Develop a Strategic Compensation Strategy

Talent Management

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By: Liz Sheffield

A strategic compensation strategy guides an organization’s approach to managing total employee

compensation. In the past, compensation may have been just a paycheck, but today it’s much more.
Employees seek employers that not only pay them a competitive wage, but also provide benefits and
programs which help them address other financial costs, such as healthcare and retirement plans.

“Given strong economic performance across many U.S. industries in 2018, employees hold much
higher expectations for greater increases in wages and bonuses going into 2019,” a vice president
from Gartner told the Society for Human Resource Management (SHRM). “Executives will need to
factor in these employee expectations to remain competitive and to attract and retain talent;
otherwise, they risk losing their best workers to competitors.”

Organizations that have a strategic approach to compensation should use it to not only manage
employee pay and benefits, but also to attract and retain talent. To reap the benefits of a strategic
compensation strategy, it’s essential that companies proactively communicate total compensation
to their workforce. When done well, strategic compensation becomes a way of building trust in the
workplace.

Steps to Create a Strategic Compensation Strategy

It’s essential to have a strategic compensation approach, as the costs are a significant expense for
businesses. In June 2019, the Bureau of Labor Statistics reported that “costs for employee
compensation averaged $36.61 per hour worked.” Wages and salaries accounted for 68.6 percent of
these costs, and benefits were 31.4 percent.

Here’s what you need to consider when creating your strategy:

1. Ask for Employee Input

Of course, employees aren’t going to be part of the team that determines salaries; however, you can
ask for their input about total compensation. Find out what benefits matter most to your workforce.
Younger employees may be interested in a daycare subsidy, while older employees might be more
focused on retirement plans. By asking for input, you can create an informed strategic compensation
approach that fits with your talent management strategy and will satisfy most employees.

2. Benchmark against Competitors

As mentioned above, your compensation plan and employee benefits are a way to attract talent. To
remain competitive in your industry and the locations where you conduct operations, take time to
benchmark what your competitors offer their employees. You may not be able to match them item
for item, but with this information you’ll be able to address gaps during interviews. And, you may be
able to get creative about other, lower-cost options you can include in your total compensation
package.

3. Allocate Budget

Compensation planning doesn’t occur in a vacuum. Take a realistic look at your company’s human
resource and operational budgets. Identify the total amount you can spend on any one employee.
Factor in all costs, including taxes, payroll costs, existing benefits, compensation, and bonuses.
Include plans for performance or merit increases that will take place as part of annual reviews.

4. Plan for Rewards

As you make your budget, consider how you can use total compensation as a way to engage
employees, increase performance, and entice them to stay. For example, you might offer a
retirement plan or additional vacation days to employees who have been with the organization for
more than a year. You might offer stock options as a bonus after 90 days. This is a way of protecting
your budget if employees don’t stay with the organization for a minimum amount of time.

5. Determine Pay Grades

One way to establish a framework for compensation is to determine pay grades based on job
position and duties. For example, positions in pay grade one may be for entry-level roles, pay grade
two for technician roles, pay grade three for managers, and pay grade four for executives. Having
this framework allows an organization to define the amount of pay available based on the job’s
requirements and level. Pay grades take the guesswork out of salaries and also provide employees
with a range of what they can expect to make for any given role.
6. Confirm Compliance

Compensation strategy provides the big picture for an organization’s pay; however, the manner in
which you implement and provide compensation must meet regulations. The Fair Labor Standards
Act (FLSA) sets the legal requirements for minimum wage, overtime, equal pay, record-keeping, and
child labor. It also has implications regarding payment practices, record-keeping, taxes, paychecks,
and withholding allowances. Some states have local compensation-related regulations.
Organizations should seek legal counsel to confirm compliance and ensure each compensation
strategy meets requirements.

7. Communicate About Total Compensation

When you communicate about total compensation, you want to make sure all employees have
access to the information they need. You also want to provide accurate, up-to-date information to
avoid issues. The gap between expectations and reality is one of the largest issues between
employers and employees that creates dissatisfaction. When you clearly communicate your total
compensation strategy, employees know what to expect and appreciate all the benefits you’re
providing, in addition to the pay. Be sure that as you communicate about total compensation, you’re
using it as an opportunity to celebrate everything that’s included in the package. Employees want all
the information available about compensation, so do your best to make the communication
engaging. An employee communication software tool can help you deliver timely, engaging, and
streamlined compensation communications.

Remain Realistic with Strategic Compensation

Many organizations want to offer amazing total compensation packages to remain competitive in
the war for talent. But after they crunch the numbers, they realize they can’t afford it. In this
situation, strategic compensation becomes even more important.

Use an employee benefits communication software to communicate with employees about the
realities of their compensation:

Be transparent about what is and isn’t possible. Let employees know you’re doing all you can to
provide the best compensation package possible.
Be an employer of choice in other ways. You may not be able to offer the top salaries in the industry.
Still, you can offer other employee benefits, such as flexible work hours, access to on-site services, or
subsidized transportation benefits.

Be realistic in your rewards. If you have a great quarter, celebrate those results but be judicious.
Once you set the standard high for compensation strategies, it’s more difficult to drop back if you
experience rough financial times.

Be intentional about how compensation supports your overall human resource strategy. Look for
ways to tie your compensation plan to tenure, individual performance, team performance, or a
combination.

This realistic approach helps set expectations with current employees, as well as enables you to
attract and retain talent. Organizations are more appealing for candidates when recruiters and hiring
managers have defined pay grades they can provide, as well as information about a robust total
compensation package to share during an interview. Don’t underestimate the impact a strategic
compensation plan can have throughout the entire employee lifecycle.

Finally, compensation planning requires a cross-functional strategic approach. Now that you have all
the steps for an effective compensation strategy, it’s important to gather stakeholders together to
review what’s most important for your organization. Once you have a compensation plan, find a
means to effectively communicate so that employees understand their pay grade, the opportunity
for growth, and career advancement. Having a well-defined approach to compensation will
ultimately encourage a company culture of trust and transparency and create a higher job
satisfaction rate among employees.

Steps To A Sound Compensation Strategy

12 April 2012

by

TCii Strategic and Management Consultants

Before you think about designing and implementing a compensation plan, you must first develop a
clear and compelling compensation strategy. To develop a successful compensation strategy you
need to take the following steps:

Define your compensation philosophy.

Link compensation to your overall business strategy.

Change the culture and reinforce it with compensation.

Reward the behaviours that drive the results.

Think total compensation.

Measure your return on invested payroll £s.

1. Define your compensation philosophy

A sound compensation programme begins with a clear, focused compensation philosophy that
defines and answers fundamental questions such as:

What do we want to pay for?

How do we want to pay for it?

What is our competitive posture?

How will we split up the pie?

We recommend developing a total compensation mission statement that clearly specifies the results
you want to accomplish, the behaviours necessary to achieve them, what you will pay people for,
and how you intend to position your company in the marketplace. This lays the foundation for your
entire compensation programme. It serves as a compass and a beacon to guide you through the
difficult task of creating and implementing the programme.

Who creates the total compensation mission statement? Depending on the size of the company and
the management structure, any or all of the following: board of directors, board of advisors, CEO,
top management team and representatives from others in the organisation.

Your pay philosophy should:

reflect the values and beliefs of the owner/CEO/management team

reflect the economic realities of your pricing structure and market share

take into account "softer" issues such as corporate culture, industry standards and your growth
strategy

provide a foundation to make consistent hiring and promotion decisions.

2. Link compensation to your overall business strategy

Most organisations know where they want to go and how to get there. Compensation provides a
very effective tool for getting employees to move in the same direction and follow the same path.
For example, suppose a young, growing company wants to increase market share. Its compensation
plan needs to reward people for bringing in new customers and clients. In contrast, a more mature
company might need a better balance between growth and profit. Accordingly, its compensation
plan should equally reward activities that generate growth and profit.

Another company might identify world-class customer service as one of its top strategic objectives. It
would need to reward the activities (in all areas of the organisation, not just the customer service
department) that lead to outstanding customer service.

If compensation doesn't have a direct connection to corporate goals and objectives, employees will
take any direction because they don't know which one to take. Compensation strategy starts with
identifying your top strategic objectives, defining what they mean in terms of organisational
behaviour, and designing your compensation plan in a way that rewards and recognises those
behaviours.

3. Change the culture and reinforce it with compensation

A good compensation strategy alone won't get the results you want. In order to get permanent
behaviour change, you must first change the culture and the environment. Then use compensation
to reinforce those changes.

If all you do is dangle money in front of people, you get short-term blips in behaviour and then
people go right back to the old ways of doing things. You don't get sustained productivity
improvements unless you change the culture. That involves identifying the results you want to
achieve as an organisation, identifying the behaviours that lead to those results, and then designing
a compensation programme to reinforce and reward those behaviours so that they become
permanently instilled in the organisation.

Compensation provides a very effective tool to reinforce organisational values. Too often, CEOs talk
about values but then don't walk their talk. For example, many companies say they value teamwork
but continue to reward individual performance. Or they talk about customer service but reward only
financial performance.

Compensation sends powerful messages to your employees about who you are as an organisation,
what you value and what skills and results you reward. If you want to instil certain values in the
organisational culture, reward them through your compensation programme.
4. Reward the behaviours that drive the results

In order to reward behaviour that drives results, you have to know what creates value in your
company. Value gets created in two ways. First, as an organisation you must do the things your
customers want, need and desire. This represents the qualitative side of the business. Second,
everyone in the company has to help the company to do those things in a profitable manner. This
represents the quantitative side of the business. Without both, a company won't survive for the long
term.

To get the customer's perspective on value, call your top 20 customers and ask two questions:

What are we doing now that is creating value for you and makes you feel good about doing business
with us?

What can we do to earn more of your business?

Asking these questions will generate some amazing feedback. It will definitely change your thinking,
not just in the compensation arena but in almost every area of your business.

Next, look internally to see who is creating value on the financial side. Every employee must do one
of two things (or both): create or support sales (revenue side) or keep expenses to a minimum
(expense side). If you find that people aren't doing either one, you have to question whether or not
their function should continue to exist.

Between the quantitative and qualitative pieces, you can start to work out where value really gets
created in your company. Then you can design a compensation plan that will get the results you
want because you have identified the specific behaviours that directly lead to those results.

5. Think total compensation

In today's fiercely competitive labour markets, compensation provides a powerful tool for attracting
and retaining quality people. Yet, most employees think of compensation as base pay plus the
occasional bonus. They forget – or are never told – that anywhere from 30% to 50% of their total
compensation comes from other areas, including:

profit sharing
retirement and pension plans

benefits

shares or equity

incentives and bonuses

recognition and rewards

holiday and personal time off

opportunity income (education reimbursement, professional development programmes, etc.).

If you don't think, talk, market and sell total compensation, you're leaving a lot of money on the
table. Talk about compensation frequently and impress upon employees that it includes a lot more
than base pay. When comparing compensation for potential employees, always use total
compensation, because base pay never tells the whole story.

We recommend providing employees with an annual total compensation statement that lists the
complete package of rewards and recognition they receive for working in your organisation.

A total compensation statement surprises employees because the bottom-line number always
exceeds what they normally think of as their compensation. You can't afford to lose employees who
might get lured away by promises of a bigger base pay. Make sure all your people understand and
appreciate the full range of compensation and benefits they enjoy in your company.

Don't stick the compensation statement in the salary slip envelope. Instead, sit down with each
employee and say: "I want to show you the full extent of our commitment to you." (Don't say:
"Here's what you cost us", because that insults the employee.) Thank them for doing a good job and
go over all the costs, answering any questions they may have.

This little meeting will get you two weeks' mileage and then employees will forget about it. The real
value comes when competitors try to steal your people. They may offer more £s above the line but
not as much below the line. Once your employees become aware of all that you pay them, they start
to ask the right questions when other employers come hunting.

6. Measure your return on invested payroll £s

How do you know whether you're getting a good return on your invested compensation £s? The
answer is simple: measure it. Yet, far too many companies either ignore or overlook this critical
practice.

Most companies don't even measure their return on compensation £s, much less determine
whether it is a good one or not. To measure your compensation ROI, decide up front what you want
to look at: productivity, bottom-line results, employee turnover, ability to recruit and retain key
people, morale, customer service or any number of measures.

Identify the measures that come from your overall business strategy, then define and track them to
see whether the return on your compensation £s matches your expectations.

Keys To An Effective Compensation Strategy

Patricia Lotich Patricia Lotich

4 years ago

Organizations use a compensation strategy to define how it views and manages employee pay and
benefits.

The strategy serves as a guide and should be outlined in a written document that clearly articulates
the organization’s approach to managing employee compensation.

An effective compensation strategy motivates current employees and is used as a tool to attract new
ones.

People often think of compensation as merely a salary. However, the total cost of employee
compensation includes every aspect of employee benefits.

This includes the cost of health benefits, retirement benefits, tuition reimbursement, bonuses, or
any other non-salary benefit that is considered part of a total compensation package.

7 Keys To An Effective Compensation Strategy

1. Budget Allocation

The strategy should include the organization’s approach to allocating compensation dollars into
salary and benefits.

This budget allocation will determine how much of the total compensation budget will be spent on
salary and what percentage will be spent on benefits and other incentives.

