Tack You – You’re Welcome!

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IKEA’s business model works very well, with its focus on low cost, flat packing, and distinctive style. However, there’s something else at IKEA that’s working very well — their employee compensation model. In 2015 IKEA raised its minimum wages.

Click here to read about IKEA’s wage boost.

IKEA is committed to providing its employees with a living minimum wage. It also understands the benefits of performance bonuses. Recently, the company created an employee loyalty program it called Tack!, which is Swedish for “thank you”. The following milestones suggest IKEA is doing something right with its Tack! program:

  • IKEA has increased its total revenue from 20 billion euros to over 36 billion euros
  • It is the number 1 furniture retailer in the world
  • It is the number 5 retail brand in the word.

David Hood, Country Retail Manager of IKEA Australia, describes the program as “build[ing] something for the future and giv[ing] something back … by building a long-term relationship with employees.”

IKEA’s basic compensation program has wages that are above the jurisdiction’s minimum wage — they provide benefits and now, with the expansion of the Tack! program, all full time and part time employees with over 5 years’ service will get an annual bonus based on IKEA’s performance in that country of operations.

Click here to read more about IKEA’s Tack! program.

In Canada, the Tack! program has paid out $145 million to its employees this year.

Click here to read about the Tack! program in Canada.

IKEA is an excellent example of an organization that understands that compensation, benefits, and bonus systems are key tools in a successful business.

 

Discussion Questions:

  1. Identify the pros and cons of paying front line retail workers a minimum living wage when it is above the minimum wage required by law.
  2. Research and identify the cost of high staff turnover and the relative benefits of employee retention in the retail environment. Summarize your findings by creating a 5-minute presentation.

 

 

Is It Time to Pay the Piper?

This is an interesting old English expression. In today’s terms it refers to the ultimate cost of poor or self-indulgent behaviour. It seems employers around the globe have been demonstrating very poor behaviour when it comes to male and female compensation practices.

Where the pay equity issue is concerned, perhaps it is time for organizations to step up and pay the piper by way of addressing and absorbing the cost of the wage gap between men and women. Indeed, this seems to be a trend that is unfolding worldwide in various developed countries.

MacLean’s magazine released two versions of its cover in February; one for men, with a price of $8.91, and another for women, with a price of $6.99. A clever way to highlight the fact that in Canada men make 26% more in full-time wages than women.

This is a global issue. Let’s review some of the concerns around pay equity in other parts of the world:

Tesco, a UK grocery store chain is facing a 4 billion Euro pay equity law suit

The BBC is being accused of fostering a gender pay gap between its male and female reporters

Icelandic companies must now prove they are paying men and women equally, and get government certification

According to Stats Canada, Canadian working women make $0.74 cents for every dollar a man makes

The gender pay gap is a systemic issue in organizations, but that is no longer acceptable in most countries. It is time for all organizations to take an in-depth look at their compensation practices to see if there is a gender pay gap, and to assign resources to correct it.

It is high time for organizations to pay the piper, and to close the gender wage gap. The only way for them to do this is to implement and maintain a comprehensive and fair job evaluation process.

Discussion Questions:

  1. You have been asked by your VP of HR to research the job evaluation process and what it entails. Once your research is complete, you are to produce a 5-minute presentation for the board of directors focusing on the process necessary to complete a formal organizational job evaluation.

Visit the HR Council of Canada as a starting point for your research.

Too Much? Too Soon?

Andre Lefrancois/Shutterstock

Your supervisor calls you into their office and lets you know that, over the next 18 months, your current wage will increase by 32%. Guaranteed. You skip out of the office imagining how you will spend your new fortune.

This is the good news story that a portion of Ontario’s workforce received, when the provincial government announced that the current minimum wage rate will be increased to $15 per hour by the year 2019. Based on the percentage calculations alone, this is an incredible boost to a targeted segment of Ontario’s workers who currently earn the $11.40 per hour minimum wage.

This significant wage increase comes from the provincial government’s Changing Workplaces review. As a result, the province has moved to the implementation of changes to existing employment laws that are intended to reshape the present and future of Ontario’s workforce challenges.

Click here to read a summary of the changes.

While promoted as a positive and much needed amendment, the proposed wage increases have not been met with an equally positive reaction from the small and independent business communities in Ontario.

Click to read reactions from the Canadian Federation of Independent Business from an HR perspective.

Click to read a news article about the reaction from small businesses.

It is interesting to note that the negative reactions seem not to be focused on the amount of the wage increase. Instead, the primary concerns are focused on the pace of implementing the increases over a very short period of time. How will small employers, with limited infrastructure and support, be able to adjust all of their compensation considerations within the time limit of the next eighteen months?

