Compensation Design

Compensating for Eldercare

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nito/Shutterstock

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?

Tack You – You’re Welcome!

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Martin Good/Shutterstock

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.

 

 

Failure to Perform: Part 1

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The Challenges of Performance Incentive Plans

Increase rating, evaluation and classification concept. Businessman draw five yellow star to increase rating of his company.
Jirsak/Shutterstock

Pay for performance is one of the oldest and most accepted compensation practices, and in conceptual terms, it is the simplest compensate strategy. If the individual performs or delivers on one or more of what an employer wants then the individual earns more money. This a very linear equation that all can comprehend, accept and execute.

If this pay for performance system is such a simple concept, then why do performance incentive plans fail to perform and sometimes deteriorate employee performance and organizational performance?

Tom Kort and Jason Baumgarten provide us with some great insights on why performance incentive plans are fraught with pitfalls; 10 of them to be exact.

Click here to read a summary of their thinking.

Here are some of their top concerns regarding performance incentive plans:

  • Poor plan communication
  • Poor alignment with business strategy
  • Company lacks best practices or procedures
  • Does not drive correct behaviours
  • Weak performance management system
  • Profit is the only key indicator measured
  • Poor allocation of your best people
  • Management game playing with resources
  • Incentive plan causes internal divisions

As one can see, a simple intellectual concept of ‘work more get paid more’ can have some serious pitfalls. HR has to be aware of where performance incentive plans can go wrong, and if their organization chooses to use them, how to prevent the negative aspects of a poorly executed performance incentive plan. Part two of this blog will continue this discussion illustrating Daniel’s Pink’s theory of performance motivation.

Discussion Questions

  1. Research two organizations that have implemented performance incentive plans that have failed to produce the desired results. Compare them to the list above, were the reasons for their failure on the list, if not why did the plan fail.

    Click here to read how to build incentive plans.

  2. Research two organizations that have implemented performance incentive plans that have succeeded, identify what specifically about the incentive plan allowed it to succeed?

Compensation Data

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How do you evaluate the labour market?

business documents on office table with smart phone and laptop computer and graph financial with social network diagram and three colleagues discussing data in the background
ESB Professional/Shutterstock

An organization’s compensation system is only as good as the data it has available to evaluate the labour market and the quality of the sources of the data. It turns out a good source of third party compensation data is the payroll companies. Take ADP for example.

Click here to read this USA today article.

There are some interesting labour market trends happening in the USA. According to ADP, about half a million U.S. workers left one job for another in the fourth quarter, up from 406,000 in the same period in 2015 and 365,000 two years ago. But ADP in the Department of Labour can give HR greater insight with information like this, as ADP also finds that more workers are shifting into new sectors, such as a marketing manager who leaves retail for finance.

HR needs to be aware of this type of data and trends. This type of data is suggesting that the USA is a long way away from the 2008 recession where they had their pick of employee talent. With this type of worker volatility of switching industries and not just jobs, combined with a USA unemployment rate at its lowest level in 43 years, these factors will surely affect an organization compensation system.

Discussion Questions

  1. What is Canada’s current unemployment rate? How will this affect an organization’s compensation system?
  2. Identify two other Canadian sources of Labour Market Data. Look them up and determine some of the labour market trends currently in Canada.

Quality of Job Evaluations

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It is all in the job evaluation method.

Job well done - concept , boss showing thumb up to one of his employee in the office
Eviled/Shutterstock

In the HR industry we call Job Analysis (JA) the foundation of any HR Department. In a similar sense, then, Job Evaluation (JE) would be considered the foundation to the compensation system.

This video clip outlines the four most common methods of JE’s.

Click here to watch the video “Four Methods of Job Evaluation”

What is the purpose of job evaluation? According to the HR Council of Canada, “Job evaluation is the systematic process for assessing the relative worth of jobs within an organization.” And even more importantly it is “a comprehensive analysis of each position’s tasks, responsibilities, knowledge, and skill requirements is used to assess the value to the employer of the job’s content and provide an internal ranking of the jobs.”

Worth and value are the true purpose of doing a JE; it helps determine wages/salary, an important aspect of the compensation system. It is hard to imagine how an organization could survive long term without some kind of JE system in place. Unfortunately, though, many of them shy away from conducting a JE for many various reasons. New HR practitioners should become knowledgeable on how to conduct JEs in any organization to ensure their value and worth.

 Discussion Questions

  1. Compare and contrast the benefits and negatives of the four methods of job evaluation. Consider why you would choose one method over the other. Be prepared to defend your answer.
    Quantitative
    – Point Rating
    – Factor Comparison
    Non-Quantitative
    – Ranking or Job Comparison
    – Grading or Job Classification
  2. If you were the HR Director of a compensation department which JE system would you recommend to ensure your company is in compliance with pay equity legislation.