For example, for a budget of $1000 for compensation, if 90% is salary and 10% is benefits, you need
to determine how that 10% is spent – one scenario might be – 7% on health benefits, 2% on
retirement savings and 1% on tuition reimbursement.

Allocating specific budget dollars to pay and benefits can help control labor, health care, and other
miscellaneous benefit costs.

2. Develop Salary Ranges

Develop salary ranges to ensure employee pay is competitive with other organizations. To be
competitive, it is important to benchmark similar jobs within the same industry and to create a pay
structure.

Salary ranges can be developed internally by conducting research or utilizing sites like salary.com or
payscale.com to determine average salaries in a particular geographic area.

how to develop a compensation strategy

Smaller organizations often pay a vendor to help develop salary ranges, whereas larger organizations
may have the HR resources to conduct the research internally.

Regardless, it is important to look at all jobs and determine what work is done, how the job is
slotted, and establish salary ranges that match all job descriptions.
3. Salary Audits

Markets change, therefore it is important to perform routine salary audits to ensure salary ranges
reflect current compensation trends in a particular industry.

When performing an audit, the goal is to determine how competitive are those particular jobs and
what is the external market demanding.

Ask the question, is it a growing or dying profession?

It is important to pay attention to market changes and to stay current because failing to keep up
with the competition can lead to the loss of valuable employees.

4. Benefit Package

Many organizations use benefit packages, in addition to salary, to attract and retain employees.

Their goal is to be competitive with health, retirement, tuition reimbursement and other benefits
because they understand that it can be the determining factor for a job candidate who is deciding
whether to accept a position with an organization, or an employee who is considering leaving.

For instance, I know employees who have stayed with organizations because the benefits were too
good to walk away from.

5. Performance Management System

It is important to have a structured performance management process to ensure employees are

meeting corporate objectives and are assessed on a regular basis.

This process should include the development of annual goals, annual performance appraisals, and a
structured process for coaching and mentoring employees.
Compensation strategies can positively influence employee engagement and improve employee
productivity.

6. Legal Compliance

A well-defined compensation strategy will incorporate legal requirements to ensure the organization
is in compliance with all federal and state laws.

The goal is to eliminate natural biases made in hiring decisions and ensure compliance with DOL
FLSA laws such as minimum wage, overtime pay, or Lilly Ledbetter Fair Pay.

7. Structured Administration

As with any other business process, the structure is important.

Develop an annual review process, salary audit, raise process timeline, and make sure someone is
responsible for all compensation areas.

A comprehensive compensation strategy can be the foundation for creating an environment that
recognizes and rewards employee performance and helps to establish a strong culture of employee
engagement.

Organizations are only as successful as their approach to hiring the right people, setting clear
expectations, managing performance, and recognizing and rewarding employees for a job well done.

Developing a Compensation Strategy

In This Article

By Bob Kelleher

Compensation is one good tool to use to encourage achievement and employee engagement. Here
are a few tips that pertain to developing your compensation strategy:
Communication about rewards must be frequent and transparent. The distribution of rewards for
high performance should not be kept secret. For example, if John is being given a plum assignment
to reward him for his high performance, others should be told why John received the assignment.
Ditto if Mary is being promoted to head up the chain’s largest store.

After all, you want people to strive to achieve, and to recognize that those who do achieve are
rewarded. That said, organizations should not share specific dollar amounts. That is, if Mary also
earns a cash bonus for her efforts, the dollar amount of that bonus should be kept private.

Consider tenure and staff level. The more junior a person is, the less his compensation should
depend on overall company performance. Instead, it should relate more to achievements within a
team or department or business unit. For senior employees — think executives and managers — the
link to overall company performance should be much more explicit.

Correlate compensation and bonuses with the employee’s potential to grow and learn. A satisfied
employee doing a decent job who shows no interest in advancement or training should eventually
“max out” her salary. In other words, it may not be in the company’s best interests to continue
investing in that person. In these instances, bonus or variable pay is the more appropriate incentive
to maintain that “C” level of engagement.

Avoid greasing the squeaky wheel. You know the type. The loud Little League parent who always
manages to get his marginally talented kid on the all-star team. The whiny diner in the booth behind
you who gets her meal for free.

Sadly, these squeaky-wheel types are all too familiar — and are all too common in business. As a
manager, avoid giving in to the employee who is always complaining about something, even if giving
in feels like the easier thing to do.

Your other employees are watching! The last thing you want is to train your entire staff to be a pain
in your behind by consistently rewarding that one squeaky wheel!

Do not overpay. In some situations, like when it comes to your superstars, paying above market rate
is a good thing. But for the other 90 percent of your employees, you should target your base pay at
the market rate (although you can vary pay to some extent to reflect differentiations in
performance).

On a related note: If you’re looking to really annoy (read: disengage) your employees, then go right
on ahead and pay a new hire who has the same skills and tenure as your incumbents more than your
existing staff. Nothing will irritate employees more than finding out the “new kid” earns more than
they do! That type of unfairness will quickly extinguish your employees’ engagement.

Hot markets and sectors should be rewarded with variable pay whenever possible. A good approach
is to offer the in-demand talent a “project premium” amount for the duration of the project. This
way, their base compensation is equitable with other divisional staff when the project ends.

They also won’t feel as entitled to this premium, compared to what showed up as part of their base
salary. No market stays hot forever.

Don’t confuse rewards and recognition. Rewards should be reserved for something significant: a
promotion, a year-end bonus, the quarterly bonus for new orders, and so on. In contrast, recognition
should be reserved to highlight an event, an episode, or something above and beyond.

You risk disengaging a deserving employee if you reward year-end performance with a $50 American
Express gift certificate, which would be far more suitable to recognize an employee’s above-and-
beyond efforts in assembling a new committee.

Think of it this way: Rewards should be somewhat substantial; recognition should be more symbolic.
In other words, with recognition, the point is your acknowledgment of the employee’s hard work,
not the value (if any) of the award itself.

On a related note, don’t confuse recognition with a simple thank-you. They’re two different things. A
thank-you is to show appreciation for the norm. Recognition should be reserved for when someone
goes above and beyond. If you over-recognize the norm, you tend to cheapen the spirit of
recognition.
Be fair (not to be confused with being equal). Although money is not a primary engagement driver, it
can certainly disengage staff if they feel they’re being rewarded unfairly compared to others in their
group (internally to the company or externally to the market).

One more thing: Some people in select industries may be highly motivated by money. Examples
include the doorman in your hotel lobby, who enthusiastically helps you with your luggage, and the
waitress at your favorite restaurant, who consistently delivers your meal with a smile.

For these people, the behavior/reward cycle is almost immediate and, therefore, quite powerful. In
my experience, however, these occupations are the exceptions. For the vast majority of people in
the vast majority of occupations, a more critical driver is achievement

HR Compensation Issues

Small Business

Setting Up a New Business

Setting Up a Company

By

Chron Contributor

Updated October 13, 2020

Small-business owners must address a variety of issues as they design compensation programs to
attract and retain talented employees. For example, how much you are paid, the value of your
benefits, how big your bonus is, whether you were promoted and how you were recognized for
going "above and beyond" are personal issues every employee thinks about.
Competing for Talent

As HR professionals strive to establish competitive pay rates so an organization can attract and retain
the right talent, they compare their compensation rates to the rates in published surveys to gauge
their competitiveness. However, many nuances complicate the process. For example, when you're
hiring the head of software development, the competition for talent might be a different set of
companies than when you're hiring an administrative assistant.

Legal Compliance Issues

Legal considerations are also on the mind of HR professionals who manage compensation programs.
In addition to being competitive with the external market, pay must be equitable internally within
the organization. Companies generally want to reward high performers with more money and try to
create pay differences between employees in the same job to recognize outstanding performance.

However, small businesses must be careful not to violate discrimination laws, improperly set up
benefits packages such as retirement or health insurance contributions or avoid overtime pay
requirements. The Equal Pay Act, for example, requires that men and women receive equal pay for
equal work, points out the U.S. Equal Employment Opportunity Commission.

Designing Executive Compensation

If you offer management at your small business many more visible perks than the average employee
gets, you can create morale and retention problems at your company. For example, if your
executives all have free, front-row parking spots, or get pubic transit passes or go to frequent
lunches with the boss or get big bonuses each year, employees might wonder why you don't have
enough money to give them a raise this year.

On the other hand, if you don't offer your top talent competitive pay and perks, you might have a
hard time attracting and retaining them. Creating attractive executive compensation packages and
keeping them private is an important process for any small business.

Recognizing and Rewarding Employees

HR professionals design programs to successfully motivate employees to perform at their best and
that recognize and reward employees for their contributions in a way that's affordable to the
company. These programs are critical for maintaining employee retention according to the Society of
Human Resource Management.

However, ultimately, it's the supervisors and managers in a company who recognize and reward
employees, and compensation staff must train and educate managers on how to use rewards and
recognition to make employees feel appreciated by the company and happy in their jobs.

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Employee Compensation Law and Legal Definition

People work in order to earn money, but the structure of compensation is quite diversified. The two
broadest categories are salaries and wages. Salaries tend to be paid every other week or monthly;
wages are typically calculated by the hour but paid by the week. As a consequence of legislative
language, salary-earning employees are sometimes referred to as "exempt" employees and hourly
workers as "non-exempt"; in other words the first are exempt from the requirements of Fair Labor
Standards Act (discussed below), the latter group are covered. Compensation may also take the form
of commissions paid to sales people based entirely on some percent of the goods or services they
sell; this type of compensation is often combined with a minimal salary to even out the ups and
downs of commission earnings—but people on pure commission who fail to "earn back" their base
salary rarely continue in the job long. Piece work, where pay is based on actual performance of some
job measured by units produced, is a variant of this approach. People serving as wait-personnel in
restaurants are typically compensated by a low wage inadequate to support them: they get the
majority of their income from tips. In the so-called New Economy which began emerging in the
1990s, characterized by cutbacks and layoffs of salaried and professional employees, many
individuals became self-employed of necessity but, often, continued working in actual "jobs," much
as before. The compensation of such people is based on contract revenues, but they receive no
fringe benefits and are required to pay their own payroll taxes.

Compensation has a legal status and, once engaged, people can use the courts to enforce the
employment agreement. Employee benefits ("fringe benefits") have another status: they are
provided at the employer's option and may be withdrawn at will. As such they are not strictly
speaking compensation although, in practice, they are viewed as a part of the full compensation
"package." The employer's payment of premiums for certain types of fringe benefits, such as health
care coverage and insurance policies (disability, life insurance), are not viewed under tax law as part
of the employee's taxable income. Others, such as the provision of an automobile or housing, are
taxable and therefore fall under the definition of "compensation."

COMPENSATION AND TIME

For the non-exempt part of the workforce hours spent on the job are the measure of compensation
to be paid. Time spent at work is regulated by the government, and laws govern pay scales over and
above the specified work week, typically 40 hours. The vast majority of exempt workers are also
required to work a fixed number of hours a week—but the hours may be flexible under "flextime"
rules set by the employer. For exempt employees, pay for "overtime" is not controlled by law in
most cases. In other words, the typical administrative/professional/executive employee is expected
to work 40 hours—and as many more as the job may require, the extra hours compensated, if at all,
by bonuses or time off. In the case of people working for commissions, time spent on the job is only
incidentally related to compensation. Normally, of course, such people spend a lot of time working—
but one can imagine the highly charismatic (and lucky) sales person who, in a couple of hours a
month, can move a million dollars worth of real estate….

COMPENSATION LAWS

The Fair Labor Standards Act of 1938 (FLSA) is in a sense the basic law controlling employment and
compensation issues and, through amendments passed later, the management of benefits packages.
FLSA sets minimum wage, overtime pay, equal pay for men and women, controls child labor, and
establishes record keeping requirements. On the whole FLSA is aimed at protecting the non-exempt
work force—which was the overwhelming majority of all workers at the time of the law's passage.
Since that time the profile of the workforce has greatly change; amendments to FLSA have in part
reflected these changes. As illustrated by state over-rides of FLSA's minimum wage requirements
(see below), states also actively regulate compensation and other aspects of the workplace.

The chief amendment of FLSA was passage of the Equal Pay Act of 1963 (EPA). EPA prohibits unequal
compensation of men and women in the same workplace doing similar jobs. EPA makes exceptions
for seniority, allows the use of merit systems, and recognizes compensation systems based on
performance. EPA requirements do not differentiate between exempt and nonexempt employees.

Other legislation related to employment compensation issues includes: 1) the Consumer Credit
Protection Act of 1968 which deals with wage garnishments; 2) the Employee Retirement Income
Security Act of 1974 (ERISA), which regulates pension programs; 3) the Old Age, Survivors, Disability
and Health Insurance Program (OASDHI), which forms the basis for most benefits programs; and 4)
legislation implementing unemployment insurance, equal employment, worker's compensation,
Social Security, Medicare, and Medicaid programs and laws.

MAJOR COMPENSATION ISSUES

The two major issues related to compensation are the adequacy of the compensation, addressed by
minimum wage laws, and pay equity—between women and men and between racial and ethnic
groups—addressed by EPA and social anti-discrimination statutes.