This is a question that will go beyond the small business community in Ontario. All employers in the province will have to look at adjustments to their overall compensation strategies and monetary policies. Many employers will have to engage in a potentially painful process to justify increasing payroll costs that they may no longer be able to carry or afford.

There is no doubt that turbulent times are ahead for anyone working in the field of compensation strategy and structure. Hopefully, the end result will reinforce a good news story once we get there.

Discussion Questions:

  1. What strategies or actions do you think small and independent business owners will have to implement in order to pay the $15 per hour minimum wage by January 2019?
  2. From a compensation planning perspective, how will the minimum wage increase impact mid-size employers in Ontario?
  3. As the minimum wage rates are adjusted in Ontario, do you expect that your own salary/wages will be adjusted accordingly? Explain your rationale.

 

 

RCMP Turnover Rates

Could it be the reward strategy?

TORONTO - NOVEMBER 18: RCMP members attend the 108th Santa Claus Parade in Toronto on November 18, 2012.
Canadapanda/Shutterstock

The compensation reward strategy is the foundation of any organization’s success. Getting it right is not a guarantee of success but getting it wrong can send shock waves through the organization. Currently, the Royal Canadian Mounted Police (RCMP) are dealing with very high turnover and this may be happening for many reasons, as outlined below:

  • Uncompetitive pay
  • Poor working conditions
  • Outdated equipment
  • Hostile working environment
  • Big bonuses for RCMP Brass

Click here to read an article about the RCMP quiet protests.

Click here to read and article about the RCMP culture of bullying.

Click here to read an article about RCMP bonus pay issues.

All organizations have to be strategic in their total compensation reward plan. Do they match the market, lead the market or lag the market? It is a question all organizations must answer. If the organization is lagging the market in wages there must be some other factors, such a great working conditions, to attract and retain employees.

It seems that the RCMP are not very successful in their overall reward strategy. Mounties at the rank of first-class will earn on average $20,000 less than a constable in Calgary or Vancouver, and according to CBC news, Mounties have been purchasing their own equipment.

Click here to read more about problems in the RCMP.

These issues are combined with a poor working environment and a perceived unfairness of compensation to senior staff. For instance, when the rank and file see bonuses paid out to RCMP Senior Leaders, like the ones below

  • $295,514 divided up among six deputy commissioners,
  • $596,669 for 28 assistant commissioners and
  • $838,137 for 56 chief superintendents.

While the front line Mounties have not received a raise since January 2014. Things are going to become unsettled.

All organization must be vigilant on understanding the impact the compensation reward strategy has on all aspects of organizational success. It looks like the RCMP must review theirs.

Discussion Question

  1. You are a senior HR Analyst for an HR consulting firm, and your company has just been asked to provide a reward strategy to the RCMP. What recommendations would you make? Where would you recommend the RCMP begin to ensure their turnover rate does not increase?

Creating Strategy With Criteria

Wooden stool
Vladislav Gajic/Shutterstock

As we have learned through our studies, affordability, legality and employee attraction are three criteria which must be met in order for any compensation strategy to be successful. If a compensation strategy is developed which is not affordable, it will not work. If it is based on shaky legal principles, it will not work. If it is not attractive to the employee marketplace, it will not work. Like the three legged stool, each of these elements must be in place in order to create and support a sustainable system for future success.

Of these three criteria, affordability must be considered in the context of the employer’s overall financial obligations and opportunities. The compensation plan is one piece of a monetary puzzle that the employer must piece together as part its overall revenue and expenditure plan. Financial obligations on the part of many employers include significant loans from financial institutions to cover items such as start-up costs and on-going operational requirements.

With this in mind, Social Capital Partners in Ontario have implemented a ‘Rate Drop Rebate’ program that supports the development of affordable compensation, by providing a rebate on the interest rates for employer loans or lines of credit. This program is only available in three Ontario municipalities at this time.

Click here to see a CBC interview with Bill Young explaining the benefits of the ‘Rate Drop Rebate’ program.

Click here to see how the program works for employers.

This program also addresses the second criteria, legality, by ensuring that appropriate recruitment and selection procedures are in place when making hiring decisions. As for the third criteria, employee attraction, this seems to be the strongest focal point for this program. The targeted employee marketplace for hiring through this program includes students with limited work experience, long-term and older unemployed persons, people with disabilities, newcomers to Canada and unemployed indigenous people.

This program offers evidence that a sustainable compensation strategy can be implemented by ensuring that each one of these three criteria is taken into account.

It also provides evidence that these criteria can support employers in the creation of social good.

Discussion Questions:

  1. After reviewing the link for the Rate Drop Rebate program, what types of recruitment strategies are in place that support employers?
  2. Why do you think the Rate Drop Rebate program should be used in other municipalities?
  3. As a Compensation Specialist, what are the risks and rewards that this program could offer your current workplace?