Pensions in Peril

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When companies go out of business, the extent of loss is significant. Sears Canada is yet another large retail provider that has made (or been forced to make) the unfortunate decision to close all of its services due to a lack of economic sustainability.

Along with all of the negative media exposure that came with Sears Canada’s inability to pay its employees their rightful severance and notice provisions, their existing pension plans are also in deep trouble.

According to a recent news item reported through Global News, Sears Canada had a Defined Benefits plan for its employees. What has come to light is the lack of funding on the part of the employer for that plan. The employer was obligated to provide financial support for the plan in order to ensure that the level of defined benefit would be available as required for employees once they moved into retirement and accessed their guaranteed pension funds.

This funding is not in place. What is more alarming, according to this news story, is that 30 % of companies in Ontario and an undetermined number in Quebec are in the same unfunded condition.

Click here to access the news story.

The article states that a defined pension plan provides for a set amount of funds to the retired employee, ‘at least in theory’. What we must learn from this example is that pension plans cannot be theoretical. The need is real for ongoing economic support, once employees make the decision to live on the income they think they have been promised, from their long-term employer.

There is another harsh lesson learned from this particular case. It reinforces the need for solid compensation planning, monitoring and adaptability on the part of the employer. Would the former employees of Sears Canada be better off if their employer had communicated the risks of the unfunded pension plan? Could some different decisions have been made before it was too late for those employees who envisioned a retirement plan based on a guaranteed level of income?

These are indeed theoretical questions that do little to help those employees facing poverty in retirement. This is a case of much too little, much too late.

Discussion Questions:

  1. How would you communicate the risks of a Defined Benefits Plan to employees in your organization?
  2. What steps could you put into place as a Compensation Manager to ensure that employee pensions are not in jeopardy?
  3. Identify the differences between a Defined Benefits Plan and a Defined Contributions Plan in order to convince your current employer to implement the one that is best for your organization.

Vacations Earned in Trust

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The title for this post reflects the typical language that is used when describing how vacation is accrued or allocated in an employment contract or a collective agreement. While meant to reflect an administrative approach to the calculation and disbursement of earned vacation time, the word ‘trust’ holds some powerful meaning in the employment relationship.

As part of an overall compensation strategy, do employers actually trust their employees when providing them with vacation time? Is it a reward well earned?

We have all heard of, or may have had personal experience with, the workplace where vacations are calculated according to strict provisions; given begrudgingly; and scheduled to fit the business needs of the organization, first and foremost.

What might happen if these approaches were thrown out the window leaving vacation earnings and usages entirely up to the employee? Could we trust our employees to manage their own time to take a break when they need it the most?

According to the CEO of Vigilant Management in the United States, yes we can!

Click here to read the article.

Clearly, the most important element of the unlimited vacation policy arrangement is a high degree of trust between all parties in this particular work place. In a Canadian context, as noted in the article, each province provides for a legislated minimum of vacation earnings which differs from the approach in the Unites States. Even with these legislated minimums, if there was no maximum time capping the amount of vacation an employee could take, how many days would actually be used?

Most of us are creatures of habit and do not like too much of good thing. This could apply equally when thinking about both going to work or taking vacation. When employees are able to see, feel and believe that they are trusted, then work and vacation both become complementary parts of one good thing, instead of too much of one being bad for the other.

Discussion Questions:

  1. At what point in your vacation time do you become bored and want to go back to work?
  2. If you had unlimited vacation time from your current workplace, how much time would you want to take as vacation? How would you schedule your time?
  3. From a compensation perspective, how could you calculate the costs of unlimited vacation for employees?

 

Millennial Considerations

Two creative millenial small business owners working on social media strategy using a digital tablet while sitting at desk
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The times they are a-changing, for sure.

Much has been written about the challenges facing the millennial generation as its members begin to take greater hold of the economy and the workforce. The millennial worker is someone who has grown up with access to a world of information through digital resources that a person from previous generations simply did not have. As this millennial generation increasingly populates the world of workers and business leaders, they are bringing about a changing view of what constitutes effective rewards and incentives for employment performance.

A recent article, published by Benefits Canada, outlines some positive statistical analysis of the millennial approach to indirect reward plans.

Click here to read the article. 

Previous generations of managers commonly held back group health and dental benefits until employees asked for them. It is apparent that upcoming business leaders recognize the reward potential of offering wellness initiatives from the very beginning of the employment relationship. In order to have a healthy, engaged and constructive workforce, millennials prefer to have a pro-active influence in an employee’s social and physical well-being.

Further, supporting employees on a pro-active wellness path is more affordable at the beginning of a business venture, rather than incurring escalating premiums for an unhealthy workforce later on. It is evident that access to digital resources, such as the statistical evidence provided in this article, has had a great impact on the way benefits are provided. It is also evident that the Human Resources professional has helped to shape this changing workforce view in a positive way. And, as noted in the article, millennial business owners appreciate the value of the Human Resources professional in helping to advise, shape and shift the modern workplace in a constructive way.

Discussion Questions:

  1. What are the top five HR compensation ‘must-haves’ you would advise a small business owner to put into place from the start?
  2. Why do you think flexible benefit plans, as outlined in this article, are attractive to the millennial workforce?
  3. After a year of working in your chosen profession, if you had a choice between a moderate pay increase or full access to an employer paid benefits plan – which would you select? Why?