Minimum Wage

Non-exempt employees, for whom the definition is intrinsically tied to time, are also guaranteed a
minimum wage of not less than $7.25 per hour, effective July 24, 2009, under the FLSA. Six states
(Alabama, Arizona, Louisiana, Mississippi, South Carolina, and Tennessee) have no minimum wage.
Fifteen states have higher minimum wage than the U.S. as a whole: Alaska, California, Connecticut,
Delaware, Florida, Hawaii, Illinois, Maine, Massachusetts, Minnesota, New Jersey, New York, Oregon,
Washington, and Wisconsin. The highest wage is in Oregon, $7.63 an hour; in 2006 Connecticut had
a $7.40 per hour minimum wage to be raised to $7.65 in 2007. The rest of the states have the same
minimum wage as the national rate. Under the federal rules, a non-exempt worker is entitled to
receive the highest minimum wage available in the place where he or she works. Changes in state
law are monitored by the U.S. Department of Labor and may be consulted at Minimum Wage Laws
in the States.

Equal Pay for Women and Men

Detailed data comparing income of men and women in the same occupation are not routinely
collected so that the pay-equity issues remains somewhat in the dark, but more general data series
give an indication of overall patterns. Based on data published by the U.S. Census Bureau, the
average income of a man in 1954, but measured in 2004 dollars, was $20,992 a year. The average
income of a woman, using the same method of calculation, was $9,358. On average, in 1954 a
woman earned 44.6 percent of what a man earned. Women's earnings were 41.1 percent of men's
in 1964, thus showing a decline, 42.2 percent in 1974 (still down from 1954), were up to 49.3
percent in 1984 but dropped again to 43 percent in 1994. In 2004, average male income was
$42,832, average female income was $24,998. A gap of $17,834 separated men from women, but
women were earning an all time high of 58.4 percent of what men earned on average.

In this 50-year period, women's income grew at a faster rate than men's (1.98 percent a year versus
men's income at 1.44 percent). Women's participation rate in the work force grew in this period as
well: female participation in the workforce increased from 34 percent to 59.2 percent, 1954 to 2004.
At the same time, the difference in male-female income averaged around $17,000 a year in this
period, strongly suggesting that women had a competitive advantage in the labor market. This is
further substantiated by data, published in Social Trends and Indicators USA showing that more men
than women (on a percentage basis) are laid off during periods recessions.

In a 2002 survey conducted by the U.S. Bureau of the Census and published in Current Population
Survey data showing income differentials between men and women of the same educational
attainment are presented. This study showed that income differentials were substantial across the
board: 2000 data showed women on average earning 57.5 percent of what men earned. The
differentials were the following: for less than 9th grade education, 59.9 percent; for high school
graduates, 59.3; for bachelor's degree, 56.0; for masters, 59.7; for professional degrees, 55.9; and
for doctoral degrees, 60.3 percent of what men with the same education attainment level earned.

Racial and Ethnic Differences

The U.S. Bureau of the Census data cited above for all men and women also provide a look at racial
and ethnic difference—and difference between men and women in those groups. Data cited are for
2004 only because long-term data are not uniformly available. The highest average earnings are
achieved by Asians. Asian women have the highest earnings among all women but earn only 61.1
percent of the income of Asian males. Lowest earnings were reported for Hispanics, again for both
males and females. Hispanic females earned 66.5 percent of what Hispanic males earned. Whites
had the second highest earnings, but white women lagged farthest behind. They had 56.9 percent of
white males' earnings. Black women earned 75.5 percent of black males' earnings. For these four
racial and ethnic group comparisons, black women were highest in relation to men.

COMPENSATION IN THE SMALL BUSINESS SECTOR

According to a Wells Fargo press release, announcing the latest Wells Fargo/Gallup Small Business
Index, "Sixty percent of small business owners see the amount of compensation they can offer an
employee as a critical disadvantage when compared to larger companies."

Are small business owners simply grumbling? No. Data for 2001 from the Census Bureau on firm size
measured by employment and payroll show that the smaller the firm, the lower the average payroll
per employee. Companies with 10,000 or more employees averaged $39,789 per employee, the
smallest firms (1-4 employees) averaged $27,299. With the exception of companies with 5-9
employees, which were even lower than the smallest at $26,706, at each step up the size-scale
payroll per employee went up.

Small firms dominate the corporate population. Firms with less than 100 employees were 98 percent
of all firms employing people, those with 100 or more employees were 2 percent of companies. But
the small firms employed 36 percent of people working for companies in 2001 (41 million) and large
firms employed 64 percent (74 million). In 2001 companies with fewer than 100 employees had
payroll costs of $29,138 per employee, companies with 100 or more employees had costs of $37,265
per employee, for a differential of $8,127 a year.

In the mid-2000s, indeed in earlier periods as well, small business had certain advantages: it was
adding while the large companies were shedding jobs. The small business sector also offers a work
environment that is attractive to many individuals and this fact can be turn to an advantage when
recruiting—even if with lower salaries. These include hands-on involvement in business activity,
absence of bureaucracy, flexible and often more varied job assignments, more rapid and rational
decision processes, and the ability of a small business to adapt to the special needs of an employee.
Some employees also value closer contact with the customer; yet others, especially those with
entrepreneurial ambitions, feel that they can learn more about business in a small enterprise than
embedded deep in the structure of a large one.

A practical aid for the small business owner offered by the Bureau of Labor Statistics is an extensive
and reasonably up-to-date tabulation of wages actually paid per occupation by area. This is the BLS
Wages by Area and Occupation Program, accessible on the internet. Close study of what wages
actually are paid often shows that prevailing rates are frequently much more modest than generally
believed because of local or regional economic conditions.

Challenges of Compensation Management- In Industry 4.0

By Ameet Naik- September 2, 20190

Industry 4.0 represents the fourth revolution that has occurred in manufacturing. Industry 4.0
focuses heavily on interconnectivity, automation, machine learning, and real-time data. Also
referred to as IoT or smart manufacturing, Industry 4.0 connects physical production and operations
with smart digital technology, machine learning, and big data to create a more holistic and better-
connected ecosystem for companies of all the disciplines in the human resources field,
compensation is one of the most complexes.

“Handling compensation issues requires knowledge of employment trends, the value of experience
and credentials for various positions and industries, negotiation skills, company budget, and the
organization’s bottom line. Economic conditions also play an important role in the compensation and
benefits issues”

Addressing compensation issues can range from developing competitive wage scales to weighing the
advantage of bonus and incentive payments.

Definition of Compensation

The term compensation means financial payments such as wages and salary paid to employees.
Compensation also includes bonus and incentive payments, raises and company stock awarded to
employees. Compensation specialists often have knowledge of both compensation and employee
benefits. This is one reason why human resources departments sometimes combine compensation
and benefits into one departmental function.

Human Resources Budget

It has been argued that human resources budget allocations are too low because HR is not a
revenue-producing department. In theory, however, the most valuable resource a company has is its
human capital. Consequently, human resources compensation specialists and HR department
leaders must sometimes work within limited budget constraints. In addition, justifying budget
increases requires proof of return on investment in HR department activities. You need to be able to
demonstrate your ROI. If you can articulate your department’s performance in terms of company
goals, it will be much more difficult for the top brass to tear into your budget.

Salary and Wage Levels

Attracting qualified applicants may depend on your company’s ability to offer extremely competitive
wages. Employee benefits are important, too, but the base amount is what initially appeals to most
job seekers. A company’s reputation is also a determinant in whether your company can become an
employer of choice. It is likely that competitors’ employees and industry experts network with your
employees to share information. Candidates want fair wages, not necessarily high wages, especially
when a job offer comes with an attractive benefits package. Compensation specialists analyze
competitors’ wages, labour market trends and employment levels to construct compensation
policies.

Bonus and Incentive Pay

Some employers offer annual bonuses or incentive pay based on the individual employee’s
performance or organizational performance, also called variable pay. “The broadest type of variable-
pay incentive programs — company-wide pay-for-performance plans — reward employees on the
basis of the entire corporation’s performance. The most widely used program of this kind is profit
sharing.” The amount of bonuses and incentives is difficult to budget too far ahead if your company
is relatively new; however, if you have an incentive program that’s structured and adhered to
consistently without favoritism and bias, you can accurately project budget requests for bonuses and
incentive pay.

Easy to Administer

In a job-based compensation structure, the job itself becomes the unit of determining base pay.
Human resource professionals establish minimum and maximum pay amounts for each job and
compensate employees based on their performance. Employee job evaluation determines employee
performance. This structure is easy to administer because it focuses on allocating pay systematically
and ensuring that the most important jobs are paid more.

Skill-based Pay

Skill-based systems have long been used to define jobs within the trades. Increasing skill levels are
the determining factor in describing positions like an apprentice. Other examples of skill-based pay
systems can be found among white-collar jobs where the company is providing a career progression
based on increasing technical skill as an alternative to being promoted through various management
levels.

Competency-Based Pay

The term competency-based pay describes a system where rewards are based on the use of
competence without consideration for results. The premise is that individual performance depends
on having relevant competencies and higher levels of competence will produce superior
performance. A competency-based pay system focuses on individuals. In practice, competency-
based systems are seldom used in a pure form. Competency may be one of the factors determining
pay, but performance may also be a factor.
India is diverse, so are its compensation practices. Just as India is a highly diverse nation made up of
multiple languages, religions, ethnic groups, and customs spread across a tremendous geographic
range – so too are its compensation practices.

Legal Issues in Compensation

Legal Issues in Compensation

Legal Issues in Compensation- The laws of compensation and work hours are very complex. An
employer with best intentions could also commit mistakes while going through the various terms
and conditions. Federal and state laws take the issue of an employer to trust on the requirements in
such a favorable manner for most of the employees. It is really tough to judge which employees are
perfectly immune and not exempt from the lowest amount of wage.

Compensation and Income Tax Act, 1961

Income under heads of salary is defined as remuneration received by an individual for services
rendered by him to undertake a contract whether it is expressed or implied. According to the
Income Tax Act 1961, these are the following conditions where all such remunerations are
chargeable to income tax:

When remuneration is due from the former employer or present employer in the previous year.

When remuneration is paid or allowed in the previous year, by or on behalf of a former employer or
present employer, though not due or before it becomes due.

When arrears of salary is paid in the previous year by or on behalf of a former employer or present
employer, if not charged to tax in the period to which it relates.

Under Section 197 of the Income Tax Act, 1961 the income which come under the heads of salary
are as follows:

Salary (including advance salary)

Wages

Fees

Commissions
Pensions

Annuity

Perks

Gratuity

Annual bonus

Income from Provident Fund

Leave Encashment

Allowance

Awards

The module includes:

Compensation and Income Tax Act, 1961

Tax implications

Wage fixation and legal interpretation

Executive compensation

Executive compensation, also known as executive pay, refers to remuneration packages specifically
designed for business leaders, senior management and executive-level employees of a company.
Executive compensation includes benefits such as salaries, perks, incentives, insurances etc.

What Is Executive Compensation?

Executive compensation differs substantially from typical pay packages for either hourly workers or
salaried management and professionals in that executive pay is heavily biased toward rewards for
actual results. Hence if a company underperforms, the executives typically receive a smaller fraction
of their potential pay. Conversely, if a company meets its annual objectives and the stock price
responds long term, the executives stand to receive a much larger payout.

This section of the site describes the typical Executive Compensation program and explains the most
commonly used terms. It includes several charts, including one below that shows the share of
compensation that is at risk by executives, as compared with managers and hourly employees.
The pay packages given to the senior executives of corporations often consist of six components:

Base salary

Performance based annual incentive (bonus)

Performance based long term incentive

Benefits

Executive perquisites

Contingent Payments

Executive pay is structured to reward company performance and align executive pay with
shareholder value. As a result, unlike most other employees, a majority of executive pay is at-risk; in
other words, executives may never receive it. However, if executives and the company perform well,
they along with the company's shareholders stand to gain much more from superior performance.

Evaluating Executive Compensation

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By JUSTIN KUEPPER Updated Jun 25, 2019

Executive compensation is a significant thing to consider when evaluating an investment

opportunity. Executives who are improperly compensated may not have the incentive to perform in
the best interest of shareholders, which can be costly for those shareholders.

While new laws and regulations have made executive compensation much clearer in company
filings, many investors remain clueless as to how to find and read these critical reports. This article
will take a look at the different types of executive compensation and how investors can find and
evaluate compensation information.

Types of Executive Compensation

There are many different forms of executive compensation, offering a variety of tax benefits and
performance incentives. Below are the most common forms:

Cash compensation: This is the sum of all standard cash compensation the executive receives for the
year. In the proxy statement, the company will list the base salary for each key member of the
management team, such as the chief executive officer (CEO), chief financial officer (CFO), legal
counsel, director of sales, and other divisional heads.

Option grants: This is a list of all options granted to the executive; the information includes strike
prices and expiration dates. Stock options, if used the right way, are a terrific way to inspire
management to maximize shareholder value. However, there is a downside to options
compensation. For example, management is awarded a significant options grant that is barely out of
the money, meaning if the stock price goes up a little, management will be able to exercise options,
convert them to common stock and sell the shares to reap a quick windfall.

Deferred compensation: This compensation is deferred until a later date, typically for tax purposes.
However, changes in regulations have lessened the popularity of this type of compensation.

Long-term incentive plans (LTIPs): Long-term incentive plans encompass all compensation tied to
performance for tax purposes. Current tax laws favor pay-for-performance compensation.

