroom improvements are just not going to happen. Of course, you have to pay for it all over again. Throughout all of this you realize you have no choice other than to keep trying to figure out what and how to proceed because it is the only bathroom you’ve got.

This little analogy can be applied to what has happened in Ontario as a result of the continuing changes to the provincial Employment Standards Act. Under the previous government, Bill 148 began to be implemented in January 2018. The changes under this bill were significant, given that no amendments had been made for over twenty years. The primary impact included ongoing increases to the minimum wage, scheduling, vacation and holiday pay changes, along with other amendments impacting compensation plans across the province. A new government was voted in and introduced Bill 47 for immediate implementation. By January of 2019, Bill 47 had repealed and/or replaced many of the aforementioned changes, some of which included the requirement for employers to revert back to pre-Bill 148 practices.

Click here to read a summary of the changes from Canadian HR Reporter.

Click here to refer to the updated guide to the Employment Standards Act.

While there are many opinions on whether or not the impact of Bill 47 is good for employees or employers or both or none, the bottom line is that HR practitioners across the province have had to deal with all of it. Anecdotally, it has not been a smooth transition. An HR colleague, who works in compensation and didn’t want to be named, described her departments’ reaction as follows: “We were in shock. I could feel myself shaking when the new changes were announced. We had absolutely no idea what we were supposed to do. What would happen to our employees and their wages? What would happen to all of the work and changes we needed to put into place over the past year? It was all gone. We had to start all over again. Trying to figure out what was new and what we had redo has been a nightmare.”

As she turned away, she left with saying how lucky she was to work with a team of HR professionals because they would get it done.

Perhaps, upon reflection, all of this represents the challenge and the opportunity of working in Human Resources. No matter what happens on the political, legal and implementation landscape, sometimes our job is simply put – just get it done.

Discussion Questions:

  1. How will you work through implementing changes that you may or may not agree with on behalf of your employer as an HR professional?
  2. Review the changes to the Employment Standards Act and identify three areas that have a direct impact on compensation planning.
  3. How will you calculate wage increases (including minimum wages) for the next five years?

 

Pay Increase = Price Increase

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In the world of compensation strategy and design, some things are highly predictable. When an expense goes up, there must be a correlating financial adjustment in order to pay for that increased expense. This adjustment could be realized through one of a few options, which include the potential reduction of other expenses, or the increase of other revenue streams in order to cover increased costs.

With the implementation of minimum wage increases in Ontario, we are starting to see how the required cost adjustments are being achieved. According to numerous media reports, the restaurant industry is offsetting the increase in payroll expenses by raising product prices – a cost that is ultimately absorbed by the consumer.

Click here to read about the impact of minimum wage on consumer pricing.

As noted in the article, the increase in consumer price adjustments can be connected directly to minimum wage increases for employees. It is interesting to note, however, that the extent of the increase in employer expenses is significantly greater than expected. It seems that many employers in Ontario may not have taken into account some of the additional compensation-related cost increases that have resulted from legislation imposing a higher minimum wage.

This article provides us with a good example of how and why compensation planning must take into account more than just wage or salary increases.

No matter how the financial adjustment is realized, good compensation strategies will require careful planning and timing if they are to be implemented successfully – and this includes a broad range of compensation-related considerations.

Additional minimum wage increases are a known quantity for all businesses in Ontario. With this in mind, businesses need also to ensure that thoughtful compensation planning (taking all cost-related expenses into consideration) is a known quantity – one that feeds into rational and reasonable economic responses.

 

Discussion Questions:

  1. How would you design an affordable compensation strategy that supports on-going minimum wage increases over the next two years?
  2. What types of rewards or incentives could you offer to employees that are cost neutral?
  3. From your perspective, do restaurant owners have other options to pay for increased wages besides increasing menu prices? Explain your rationale.