13: Activating and Maintaining an Effective Compensation System

The Changing Times for Sick Time

April 8, 2020 by esoostar

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:

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

Benefits Fraud – It’s a Fact

November 4, 2019 by esoostar

Q: What happens when compensation monitoring goes awry?

A: Benefits fraud

B: Costly consequences

C: Negative public disclosure

D: All of the above and more

If this was a multiple choice question, the answer is D: All of the above and more.

A real-life example for this response comes from the Baycrest Centre in Toronto. In July 2019, the centre announced that 150 employees were terminated from the organization (resigned or let go) as a result of their participation in a long-term benefits fraud scheme. Allegedly, these health-care employees had defrauded their benefits plan of millions of dollars over the past eight years.

Click here to read about the allegations of benefits fraud at the Baycrest Centre.

Unfortunately, benefits fraud is not something unique to one particular organization or sector. In 2016, the Toronto Transit Commission (TTC) hit the media headlines with a very similar and significant employee benefits fraud problem.

Click here to read about the TTC’s benefits fraud investigation.

In fact, the benefits industry continues to deal with increasingly creative approaches by employees who participate in fraudulent benefits activity resulting in losses of billions of dollars.

Click here to read about the impact of employee benefits fraud on the insurance industry.

As noted in the articles, benefits fraud is theft. It is stealing. It is exactly like taking money from someone else’s wallet without their express knowledge or permission.

Unlike other crimes, however, it is rare that perpetrators of benefits fraud are charged with a criminal offense. Until recently, it was also rare for employers to act on what was sometimes perceived as an act of ‘entitlement’ on the part of employees. This perceived inaction on the part of employers does not come from a lack of interest or an act of conscious negligence. It may come from a lack of rigour in monitoring or systems controls which must be included as part of effective compensation management planning.

Not all employees steal from their employer. That is a fact. Some employees do steal from their employer. That is also a fact. Who pays for the consequences of stealing from their employer in the form of benefits fraud? We all do. That is the ultimate and most costly fact. Good compensation planning should take all of these facts into consideration, both positive and negative, in a proactive way so that the actual benefits of an organization’s benefits plan provide support and assistance for those who need it the most.

Discussion Questions:

What types of monitoring systems or controls would you put into place as the Compensation Manager in these types of situations?
The Baycrest and TTC articles state that this type of benefits fraud has been going on for years. How would you go about changing the organizational culture and a possible ‘entitlement’ approach in each organization?
Is benefits fraud a ‘victimless’ crime? Explain your rationale

When Changes Keep Changing

May 31, 2019 by esoostar

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:

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

Paying the Price

August 17, 2018 by esoostar

When is the last time you had to ask for a pay increase? For many Canadian workers, approaching their employer to ask for more money is not high on the list of job-related things they enjoy doing. While there are many valid reasons that an employee might have for requesting a pay increase, there is no guarantee that the response from the employer will be one that meets the needs of that request.

A recent study by the American-based PayScale compensation software firm, offers an uncomfortable set of findings based on a wide-reading survey exploring issues around pay raise requests.

Click here to access the summary of PayScale’s survey.

The results of this survey are analyzed in a corresponding article posted recently by Harvard Business Review.

Click here to read the article.

From a compensation management perspective, some key messages emerge about the connections between constructive/pro-active compensation strategies versus negative/negligent compensation approaches and their direct links to employee retention. Unsurprisingly, the survey provides statistical evidence showing that when an employee is denied a wage increase, there is a high probability that the employee will be on the path to exit from that employer.

While the survey and the results are based on American companies, they show an alarming connection between race, gender, and the denial of pay increases—this contrasts with much lower rates of pay-increase denial for white males. As Canadians and as pro-active Human Resources practitioners, we must take these statistical results seriously and consider them in relation to our own workplaces to ensure that our compensation practices, especially as they relate to race and gender, do not follow the same statistical paths.

Good compensation planning must be neutral, pro-active, and fair so that Canadian workers can focus on the things they do enjoy doing.

Discussion Questions:

Based on your own experience as an employee, what would you do if your request for a pay increase was rejected by your employer?
From the perspective of an HR professional, develop a script for supervisors/managers to use when telling employees why they will not be receiving the wage increase they have asked for.
Identify three positive and three negative aspects of a differentiated compensation system (wage increases granted or denied based on individual requests).
Identify and explain three key compensation methodologies that can be used to ensure an objective, fair, and pro-active approach to individual wage requests.

Have We Got a Job For You!

September 8, 2017 by esoostar

For many people involved in the study of compensation strategies, their goal is to work in the compensation field — as soon as possible. Coincidentally, the federal government is looking for qualified compensation advisors to begin working — as soon as possible.

What’s the catch? The work itself requires some heavy-duty clearing up of the systems mess resulting from the implementation of the Phoenix pay system for federal employees.

As reported through Canadian news outlets, the federal government is continuing in its efforts to try to fix the numerous issues that continue to plague its pay systems. There is, apparently, a fundamental problem that has resulted in hundreds of federal employees receiving incorrect pay, or no pay at all. These issues have been in the news since the winter of 2016 and are still not resolved.

Click here to read the most recent update.

An important element of learning is the process of figuring out how not to make the same mistake over and over again. Though I don’t have the benefit of all of the facts linked to the system problems, it seems evident that there is a significant failure of learning in this case. The mistakes continue to be made.

What we can learn from this is how critical it is that the right strategies be implemented with the right people in the right way in order for any compensation change — be it structural or procedural — to be successful. It does not matter if the amount of compensation offered to federal employees is generous, or even fair. If these employees do not get paid what they were offered and what they accepted as part of their contract of employment, the amount of compensation considerations mean nothing.

Hopefully, the compensation advisor positions will be filled as quickly as possible by qualified and dedicated professionals (like you), who are ready to get the job done.

Discussion Questions:

Would you accept a position as a compensation advisor with the federal government as described in the news article? Explain your rationale.
If you were the Human Resources practitioner with responsibility for employee communications in a department impacted by these pay problems, what would you say to those employees?
If you were an employee of the federal government, what types of expectations would you have with regard to your compensation, both retro-active (if mistakes were made) and on a go-forward basis?