Retirement packages: These are packages given to executives after they retire from the company. It
is customary for some executives to receive health benefits upon retirement for years of service, or
other reasonable perks. These are important to watch because they can contain so-called golden
parachutes for corrupt executives or be payable regardless of whether the company meets its
financial objectives or is even profitable.

Executive perks: These are various other perks given to executives, including the use of a private jet,
travel reimbursements, and other rewards. These are found in the footnotes. Perks paid out to
executives at small companies should be subject to even greater scrutiny because this type of greed
is more likely to bankrupt smaller companies or contribute to annual deficits.

Finding Executive Compensation

All executive compensation information can be found in public filings with the Securities and
Exchange Commission (SEC). The SEC mandates all public companies to disclose how much they are
paying their executives, how this amount is derived, and who is involved in determining pay.1 The
information itself is disclosed in several locations, including:

Form 8-K: The current event filing can be used to disclose compensation information if the event is
related to changes in compensation policies and procedures.2
Form 10-K: The annual report filing is always used to disclose yearly compensation information.3

Form 10-Q: The quarterly report filing also contains quarterly compensation information.4

S-1/S-3 Forms: New issues contain executive compensation information relevant for future investors
to consider.5

Evaluating Executive Compensation

Evaluating executive compensation can be a difficult task for the individual investor. Luckily, there
are many tools available to make the process easier. These tools automatically parse SEC filings to
pull the numbers and make comparisons designed to give meaning to raw information.

Pay vs. Performance

One of the most popular ways to evaluate executive compensation is by comparing pay and
performance. Unfortunately, many executives are given raises and bonuses even when their
companies are faltering. Comparing pay to stock performance can help you determine whether
executives are overpaid.

The specific metric used most often is comparing the change year over year in executive pay
increases to the change year in stock price. If the change in the stock price outpaces the change in
pay, the executive is not overpaid. Here is an example of a comparison for Bill Gates, who was
Microsoft's CEO between 1975 and 2000 and the company's chief software architect and chair
between 2000 and 2006:

Source: ExecutiveDisclosure.com

Between 1998 and 2006, Bill Gates' compensation is tied pretty closely to the company's overall
performance. When the company makes more money, Gates receives more compensation and vice
versa. This is healthy because it provides executives with the incentive to perform well and increase
their wealth. Trends are showing executives receiving a higher rate than performance can mean
overcompensation for underperformance, which can hurt investors both in dollars paid out and
incentive to perform.

Peer Comparison
Another popular way to evaluate executive compensation is to compare one executive to other
industry peers. While market leaders typically have CEOs who are paid slightly more than their
industries, the majority of executives should be paid on par with their peers. Here is the same
example as above, except this time, it's a peer comparison instead of pay vs. performance:

Source: ExecutiveDisclosure.com

Here we can see that Bill Gates made more than the average executive in his industry over the
charted period. Sometimes, if the executive is the founder of the company or a high-class CEO, they
may deserve higher compensation. Because Bill Gates is both an industry mogul and the company's
founder, this may explain his comparatively higher compensation. Significant deviations between
these two in standard non-founder CEOs can indicate that they are overpaid.

Executive Compensation Laws

There have been many new laws passed to help satisfy investor concerns over executive
compensation. Changes in SEC reporting requirements have forced companies to include an
"Executive Compensation Discussion and Analysis" section to accompany future pay documentation
in all SEC forms. This section requires a "readable" explanation of how the compensation was
determined and what it encompasses.67

Other laws have been more direct in curbing practices the companies themselves use. One prime
example of this was the removal of the deferred compensation tax shelter that helped many
executives avoid millions in taxes.8 Moreover, improvements in other tax loopholes have made it
much harder for boards to justify large payouts and hide these payouts from investors.

The Bottom Line

Executive compensation is a very important issue for investors to consider when making decisions.
An improperly compensated executive can cost shareholders money and can produce an executive
who lacks the incentive to increase profits and boost the share price. Meanwhile, the government is
working to curb the problem with new laws that close loopholes and make the process more
transparent. Combined with new analysis tools, investors are now much more informed.
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be disclosed clearly in mandatory company filings. more

How to Perform Due Diligence on a Company

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Here's how to do due diligence for individual stocks. more

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Define Employee Stock Option (ESO)

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Designing Executive Compensation Plans

April 3, 2017

Scope—This article discusses considerations related to designing compensation plans for executives.
It discusses the primary design elements, practical issues and compliance with federal laws.
Overview

Incentivizing executives to meet business objectives is a critical factor in designing executive

compensation plans. Organizations can choose from several well-established methods to pay for the
performance of executives, often with significant tax advantages to the executive and the employer.

It has become increasingly more important to ensure that the public and elected officials can readily
grasp the reasonableness of executive compensation plans—especially in public corporations. Over
the past decade, executive compensation plans have come under significant regulatory and political
attack.

Seemingly lavish executive compensation garners high-voltage attention in print, TV and Internet
media. The public often does not understand that executive compensation is a matter of meeting,
and beating, global competition to attract the best and brightest executive talent. See CEOs Vastly
Overpaid, Most Americans Say.

At the same time, executive compensation plans have abused both public funds and the interests of
private shareholders. Directors of corporations, C-suite executives, division managers and HR
professionals struggle with how to design the right type of executive compensation plans to meet
corporate goals and still appear reasonable to a public that does not understand the complexities
and market challenges of the job.

Given this legal, social and political environment, a straightforward and well-balanced assessment of
key design issues is critical for HR professionals. See Corporate Directors Focusing on Executive
Compensation and Viewpoint: Making Executive Pay Work.

A sound executive compensation program depends on good governance and well-established

compensation philosophies, policies and practices that are closely aligned with the organization's
overall goals and objectives.

Expanding the executive compensation package beyond a base salary and an annual cash incentive
plan involves a number of accounting, tax, regulatory, cost and documentation issues. When
considering the range of alternatives, employers should seek the advice and counsel of
knowledgeable legal, technical and consulting professionals.
HR's Role

Within the realm of human resource management, the field of compensation and benefits has
emerged as an area of specialization. As with other professions, specialization has proved to be a
pathway to financial success for HR professionals. See HR Compensation: It Pays to Specialize.

The role of HR with regard to designing and managing an executive compensation program is varied.
The most basic role an HR professional plays is being in a position to inform management of the
benefits, costs and array of options in launching or improving an executive compensation program.
This responsibility also includes assessing the adequacy of the technology being used in the incentive
compensation program.

HR professionals are key in determining what in-house and outside expertise is necessary and
sufficient to handle an executive compensation program. Almost every organization needs some
degree of outside expertise for the design and management of an effective executive compensation
program.

Communications

Communication is one of the most important and common roles of HR professionals with respect to
executive compensation programs, and it is a key component for success. Communications take
place with other compensation professionals, the executives at issue, the board of directors, and
possibly the media and governmental agencies.

The failure of many executive compensation programs can be linked to failures in the
communication process, such as the following:

Failure to obtain employee input in programs that will actually incentivize executive performance.

Failure to clearly define performance goals up front.

Failure to state performance goals that are within the scope of influence of the target employee.

Changing performance standards midstream.

Judging employee performance according to standards that were not stated in written
documentation.
Providing job descriptions that do not reflect the goals set forth in the executive compensation plan.

Effective communication can also avert employee perceptions of unfair executive pay. Having a
clearly communicated compensation philosophy that addresses the company's executive
compensation strategy can be beneficial.

The U.S. Securities and Exchange Commission (SEC) issued a rule requiring U.S.-based publicly traded
companies to disclose how median employee pay compares with CEO compensation. Employers
must reveal this information for their first fiscal year beginning on or after Jan. 1, 2017. After that,
they must identify the median worker wage once every three years—or more frequently if their
workforce or pay arrangements significantly change. See How to Counter Employee Perceptions of
Income Inequality and 'My Pay Isn't Fair,' Nearly Half the Workforce Thinks.

Metrics

As with any effort to improve organizational performance, metrics are key. Organizations spend a lot
of time on executive compensation plans, so they should make sure they are getting their money's
worth. The metrics should establish a baseline of where the organization is before the changes are
applied and measure the results with the same methodology at the end of a specific time period. See
The Compensation Scorecard: What Gets Measured Gets Done and CEOs and Directors Disagree on
Performance Metrics.

Technology

Enterprise incentive management (EIM) and incentive compensation management (ICM) technology
are categories of software and services for automating variable-pay processes, which can be
powerful behavior modification tools and further HR's role as a valued business partner. This
technology analyzes, tracks and pays bonuses, commissions and other types of variable
compensation. It collates data from various systems to provide management with a comprehensive
picture of payout versus performance, and it does so more efficiently than unwieldy manual entry
systems. Automation makes it possible to rapidly generate and analyze compensation reports more
efficiently than manually digging through numerous files to find and compile figures.

Plan Design
Designing an effective executive compensation plan requires organizations to balance shareholder
alignment, performance-based pay, recruitment and retention, and the assessment of cost versus
perceived value. A long-term compensation plan with performance-based incentive vehicles can
help achieve that balance.

Executives are privy to a wide range of compensation arrangements. Executive compensation

arrangements may include several employees, or they may consist of individual agreements
between the organization and one executive. According to the Center on Executive Compensation,
"Executive pay arrangements typically consist of six distinct compensation components: salary,
annual incentives, long-term incentives, benefits, perquisites and severance/change-in-control
agreements."1 See High-Performing Companies Pay Executives Differently.

The following are some of the latest trends in executive compensation:

A higher percentage of executive pay is now linked to performance, based on measures such as
income, profit and cash flow.

Pay incentives are more focused on long-term results. 2013 marked the first time long-term
incentives became the single heaviest component in CEO pay packages, according to Hay Group.2
Long-term incentives like stock options now make up about 61 percent of total direct compensation.

Companies have cut back on perquisites for executives, especially the types most likely to raise
shareholder ire—such as cushy severance packages, tax gross-ups on golden parachutes, spousal
travel, cars and security. Personal jets remain the most popular perk, though, and haven't lost
ground, Hay Group says.3

See Job-Changing Executives Saw Big Pay Increases Last Year and CEO-to-Worker Pay Disparity
Increases.

Recently, politicians and the media have made a case that prevailing executive compensation
practices drive employees to take short-term risks with little consideration for long-term effects on
the organization and the overall economy. Regulatory proposals have suggested that employers
offer more pay through restricted stock or other forms of long-term incentives designed not to
reward short-term performance. Researchers from Washington University in St. Louis reviewed data
from filings of more than 700 large publicly traded firms in the U.S. and found that a large number of
firms manipulate data to meet short-term targets. While the research did not find evidence of fraud
or illegal activity, it does question whether these firms are acting in the best interest of shareholders
in the long term.4
Total compensation strategy

Each element of an executive compensation plan contains various degrees of accounting, tax and
regulatory considerations. Organizations need to develop a strategy for how they will use each of
these elements. The total compensation strategy should address all the elements of the executive
compensation plan.

See:

10 Executive Comp Issues for Aligning Pay Strategy

Setting Goals for Executive Incentive Plans

When determining the appropriate compensation strategy, employers should consider the following
organizational factors:

Business philosophy, mission and vision.

Business plan or strategy.

Life cycle, organizational structure and business processes.

Workforce composition and demographics.

Tax and accounting regulations.

Industry and competition.

An organization's business philosophy encompasses its basic values and beliefs and defines the
environment in which a total compensation strategy is to be administered. Mission and vision
statements normally set the employer's culture and philosophy as well as its total compensation
strategy. Similarly, the organization's business plan outlines the executives' key performance
measures and total compensation plan.

The total compensation strategy should also address benefits such as health care, retirement, life
and disability insurance, and capital accumulation plans. These types of benefits, unlike vacation,
holiday and paid-time-off plans, are directly affected by changes in business conditions, which in turn
affect the organization's total compensation strategy.
Compensation rates and trends among comparable organizations are important factors in
determining the direct and indirect pay that organizations may provide an executive.

See Five Executive Pay Challenges and Responses.

Direct compensation

After reviewing and determining the factors associated with the total compensation strategy,
employers typically identify target amounts for each element of the executive compensation plan
and express them as a percentage of base salary.

For many jobs in an organization, base pay rates are heavily influenced by compensation trends in
the local or regional labor market. For executive-level jobs, the direct pay criteria are predominantly
the type of industry and the size of the organization as measured by sales revenue or assets. See
Executive Pay: How Much Is Too Much? and SHRM Compensation Data Center.

Annual incentives and bonuses

Annual incentives and bonuses are common ways to provide incentive compensation to corporate
executives. Bonuses may be paid as a fixed amount or as a percentage of sales or profits. Generally
organizations base annual bonuses on a predetermined percentage of profits.

Within the specialty of compensation, incentive compensation has grown in importance as

organizations continue to refine their methods of paying for performance. Executive compensation
has increasingly come under the pay-for-performance methodology. Performance-based cash
bonuses are used by organizations as a source of motivation for executives to reach both
organizational and individual goals. See Top Executives Earn Performance Bonuses Despite 'Tepid
Growth' and Mid-Market Executive Pay Shows Momentum.

Bonus percentages can vary widely depending on the industry, on an organization's view of the at-
risk element of direct pay, on a job's level in the organizational structure, on numerous combinations
of the priorities and objectives of the overall organization or a specific unit or department, and on an
individual's job performance.
Long-term incentives

Long-term incentive plans are another distinctive element of many executive pay packages. These
plans typically have performance measurement periods of three years or more and are provided to
select top managers whose decisions and actions have a direct impact on the performance and
success of the entire organization. See CEO Pay Mix Is Changing, Emphasizing Long-Term Incentives.

The most common form of long-term incentive arrangement among organizations with publicly
traded stock is the nonqualified stock option. With this type of incentive, participants are granted a
right or option to purchase stock from the company at a specific price—usually the fair market value
of the stock when the option is granted.

The option to purchase shares continues over an extended period that is measured in years.
Presumably, sustained good performance by the organization will lead to a higher market price for
the shares when they are sold at a future time. The executive can realize a monetary gain by
exercising the option to purchase shares at a lower price and concurrently or at a later date sell the
shares at a higher market value. Of course, if the market price of the stock falls below the price paid
by the executive at the time the option is granted, the opportunity for compensation under the plan
is nullified. If a stock option will not return a profit for reasons beyond control of the executive (for
example, a natural disaster, terrorism or a scandal involving a different executive), then the incentive
value is lost and the executive may lose motivation to perform in his or her area of responsibility; in
fact, the executive may be motivated to seek more favorable compensation elsewhere. See Do Stock
Options Work as an Employee Incentive? and Apply Long-Term Incentive Plans at Private Firms.

Stock plans

Incentive stock options and restricted stock grants are two other forms of longer-term incentive
plans employers use to give executives an opportunity for significant additional compensation.

Each plan has different eligibility, grant size or company and personal tax implications. The plans
may be used alone or in combination with nonqualified stock options.

Organizations that do not have publicly traded stock may provide executives with longer-term
compensation plans by using other types of organizational performance measures. These can
include phantom stock arrangements, wherein the value of a hypothetical stock unit that may be
granted is linked to the book value of the organization at various points in time, or the appreciation
in the value of a hypothetical unit is determined with a precise formula.

See:

Phantom Stock—It's Alive!

Incentive Pay Metrics: The Long and the Short of It

New Rules Govern Employee Stock Purchase Plans and Incentive Stock Options

Ensure the Strategic Use of Stock-Based Pay

Perquisites/benefits plans

Executive compensation packages frequently include a number of indirect pay or noncash privileges
called perquisites or perks. Employers have long used special perks and fringe benefits to attract,
reward and improve the productivity of executives. These perks are generally noncash fringe
benefits that provide an immediate financial reward and are given in addition to wages, commissions
or incentives.

Perks include employer-provided vehicles, paid meals and lodging, use of eating and athletic
facilities, paid entertainment expenses, participation in educational reimbursement plans, free
parking, vacations, country club memberships, cellphones and laptops, and much more.

Many organizations also offer executives supplemental health and welfare benefits. Some of these
may be automatic and fully paid (or reimbursed) or provided by the employer. Some organizations
may even make a range of choices available to the executive, either within an existing pretax
payment plan provided to all employees or as a voluntary out-of-pocket, after-tax expense to be
paid by the executive.

Among these types of executive benefits are the following:

Supplemental life insurance.

Split-dollar life insurance.

Supplemental disability insurance.

Long-term care insurance.

Job-related liability insurance.

Supplemental medical insurance or reimbursement.

Extra or special vacation day allowances or sabbatical leave of absence.

Although the use of perks has been a longstanding practice, many organizations have started cutting
back on perks and fringe benefits they provide to executives as a result of increased scrutiny and
government regulations.

See Some Executive Rewards Decline; Other Perks Hold Steady and Fewer Companies Offer CEOs
Perks and Incentives.

Additionally, the value of all fringe benefits must be included in an employee's wages for income tax
and employment tax purposes, unless they are specifically excluded or exempt from taxation. See
Executive Compensation—Fringe Benefits Audit Techniques Guide.

Four categories of noncash fringe benefits can be excluded from an executive's gross income for tax
compliance purposes:

No-additional-cost services. These are free services provided to all employees in which the employer
incurs no substantial additional cost in providing the service, and the service is normally offered to
the employer's customers in the line of business.

Qualified employee discounts. These are discounts provided to all employees on the selling price of
certain property or services in the ordinary course of the employer's business. In the case of
merchandise, the discount cannot exceed the gross profit percentage of the price at which the
property is offered to customers. For services, the discount may not exceed 20 percent of the price
at which the service is offered to customers.

De minimis fringe benefits. These include property or services provided to all employees that are so
minimal that accounting for them would be unreasonable or administratively impractical. See De
Minimis Fringe Benefits.

Working condition fringe benefits. These consist of the fair market value of any property or service
provided to an employee to the extent that if the employee paid for that property or service, the
payment could be claimed as a business deduction. The fair market value of a working condition
fringe benefit is excluded from the employee's gross income if the employee could have deducted
the expense as a business expense if he or she purchased the item directly.
See Employers Tax Guide to Fringe Benefits.

Retirement plans

Plans that do not meet the guidelines required to receive favorable tax treatment are known as
nonqualified plans. These plans are exempt from the restrictions placed on qualified plans and are
typically used to provide additional benefits to key or highly paid employees, such as executives and
officers. Nonqualified plans are not "qualified" under the Internal Revenue Code or the Employee
Retirement Income Security Act (ERISA), the way 401(k) plans are, for instance, because nonqualified
deferred compensation (NQDC) plans are offered only to certain highly compensated employees.
That means they are exempt from most ERISA and reporting requirements; there are no caps on
contributions and no minimum distribution rules. However, to ensure exemption from ERISA
mandates, employers should offer the plan to no more than the top 10 percent of earners. See
Nonqualified Deferred Compensation Audit Techniques Guide.

Deferred compensation

Due to the limitations imposed on qualified plans, such as 401(k) plans, under the Internal Revenue
Code and Employee Retirement Income Security Act (ERISA), executives are often not given the
opportunity to fully participate in an employer's tax-deferred savings plans. Nonqualified plans give
an organization the flexibility to design an arrangement to compensate a select group of managers
and highly compensated individuals. These nonqualified plans give executives the opportunity to
defer taxation of compensation and investment earnings until retirement or some future date.

NQDC plans are one of the most popular nonqualified compensation options. These plans allow
executives to defer part or all of their compensation until a time in the future, thus significantly
reducing their tax liability in some cases. However, for the plan to retain a tax-deferred status, it
must meet the following criteria:

The employee is not in constructive receipt of the amount promised, which means the employee has
no right to receive or turn down the benefit.

The employee does not receive an economic benefit from the compensation; for example, the
employee cannot use the promised benefit as security for a loan.

A substantial risk of forfeiture must exist; that is, the executive's ownership is contingent on meeting
certain conditions and goals, and ownership is forfeited if those goals or conditions are not met.
The plan usually credits interest to the deferrals, which allows executives to maximize tax-deferred
growth and take their total earnings over an extended period of time. Executives can choose to defer
a significant amount of their salary or bonus and write their own pre- and post-retirement options.
As executives' needs change, so can the amount of deferrals and future payout arrangements.

Supplemental executive retirement plans

One example of a nonqualified benefits plan is a supplemental executive retirement plan (SERP). A
SERP may be offered to meet a number of different goals, including making up benefits lost in other
retirement plans. Unlike a deferred compensation plan, a SERP is generally paid solely by the
employer to offset the disparity in retirement benefits between key executives and other
employees. The SERP provides retirement benefits that may not be provided through the employer's
regular retirement plan because the level of benefits would cause the plan to violate
nondiscrimination rules or would exceed specified caps on maximum benefits or compensation that
can be provided. See SERPs Sweeten Tax-Exempt's Executive Pay.

A SERP can take into account all executive income, including bonuses and other incentives that
exceed the compensation dollar limit for qualified retirement plans. For organizations with defined
benefit pension plans, this is an attractive solution to retention.

Rabbi trusts

Protecting the plan assets ensures that executives receive the benefit promised in case of a change
of control due to mergers or acquisitions of the company. The most popular trust vehicle in use
today is the rabbi trust, which is a trust established by an employer to provide a source of funds that
can satisfy the employer's obligation to executives under one or more nonqualified plans. The rabbi
trust is used to provide the executive with assurance that the employer will pay the promise when
due. However, the assets of the trust are always subject to some risk of loss because they are
subject to the claims of the employer's creditors in the event of the employer's bankruptcy or
insolvency.

Golden parachutes

Golden parachutes are executive compensation arrangements under which a corporation agrees to
pay amounts—often in excess of the executive's usual compensation—if the corporation undergoes
a change in ownership or control. Golden parachutes are often used by employers as a defensive
measure to prevent hostile takeovers under the assumption that the guarantee of additional
financial benefits to executives will increase the cost of the acquisition and, thereby, discourage
prospective purchasers. See 'Golden Parachute' Payments Up by 32% Over Two Years at Large Firms.

A parachute payment is any payment, in the nature of compensation, to a disqualified individual

(i.e., shareholders, officers or highly compensated individuals, including corporate directors) that is
contingent on a change in ownership or effective control of a corporation, or in the ownership of a
substantial portion of its assets. In addition, the aggregate present value of payments in the nature
of compensation must equal or exceed three times the individual's base compensation amount.

Payments that are not contingent on a change in control may still be treated as parachute payments.
Payments in the nature of compensation that are made to or for the benefit of a disqualified
individual, pursuant to an agreement that violates generally enforced securities laws or regulations,
are subject to regulation as securities violation parachute payments.

A parachute payment can come in the form of cash or property, including the spread on the exercise
of a stock option, pension proceeds, insurance or annuity proceeds and payments made pursuant to
a covenant not to compete.

The golden parachute rules were expanded in 2008 to apply in the event of a severance from
employment by a covered executive of an employer that participated in the U.S. Department of the
Treasury's Troubled Asset Relief Program (TARP). Because of the potential for abuse that is implicit
in such arrangements, excess parachute payments that exceed three times an executive's
compensation are subject to tax penalties. Amounts equal to the excess of any parachute payment
made over the portion of the base compensation amount allocated to the payment are considered
excess parachute payments.

Excess parachute payments may not be deducted by the employer. The disqualified individual is also
subject to a nondeductible excise tax (in addition to applicable state and federal income taxes and
Social Security taxes) of 20 percent of the amount of the excess parachute payment. The amount of
an excess parachute payment may be reduced if there is evidence that the payment was reasonable
compensation for services rendered by the disqualified individual prior to a change in ownership or
control.

The Internal Revenue Service (IRS) has provided a safe harbor method for valuing compensatory
stock options. The following payments are exempt from treatment as parachute payments and, thus,
may be deducted by the employer and do not subject the recipient to the 20 percent excise tax:
Payments with respect to a small domestic business corporation.

Payments with respect to a corporation in which, immediately before the change in ownership or
control, no stock is readily tradable on an established securities market or otherwise; and payments
that have been approved by more than 75 percent of the corporation's shareholders.

Payments to or from a qualified plan, including a tax-sheltered annuity, simplified employee pension
(SEP) plan or savings incentive match plan for employees (SIMPLE).

Payments made by a tax-exempt organization undergoing a change in ownership or control.

Payments of reasonable compensation for services to be rendered on or after the change in

ownership or control (including payments made pursuant to a covenant not to compete).

See IRS: Golden Parachute Payments Guide.

Compensation agreements

The various elements of direct and indirect compensation included in the pay package of an
executive are often expressly outlined in a formal employment agreement that spans multiple years.
See Agreement: Executive Employment Agreement.

These agreements may also include special severance pay arrangements that become effective when
an involuntary termination occurs or simply when there is a change of control due to a merger or
acquisition.

Some employers also establish formal plans for deferring current compensation to a point in time
when an executive's marginal tax rate may be lower. In addition, it is not uncommon for executive
pay packages to include one or more (nonqualified) deferred compensation plans specifically
designed to provide retirement income that, in effect, makes up for benefits payments that would
have been available from any qualified (ERISA) plan or plans provided to all employees, were it not
for a number of regulatory limitations on contribution, covered compensation and maximum benefit
amounts. In some organizations, for example, other deferred plans are instituted simply to provide
supplemental retirement income for a select group of highly paid personnel as an incentive to
encourage prospective midcareer executives to join an organization.

Golden handcuffs
Although definitions vary, the general idea of golden handcuffs is to cause financial hardship to
senior managers and executives if they leave the organization before the organization wants them to
leave. A golden handcuff is a benefit, payment or incentive linked to the recipient staying for a
specified period of time.

There are many ways financially to bind an employee to an organization, such as requiring the
employee to reimburse the company for a hiring bonus or for education or relocation expenses if the
employee leaves for a new job within a one- to three-year period. Golden handcuffs may do little to
retain very wealthy executives who can easily shrug off the financial hit.

To bring home the consequences of leaving early on highly compensated executives, employers can
use various kinds of NQDC plans. Typically these are set up as 401(k) mirror accounts. To executives,
it seems just like a 401(k) account, allowing them to put aside some of their own salary, with a
match, to be paid out either at retirement or at some point in the future. This approach gives highly
compensated executives flexibility to invest money for retirement without immediate tax
consequences. Another similar tactic is to provide a supplemental employee retirement plan that
acts like a pension—as long as the employee makes it to retirement with the organization. The major
disadvantage of retirement-based handcuffs is that they may be far less effective with younger
executives.

Stock options with a vesting period are another common retention tool. Typical vesting periods
range from one to three years and often include some kind of rolling schedule. As executives
become fully vested and can exercise options, they pick up other options with a new, later vesting
period.

Employers may also offer split-dollar insurance plans. Some executives have large estates that will be
subject to hefty estate taxes when they die. To address this concern, some organizations pay for life
insurance policies, the proceeds of which will be paid to family trusts, free of estate taxes, after the
executive dies. An executive who leaves the company before death or retirement loses that
insurance. When considering split-dollar insurance, it is imperative to review the details carefully,
keeping in mind that premiums may not be deductible by either the employee or the employer.

Compliance Issues

Compliance with the many legislative and regulatory requirements surrounding executive
compensation and NQDC plans is critical to avoid sanctions, fines and potential disqualification of
the plans themselves.
Over the past several years, Congress and other governmental agencies have made significant
changes to the rules governing executive compensation and NQDC plans.

Employers that maintain NQDC plans for executives must be aware of these rules, which require that
many of these plans be amended periodically. Additionally, employers must address new tax
reporting rules, disclosure statements and proxy statements.

SEC rules

At the federal level, the SEC defines what executive pay items must be disclosed to shareholders or
filed with the SEC. The SEC also has oversight responsibility for financial accounting, which is
currently more directly controlled by the Financial Accounting Standards Board (FASB), a privately
funded organization that promulgates rules on financial accounting to be followed by organizations
and independent financial auditors.

The SEC requires in-depth disclosure of executive compensation, pursuant to rules that are designed
to accomplish the following:

Provide shareholders with a clear and concise report of all the compensation paid to an
organization's principal executive officer, principal financial officer, highest-paid executive officers
and directors.

Clarify and explain the reasoning underlying fundamental compensation decisions.

The U.S. Securities Act, the Securities Exchange Act and the Investment Company Act require certain
companies to file public disclosures with the SEC.

See:

Less Freedom to Pay: Executive Comp After Financial Regulatory Reform

Reporting CEO-to-Employee Pay Ratios: Navigating the Minefield

For 2010, SEC Revises Executive Comp Disclosure Amendments

In a section called Compensation Discussion and Analysis, the SEC requires detailed disclosure of
three categories of executive compensation:

Compensation with respect to the past fiscal year, as reported in a Summary Compensation Table
that reflects current and deferred compensation and compensation composed of current earnings or
awards provided under the plan.

Holdings of equity-related interests that pertain to compensation or are potential sources of future
gain.

Retirement and other post-employment compensation, including retirement and deferred

compensation plans, other retirement benefits, and post-employment benefits.

An employer must disclose compensation policies for nonexecutive officers if the policies create risks
that are reasonably likely to have a material adverse effect on the company.

In disclosing executive compensation, organizations (other than small business issuers) are initially
required to provide a narrative overview of the compensation program maintained for named
executive officers. The Compensation Discussion and Analysis must address all material elements of
the organization's compensation arrangements, including the following:

The objectives of the company's compensation program and what the program is designed to
reward.

Each element of compensation.

How the employer chooses to pay each element of compensation.

How the employer determines the amount for each element.

How the element of compensation and the organization's decisions regarding that element fit into
its overall compensation strategies and affect decisions regarding other elements of compensation.

The SEC adopted a final rule mandated by Section 953(b) of the Dodd-Frank Wall Street Reform and
Consumer Protection Act that requires a public company to disclose the ratio of the compensation of
its CEO to the median compensation of its employees. The rule provides shareholders with
information they can use to evaluate a CEO's compensation and requires disclosure of the pay ratio
in registration statements, proxy and information statements, and annual reports that call for
executive compensation disclosure. Companies are required to provide disclosure of their pay ratios
for their first fiscal year beginning on or after Jan. 1, 2017. The rule does not apply to smaller
reporting companies, emerging growth companies, foreign private issuers, multijurisdictional
disclosure system (MJDS) filers or registered investment companies. The rule does provide transition
periods for new companies, companies engaging in business combinations or acquisitions and
companies that cease to be smaller reporting companies or emerging growth companies. See SEC
Pay-Ratio Rule Spotlights CEO Compensation and Trump Orders Dodd-Frank Review; SEC Requests
Comments on CEO Pay Ratio.

In 2015, the SEC proposed the Exchange Act Rule 10D-1 that would direct national securities
exchanges and national securities associations to establish listing standards requiring issuers to have
policies for the recovery of erroneously awarded compensation, which are commonly referred to as
"clawbacks." See In 'Clawback' Policies, Triggering Actions Vary.

Troubled Asset Relief Program (TARP)

The U.S. government created TARP to buy distressed assets from financial institutions in response to
the 2008 financial crisis. The program was created through the Emergency Economic Stabilization
Act of 2008 and is managed by the Office of Financial Stability at the U.S. Treasury. TARP was initially
designed to buy distressed mortgage-backed securities from financial institutions, but it evolved to
encompass corporate debt and inject equity into banks. Institutions that participated in this program
were subject to more oversight from the government and limits on executive compensation. In Dec.
2014, Treasury announced the sale of its remaining shares in the last exceptional assistance recipient
under TARP essentially ending the program. See TARP: Executive Compensation.

Sarbanes-Oxley Act

The Sarbanes-Oxley Act, also known as SOX, came into force in July 2002 and introduced major
changes to the regulation of corporate governance and financial practice. SOX contains sweeping
provisions relating to corporate governance and accounting reforms, executive compensation and
employee benefits. See Excess Benefits: A Potential Pitfall for Nonprofit Insiders and Sarbanes Oxley
10 Years Later.

SOX contains the following provisions:

Public companies may not make personal loans to their directors and executive officers.

Insiders cannot trade in company stock during certain blackout periods.

Plan administrators of individual account plans like 401(k)s must give a 30-day advance notice of any
blackout period.

CEOs and CFOs must repay certain compensation if earnings are restated.
Penalties are increased for ERISA violations.

Employee Retirement Insurance Security Act

A fundamental question employers must ask themselves is whether their executive compensation
plans are covered by ERISA. If so, certain disclosure and reporting procedures are mandated, and
administrators of the plan may be deemed "fiduciaries" subject to individual liability.

A nonelective retirement plan maintained in conjunction with a qualified retirement plan may
provide for benefits under the qualified plan's formula, to the extent they cannot be provided by the
qualified plan because of the limitations of §415 of the Internal Revenue Code. This plan is called an
"excess benefit plan," and it is exempt from ERISA coverage. Therefore, it is a contract subject to
state contract law. Any other nonelective, unfunded retirement plan that covers a select group of
highly compensated employees is known as a top-hat plan and is subject to ERISA.

If an excess benefits plan is amended to provide benefits that are restricted because of the
compensation limitation of §401(a)(17) of the Internal Revenue Code, the plan will become a top-hat
plan because it is no longer limited to excess benefits.

Other executive compensation arrangements may be subject to ERISA enforcement if they are found
to provide welfare benefits of the type covered by ERISA. Regardless of whether the arrangement
provides for welfare or retirement benefits, the initial inquiry often focuses on whether the
arrangement is a "plan." Given the broad scope of ERISA's definition of a plan, benefits provisions
contained in employment agreements or memoranda are likely to be enforceable under ERISA.

Internal Revenue Code

Section 409A of the Internal Revenue Code defines coverage for NQDC plans. For deferral decisions
to be in compliance, the election to defer must have been made in the year before the year in which
services were performed, within 30 days after first becoming eligible or within six months before the
end of a performance-based compensation plan of at least 12 months. See IRS Begins Section 409A
Compliance Initiative.

Distributions may be made only for the following reasons:

Separation from service.

Disability.

Death.

Date specified on election date.

Change in company ownership.

Unforeseen emergency causing financial hardship (with amount limited to the amount of the
emergency need).

Termination of the plan.

When an executive receives the deferred amount, it is taxed as ordinary income. An exception is if
the deferral is shares of stock and the executive made an election in accordance with Internal
Revenue Code §83b within 30 days of being informed of the award. In this situation, the executive
would be taxed at the time of deferral at the current value of the stock and long-term capital gains
tax on the increase in stock value when received. However, the executive forfeits the paid tax if he
or she is unable to collect the deferral. Furthermore, employers are not required to allow executives
to make an §83b election or even to defer income.

Global Issues

Incentive compensation programs are likely to produce a significant pay gap between persons in the
program and persons outside the program, particularly in global organizations in which competition
for the most qualified, internationally capable executives is fierce.

Components Of An Executive Compensation Plan

The components of an executive compensation plan vary widely across companies. How incentive
vehicles are structured and implemented vary even more widely. Below are the most common
components of an executive compensation plan:

Base Salary

The standard wage paid to an executive that typically is the largest share of an annual compensation
package.

Bonuses (Short-term incentives)

Distributions for annual milestones or reaching incentivized goals that are typically cash-based.

Get immediate access to our annual CEO & Senior Executive Compensation Report for Private
Companies, with detailed information on salaries, bonuses, equity grants, benefits, perks, as well as
how these elements vary by company size and more.

Long-term incentives

Vehicles used to share long-term value creation with employees. These are often tied to equity or
enterprise value.

Benefits

Non-cash compensation provided to an employee on an annual basis. These typically include

elements like health and life insurance, defined benefit or contribution plans, and paid vacations.

Perquisites

Privileged grants to employees in addition to their other compensation. These can include
everything from a company car to a business-paid cell phone.

Talent management: a key component of HR

By Kathy Gurchiek

January 25, 2006

Talent management is a top priority at organizations, although the success and quality of those
strategies vary, according to the latest survey by the Society for Human Resource Management
(SHRM).

Talent management is becoming an important component of human resource management, SHRM

survey research specialist Shawn Fegley writes in the 2006 Talent Management Survey Report
released Jan. 25.

Talent management strategies are designed to attract, develop, retain and use employees with the
necessary skills and aptitude to meet a businesss current and future needs.
Fegley notes that talent management has evolved from an administrative process into a continuous
organizational practice that includes succession planning, leadership development, and retention
and career planning.

Three-fourths (76 percent) of 203 respondents in the poll said talent management is a top priority at
their organization, and, among those ranking it a top priority, 90 percent were at organizations with
500 or more employees; 69 percent were medium-sized employers (100 to 499 employees), and 75
percent were small (one to 99 employees), according to a September e-mail poll of SHRM members.

Very successful organizations like Yahoo Inc., the subject of an SHRM Foundation DVD on talent
management, are well-known for their corporate culture and making talent management a top
priority, Fegley says in the report.

More than half (53 percent) of 384 HR professionals surveyed said their organization has specific
talent management initiatives in place. Organizations with such initiatives, the survey found, were
more likely to:

Have formal budgets for recruiting candidates and developing and retaining employees.

Consider talent management a top priority for their organizations.

Be large organizations with 500 or more employees; publicly or privately owned for-profit
organizations; and have five or more staffers in their HR departments.

Have HR working directly with employees or managers in talent management. More than three-
fourths of those polled said this was the case.

Have their HR people rate their organizations more highly regarding workplace culture, planning,
development opportunities, professional advancement, reward management, recruitment and
retention.
They also were slightly more likely to prepare junior or mid-level employees for senior leadership
roles.

Not surprisingly, the survey found, HR was primarily responsible for recruitment, with development
and retention falling to the employees supervisor. However, less than one-third (31 percent) of
those polled said their organizations had formal budgets for retaining employees, and overall the
retention budget was significantly lower than for recruiting and developing employees.

Building a deeper pool of people who could move up at every level topped a list of areas where their
organizations needed to improve talent management practices, HR professionals said.

The other three areas were:

Creating a culture where employees want to stay with the organization.

Identifying gaps in the competency levels of employees and job candidates.

Creating policies that encourage career growth and development opportunities.

The degree of quality and the success that organizations have with talent management varies, the
report concluded, and organizations that use more outcome-driven practices in their talent
management and are committed to comprehensive talent management systems tend to be more
successful.

Implementing and maintaining a talent management plan can be a challenge since it is a constantly
evolving process, and HRs role is vital, Fegley concludes.

It is important that HR professionals take the lead in helping to create and integrate talent
management initiatives within their organizations because these initiatives are extended to all
employees.

Talent Management
Knowledge Hub

Updated April 9, 2021

Human resources plays many roles in a company. The department manages employee relations,
talent acquisition, payroll, onboarding, and much more. One more duty of HR is talent management.

This is key to keeping your organization moving ever closer to its goals.

Discover:

What Is Talent Management?

The importance of Talent Management

Talent Management Model

Talent Management Strategy

Building Your Talent Management Strategy

The Talent Management Process

The 7 Steps of a Great Talent Management Process

What Is Talent Management?

Talent management is a constant process that involves attracting and retaining high-quality
employees, developing their skills, and continuously motivating them to improve their performance.

The primary purpose of talent management is to create a motivated workforce who will stay with
your company in the long run. The exact way to achieve this will differ from company to company.

Talent management in HR

Talent management naturally encompasses many of the responsibilities of HR.

All the same, it is not enough to expect that just because you have an HR department, you are
managing talent.
You need to have a talent management strategy in place designed just for your company to gain
optimal results.

The importance of Talent Management

The simple answer is because it capitalizes on employees — arguably, the most important asset of
your company.

Talent management helps you maximize the value of employees.

The importance of Talent Management

Source: www.mckinsey.com

As you can see from the graph above, there is widespread agreement that talent management is
effective (or even very effective) at attracting and retaining talent as well as improving overall
performance.

There are a few main reasons why this is the case.

1. It helps businesses improve performance

With top specialists in your organization, you can reach any goal.

Image displays relationship between talent management practices and outcomes: rapid talent
allocation, positive employee experience, strategic HR team and their effect on effective talent
management.

Source: www.mckinsey.com

Talent management is most effective of all when it combines three key components: rapid talent
allocation, positive employee experience, and a strategic HR team.
2. It allows companies to stay competitive

By hiring and developing talented employees, your organization becomes stronger and better
prepared to face changes and risks.

3. It drives innovation

New technologies are always hitting the scene, whatever your industry. Talented employees are able
to find ways to harness the capabilities of new tools and solve problems or come up with original
ideas.

4. It helps form productive teams

The appropriate talent management strategy will allow you to form a more productive team. This is
far more useful than just having a bunch of creative and talented people in your organization.

5. It decreases turnover

When employees feel valued at a company, when they know they will have plenty of opportunities
to grow in the business, they are less likely to seek work elsewhere.

6. It leads to strong employer branding

Talent management brands your company as an employer. This helps you to attract the best
candidates for future hires.

7. It motivates others to grow

Having inspiring talent on your team will motivate other employees and help them grow.

Talent Management Model

Talent Management Model displayed as a circle with its main stages: planning, attracting,
developing, retaining, and transitioning of employees.

Source: expert360.com
Whereas there is no standardized model for talent management, some HR professionals have
proposed excellent models that any company can use.

However you choose to develop your model, it must include the following.

1. Planning

Planning aligns your talent management model in line with the overall goals of your organization.

Only with the correct planning can you ensure that you seek talent with the right skills and
experience. In addition, it assesses current employees to see what is working well for the company.

For instance, if employees with certain characteristics tend to stay at the organization for longer, you
should plan to hire more workers like them.

2. Attracting

It is not always as simple as when one person leaves the company, you start a search for someone
else to fill the role.

For instance, your needs may change or employees may take on new responsibilities. Talent
management ensures that you always have sufficient staff to carry out all your operations and
prevent heavy workloads that could cause demotivation.

The right strategy will attract just the kind of workers you want at your business. Such hires will be
driven, skilled, and seeking to advance within the company.

Attracting talent is all about branding your company as an employer. You’ll need to find ways to
increase visibility in ways that allow you to present company as a best place to work. The main
consideration here is to make your business more approachable.
Even if you choose not to hire someone for a particular position, you still need to create a positive
experience. This will give you the opportunity to hire these candidates for other jobs or use them as
ambassadors to acquire other talent.

3. Developing

The development part of the model involves taking steps to help talent grow within the company.

It should be aligned with the employee development plan and includes identifying roles where
particular employees could move to in the future as well as considering how to expand workers’
skills and knowledge to fulfill new challenges facing your organization.

Talent management also looks at what will keep employees at your company enthusiastic and willing
to go the extra mile. It is necessary to provide employees with value.

Motivation also requires the correct onboarding — to give new hires a great impression of your
company from the very beginning. This will increase the chance that they stay with the company and
work hard.

4. Retaining

Another purpose of talent management is to keep people at your company for longer.

Employees need to continue feeling that the company is an enjoyable, meaningful place to work.

Through training and other types of engagement, employees have the chance to create a career
without leaving the company. You may achieve this by focusing on compensation (monetary and
otherwise) as well as company culture.

5. Transitioning

After hiring and developing their skills, you need to plan for employees’ transitions.
Your aim at this stage is to keep their knowledge within the company — this is called knowledge
management.

You need to have a plan in place to promote employees or move them to another role, department,
or office. If a worker does decide to leave, you need to know why.

Talent Management Strategy

A talent management strategy is based on the talent management model. It should match your
organization’s goals and clearly define what type of talent you need.

You organize the talent management process based on the talent management strategy.

There are few different types strategies you can choose from.

Strategy #1: Hire Only Top Employees

The advantages of this strategy are obvious:

You immediately receive top talent.

The employees will perform well and probably reach high performance faster.

You are able to grow your company faster.

You are more prepared for challenges and risks.

However, there are some disadvantages:

It’s expensive, and will cost you even more if you end up needing to hire someone else.

It could be more difficult to retain top talent.

The hiring process may take longer, as you’ll probably want to select from a wider pool of
candidates.

It can be challenging to manage team of top talent.

Having too many top performers on a team can lead to competition and result in underperformance.
Strategy #2: Hire Promising Specialists and Develop Them

This second option has a couple advantages:

You can find talent faster. This may be necessary if you are in urgent need for talent and have
insufficient time to search for top employees.

You will likely save money on salaries.

The employee has the potential to become a skilled and loyal professional.

You can hire two, or even three, promising specialists for the same amount as for one top
performer.

The main disadvantages are:

Your company may grow slower.

Compared to top talent, these hires lack of knowledge. This can lead to lower performance.

You may need to hire another specialist if the employee cannot handle the role.

It requires a larger investment in development.

The strategy may fail entirely and you’ll need to revert to option 1.

Strategy #3: Combine Strategies 1 and 2

This quote describes the strategy best:

"Your team’s strength is not a function of the talent of individual members. It’s a function of their
collaboration, tenacity, and mutual respect."

Finally, the pros of combining the two above are:

It gives you the best of both worlds.

It also allows you to take advantage of a combination of new hires and existing talent.

Having top talent and potentially good specialists (e.g. young employees) will help the specialists
grow faster and motivate them.

It leads to knowledge transfer — top talent can teach other employees.

All the same, there is one con:

If you have specific requirements (such as you are in urgent need of growth or if you are on a tight
budget), sticking to a single strategy may be more appropriate.

Building Your Talent Management Strategy

Lastly, before you go ahead and launch your recruitment and talent management strategy, make
sure you include the essential components of a talent management strategy.

1. Know What Is Your Talent Management Strategy Is For

Every organization has its own unique goals. Whether they relate to better performance or higher
revenue, your goals need to be clearly stated and achievable. You also need to know exactly how
employees will play a role in helping you meet your targets.

2. Measure the Results

You need to know how to measure results to see if your strategy is working. Define the metrics you’ll
use and how often you’ll take measurements.

3. Assign Responsibilities

Much of the talent management strategy is down to HR, but other people at your company will also
need to be involved. For instance, C-level executives are responsible for succession planning.

4. Communicate with Employees

Make sure your employees are clear about where they stand and know what is expected of them.
Talk to them about their career goals to ensure that your company is creating the right
opportunities.

The Talent Management Process

Now you have an understanding of why you need talent management and what it involves. Next,
you need to take a look at the talent management process itself and learn how to apply it to your
company.

What Is the Talent Management Process?

The talent management process is how you organize the management of your human resources. It is
how you choose employees, how you hire them, and how (or if) you train them, motivate them, fire
them, and so on.

The 7 Steps of a Great Talent Management Process

The following steps cover what you need to do to develop a continuous talent management process
for your organization.

It covers how to find the most talented people available and then help them stay in your company.

Step 1: Specify What Skills You Need

What is the first step in the talent management process?

Before you can go any further, you must determine what kinds of hires you need and what
requirements they should fill.

Consider if it would be possible to teach existing employees to avoid the need to hire anyone new.

Step 2: Attract the Right People

There are several stages to attracting talent:

Create targeted advertisements and post them on top job sites — HR branding is helpful here.

Plan interviews and other means to identify the best person for the job. In addition to regular
questions, consider using personality assessments, references, and tests that require candidates to
perform in real-life situations.

Hire your top choices.

Step 3: Onboard and Organize Work

Help new employees feel orientated by being ready for them as soon as they enter the company.

Know what tasks you will set them, have training sessions scheduled, and assign current employees
to support new workers settle in.
Step 4: Organize Learning and Development

Remember, it is often easier to develop the skills of your current employees than to hire new talent.

Plus, even if you do hire top talent, they will likely want to learn something in their new role.

Plan ways for your workers to learn and grow, such as through conferences, courses, and a learning
management system to create a learning environment.

Step 5: Hold Performance Appraisals

Checking employee performance regularly allows you to see if workers could manage additional
responsibilities.

This could save you hiring new talent and it may help an employee prepare for a promotion.

Step 6: Strategize to Retain Your Best Talent

Keep employees satisfied at work through promotions, benefits, motivating tactics, ensuring job
satisfaction, and improving company culture.

Step 7: Plan for Successions

Nurture employees for successions, such as for when a senior member of staff retires.

Enable employees to perform to their best through continuous learning opportunities, including
knowledge management.

If an employee decides to leave the company, conduct an exit interview to find out what went
wrong — this will help you prevent the same issue occurring again in the future.

Conclusion
You need to stop assuming that you already have talent management covered just because you have
HR at your company. Talent management rarely happens naturally.

You need a strategy that is tailored to your business alone. Only like this will you obtain and retain
top talent and gain a competitive advantage over other businesses in your industry.

Developing and Sustaining Employee Engagement

Register for the SHRM Annual Conference & Expo 2021 Sept. 9-12 to attend forward-thinking
sessions on employee engagement such as The Future of Engagement Analytics Won't Come from
Surveys and It's Not How You Feel, It's What You Do! Changing the Nature of Engagement.

Overview

The term employee engagement relates to the level of an employee's commitment and connection
to an organization. Employee engagement has emerged as a critical driver of business success in
today's competitive marketplace. High levels of engagement promote retention of talent, foster
customer loyalty and improve organizational performance and stakeholder value.

This article discusses:

The business case in support of employee engagement initiatives.

The nature and drivers of employee engagement.

The roles of HR and management in engaging employees.

Guidelines for developing effective employee engagement initiatives and engagement surveys.

HR practices that can increase engagement.

Communications opportunities and methods for engaging employees.

Global issues related to employee engagement.

Business Case
Executives from around the world say that enhancing employee engagement is one of their top five
global business strategies. Not only does engagement have the potential to significantly affect
employee retention, productivity and loyalty, it is also a key link to customer satisfaction, company
reputation and overall stakeholder value. Increasingly, organizations are turning to HR to set the
agenda for employee engagement and commitment to establish a competitive advantage. See 2017
Employee Job Satisfaction and Engagement: The Doors of Opportunity Are Open.

Most executives already understand that employee engagement directly affects an organization's
financial health and profitability. According to Gallup, just 33 percent of American workers are
engaged by their jobs. Fifty-two percent say they're "just showing up," and 17 percent describe
themselves as "actively disengaged"1; therefore, most employers have a lot of work to do to unlock
the full potential of their workforce.

Engagement and productivity can be affected by social cohesion, feeling supported by one's
supervisor, information sharing, common goals and vision, communication, and trust. Employees
want to feel valued and respected; they want to know that their work is meaningful and their ideas
are heard. Highly engaged employees are more productive and committed to the organizations in
which they work. See Workplaces That Enhance Performance and the Human Experience.

Business Results of Engagement

At beverage giant Molson Coors, highly engaged employees were five times less likely than
nonengaged employees to have a safety incident and seven times less likely to have a lost-time
safety incident. By strengthening employee engagement, the company saved $1,721,760 in safety
costs in one year.

Construction-equipment maker Caterpillar's increased employee engagement resulted in $8.8

million annual savings from decreased attrition, absenteeism and overtime in a European plant, and
a $2 million increase in profit plus a 34 percent increase in highly satisfied customers in a start-up
plant.

What Employee Engagement Is—and Is Not

Researchers and consulting firms have developed varied definitions of employee engagement. They
have also created categories to describe and distinguish differing levels of worker engagement.
Although the concepts of employee engagement and job satisfaction are somewhat interrelated,
they are not synonymous. Job satisfaction has more to do with whether the employee is personally
happy than with whether the employee is actively involved in advancing organizational goals.

EMPLOYEE ENGAGEMENT DEFINITIONS

Definitions of employee engagement range from the brief and concise to the descriptive and
detailed. Many of these definitions emphasize some aspect of an employee's commitment to the
organization or the positive behaviors an engaged employee exhibits. Examples of employee
engagement definitions include:

Quantum Workplace - Employee engagement is the strength of the mental and emotional
connection employees feel toward their places of work.

Gallup - Engaged employees as those who are involved in, enthusiastic about and committed to their
work and workplace.

Willis Towers Watson – Engagement is employees' willingness and ability to contribute to company
success.

Aon Hewitt - Employee engagement is "the level of an employee's psychological investment in their
organization."

WHAT DIFFERENTIATES ENGAGED AND DISENGAGED WORKERS?

Organizations that conduct research on employee engagement categorize employees based on the
employee's level of engagement, but they have used different terminology in doing so. For example,
engaged and less than fully engaged employees have been described as follows:

Gallup distinguishes between employees who are "actively engaged" (loyal and productive), "not
engaged" (average performers) and "actively disengaged" (ROAD warriors, or "retired on active
duty").

Sibson Consulting differentiates "engaged" employees (those who know what to do and want to do
it) from "disengaged" employees (those who don't know what to do and don't want to do it),
"enthusiasts" (those who want to do the work but don't know how to do it) and "renegades" (those
who know what to do but do not want to do it).

Disengaged workers feel no real connection to their jobs and tend to do the bare minimum.
Disengagement may show itself in a number of common ways, including a sudden 9-to-5 time clock
mentality, an unwillingness to participate in social events outside the office or a tendency to fox hole
oneself apart from peers. It becomes most noticeable when someone who's normally outgoing and
enthusiastic seems to fall by the wayside and has nothing positive to contribute. They may resent
their jobs, tend to gripe to co-workers and drag down office morale.

Behaviors of engaged and disengaged employees:

Engaged behaviors

Disengaged behaviors

Optimistic

Pessimistic

Team-oriented

Self-centered

Goes above and beyond

High absenteeism

Solution-oriented

Negative attitude

Selfless

Egocentric

Shows a passion for learning

Focuses on monetary worth

Passes along credit but accepts blame

Accepts credit but passes along blame

HOW DOES EMPLOYEE ENGAGEMENT DIFFER FROM JOB SATISFACTION?

The terms engagement and job satisfaction are often used interchangeably. However, research has
revealed that although there is some overlap in the drivers of engagement and satisfaction, there
are also key differences in the components that determine each.

Some experts define engagement in terms of employees' feelings and behavior. Engaged employees
might report feeling focused and intensely involved in the work they do. They are enthusiastic and
have a sense of urgency. Engaged behavior is persistent, proactive and adaptive in ways that expand
the job roles as necessary. Engaged employees go beyond job descriptions in, for example, service
delivery or innovation. Whereas engaged employees feel focused with a sense of urgency and
concentrate on how they approach what they do, satisfied employees, in contrast, feel pleasant,
content and gratified. The level of employee job satisfaction in an organization often relates to
factors over which the organization has control (such as pay, benefits and job security), whereas
engagement levels are largely in direct control or significantly influenced by the employee's manager
(through job assignments, trust, recognition, day-to-day communications, etc.).

Researchers at Kenexa High Performance Institute looked at 840,000 responses on employee

engagement from companies in the U.S. and Britain and found that after two years in a job, 57
percent of the respondents were disengaged.

See:

Miserable Modern Workers: Why Are They So Unhappy?

Amazon Offers 'Pay to Quit' Bonuses to Disgruntled Workers

What Drives Employee Engagement?

Extensive research has been conducted to determine the factors that influence employee
engagement levels. The research has indicated that there are both organizational drivers and
managerial drivers.

See:
Pay Fairness Perception Beats Higher Pay for Improving Employee Engagement

Coach to Your Team's Strengths to Improve Employee Engagement

In today's digital age, less person-to-person interaction and increasing on-demand technology from
chats and texts to social media updates and news feeds, is eroding employee engagement.

ORGANIZATIONAL DRIVERS

Some of the research identifies organization wide drivers of employee engagement.

Quantum Workplace (the research firm behind the "Best Places to Work" programs in more than 47
metro areas) has identified six drivers of employee engagement that have the greatest impact:

The leaders of their organization are committed to making it a great place to work.

Trust in the leaders of the organization to set the right course.

Belief that the organization will be successful in the future.

Understanding of how I fit into the organization's future plans.

The leaders of the organization value people as their most important resource.

The organization makes investments to make employees more successful.

MANAGEMENT DRIVERS

Employee engagement increases dramatically when the daily experiences of employees include
positive relationships with their direct supervisors or managers. Behaviors of an employee's direct
supervisors that have been correlated with employee engagement include:

The Gallup "Q12," which are 12 core elements that link strongly to key business outcomes. These
elements relate to what the employee gets (e.g., clear expectations, resources), what the employee
gives (e.g., the employee's individual contributions), whether the individual fits in the organization
(e.g., based on the company mission and co-workers) and whether the employee has the
opportunity to grow (e.g., by getting feedback about work and opportunities to learn).
Employees enjoy a good relationship with their supervisor.

Employees have the necessary equipment to do the job well.

Employees have authority necessary to accomplish their job well.

Employees have freedom to make work decisions.

The Roles of HR and Management

Employee engagement is influenced by many factors—from workplace culture, organizational

communication and managerial styles to trust and respect, leadership, and company reputation. In
combination and individually, HR professionals and managers play important roles in ensuring the
success of the organization's employee engagement initiatives.

THE ROLE OF HR

To foster a culture of engagement, HR should lead the way in the design, measurement and
evaluation of proactive workplace policies and practices that help attract and retain talent with skills
and competencies necessary for growth and sustainability.

THE ROLE OF MANAGERS

Middle managers play a key role in employee engagement, creating a respectful and trusting
relationship with their direct reports, communicating company values and setting expectations for
the day-to-day business of any organization.

Studies show that people leave managers, not companies and ensuring managers are actively
participating in and managing employee engagement is paramount. See Employee Engagement
Issues? Use These 10 Tips to Get Managers Engaged.

But middle managers need to be empowered by being given larger responsibilities, trained for their
expanded roles and more involved in strategic decisions. If an organization's executives and HR
professionals want to hold managers accountable for the engagement levels, they should:

Make sure that managers and employees have the tools to do their jobs correctly.
Periodically assign managers larger, more exciting roles.

Give managers appropriate authority.

Accelerate leadership development efforts.

Ask managers to convey the corporate mission and vision and to help transform the organization.

According to a 2017 Dale Carnegie study, "Just 26% of leaders surveyed say that [employee
engagement] is a very important part of what they think about, plan, and do every day. Another 42%
say they work on it frequently, and the rest only occasionally, rarely or never."

How to Develop and Sustain Employee Engagement

To increase employee engagement levels, employers should give careful thought to the design of
engagement initiatives.

GENERAL GUIDELINES

As HR professionals consider adopting or modifying practices or initiatives to increase employee

engagement, they should:

Make sound investments. The organization should consider the strategic implications of various HR
practices and determine which are more important and merit greater investment to enhance
engagement levels.

Develop a compelling business case. HR professionals should be able to demonstrate how these
investments have led to positive, measurable business outcomes for the organization or other
businesses.

Consider unintended consequences. When evaluating alternatives for redesigning HR practices to

foster employee engagement, think about the likely impact of the revised policies. Are there
potentially unintended, unfavorable consequences that may occur based on the impact of that
change on employees in different circumstances and life situations?
Base investment decisions on sound data. Employee engagement should be measured annually.
Survey items should be linked to the organization's key performance measures, such as profitability,
productivity, quality, customer satisfaction and customer loyalty. Outcomes of employee
engagement research should include the identification of the highest-impact engagement levers and
survey items that differentiate top-performing business units from less successful units.

Create an "engagement culture." This can be done by communicating the value of engagement in
the mission statement and executive communications, ensuring that business units implement their
engagement action plans, monitoring progress, adjusting strategies and plans as needed, and
recognizing and celebrating progress and results.

HR PRACTICES

HR practices have a significant impact on employee engagement. The following practices can
increase employee engagement:

Job enrichment. Incorporate meaning, variety, autonomy and co-worker respect into jobs and tasks
so that employees view their role more broadly and become more willing to take on duties beyond
their job description.

Recruiting. Target applicants who are likely to view their work as interesting and challenging.
Encourage those who are not suited for particular work to opt out of the process.

Selection. Choose candidates who are most likely to perform job duties well, make voluntary
contributions and avoid improper conduct.

Training and development. Provide orientation to create understanding about how the job
contributes to the organization. Offer skill development training to increase job performance,
satisfaction and self-efficacy.

Strategic compensation. Use pay-for-performance programs to focus employees' attention on

incentivized behaviors. Adopt competency-based pay to encourage acquisition of knowledge and
skills and enhance employee performance.

Performance management. Set challenging goals that align with the organization's strategic
objectives, provide feedback, and recognize accomplishments and extra voluntary contributions.

See SHRM/Globoforce Using Recognition and Other Workplace Efforts to Engage Employees and
How to Improve the Engagement and Retention of Young Hourly Workers.

Communications
Targeted communication initiatives can enable managers and HR professionals to stay on top of
employee engagement issues, get ongoing feedback from employees and anticipate changing needs
of workgroups. Managers and HR professionals should take advantage of opportunities to engage
employees and should use varied communication methods to do so. See Fixing Poor Engagement
Starts with Understanding Its Cause.

COMMUNICATION OPPORTUNITIES

Employers have numerous opportunities for "engageable moments," when they can motivate and
provide direction for employees. Watson Wyatt's WorkUSA report identified the following formal
and informal "engageable moment" opportunities:4

Formal opportunities include:

Recruitment; onboarding.

Performance reviews.

Goal setting.

Training.

Communications by senior leaders.

Employee surveys.

Informal opportunities include:

Coaching.

Mentoring.

Career development discussions.

Ongoing performance feedback.

Recognition programs.

Company social events.

Personal crises.

COMMUNICATION METHODS
The size, composition and expected reaction of the target group of employees should dictate the
type of communication used for engagement activities. Some of the communication methods HR
professionals and managers can use include:

"Keeping in touch." Ongoing communications with workgroups can occur through regular weekly or
biweekly meetings, ideally with 10-15 employees in each meeting. In this forum, issues can be aired
or ideas can be discussed to gain immediate feedback. Another component of keeping in touch is
one-on-one meetings with an employee who is targeted for superior performance, identified for
performance improvement or randomly chosen from the workgroup.

Remote communication. Different technologies allow managers and HR professionals to maintain

contact, including:

Employee listening platforms where HR can survey workers, gather comments and suggestions,
conduct exit interviews, etc.

Social media and mobile app resources to discuss issues, share ideas, conduct surveys and vote on
issues.

Blogs that routinely inform and update employees on new initiatives and allow employee responses
to be recorded and openly available.

Videoconferencing and teleconferencing.

E-mailed newsletters.

Metrics

Many organizations conduct workforce surveys to measure levels of employee engagement within
the organization and to analyze the relationships between employee engagement and key business
outcomes. The results of such surveys can identify which engagement initiatives are achieving
desired goals. Surveys can be helpful in gauging levels of employee engagement, but employers
need to realize that employee engagement surveys differ from other employee surveys.

For the best results, employers should create an overall engagement strategy that goes beyond
simply measuring engagement scores. Ideally, an employee engagement strategy should be created
before an engagement survey is administered. An effective plan will detail these five components:

How the strategy will be communicated.

How action areas will be identified.

What measurable outcomes will be used to evaluate progress.

What specific actions will be taken to address the survey results.

How the engagement strategy will be sustained over time.

UNIQUE ASPECTS OF EMPLOYEE ENGAGEMENT SURVEYS

Employee engagement surveys have a different focus than other types of employee surveys. While
employee opinion and satisfaction surveys measure workers' views, attitudes and perceptions of
their organization, and an employee culture survey measures employees' points of view to assess
whether they align with the organization or its departments, engagement surveys measure
employees' commitment, motivation, sense of purpose and passion for their work and the
organization. See Employee Engagement Surveys: Why Do Workers Distrust Them? and Carefully
Craft the Employee Engagement Survey.

CREATING ENGAGEMENT SURVEYS

When developing employee engagement surveys, organizations should consider the following
guidelines:

Include questions that could be asked every year or more frequently. This will provide a base line for
management of employee engagement.

Keep language neutral or positive. For example, ask, "Is our line-to-staff ratio correct for a company
our size?" instead of "Are there too many staff for a company our size?" Avoid negatively worded
items.

Focus on behaviors. Good questions probe supervisors' and employees' everyday behaviors and
relate those behaviors to customer service whenever possible.

Beware of loaded and uninformative questions. For example, questions such as "Do you look
forward to going to work on Mondays?" elicit a "no" response easily, even from engaged workers.

Keep the survey length reasonable. Overly long surveys reduce participation rates and may result in
skewed responses because participants check answers just to finish the survey as quickly as possible.

If you work with a vendor that comes to you with a "standard" list of questions, consider tailoring
questions to reflect your organizational needs.

Consider what you're saying about the organization's values in issuing the questionnaire. Question
selection is critical because it tells employees what the organization cares enough to ask about.
Ask for a few written comments. Some organizations include open-ended questions, where
employees can write comments at the end of surveys, to identify themes they might not have
covered in the survey and might want to address in the future.

Consider doing more than one type of survey, each with different questions, frequencies and
audiences. For example, "pulse" surveys are brief, more-frequent surveys that address specific issues
or are given to specific segments of the workforce, and they can take place between annual surveys.
Or conduct different surveys for company leaders and employees, or in different business units or
specific countries.

See:

Employee Engagement Platforms: More than Feedback Tools

A New World of Tools for Measuring Employee Engagement

Measuring the ROI of Employee Engagement

USING ENGAGEMENT SURVEYS

After an employee engagement survey has been administered, survey data should be reviewed in
aggregate and broken down for each business unit to allow individual managers to make changes
that will truly affect engagement levels. Some experts also advocate having line managers
communicate survey results to their own employees and create action plans to respond to survey
recommendations. In addition, the organization may require that all employees have engagement
objectives in their performance reviews so that engagement goals are developed both from the top
down and from the bottom up.

Common missteps that organizations make with engagement surveys are failing to gain senior
management commitment to act on survey results and failing to use focus groups to delve into the
root of negative scores or comments. To avoid those mistakes, organizations should:

Have management communicate to employees that the survey is an organizational, not a public
relations, initiative.

Consider creating a survey committee to instill broad buy-in.

Create feedback or focus groups to determine the level of significance of specific items mentioned in
the survey.

Involve the entire management team in the action-planning process to ensure that changes are
made based on employee feedback.

Group open-ended survey comments by theme and categorize them at the workgroup level to
ensure confidentiality of survey feedback.

Global Issues

The factors that drive employees to be engaged in their work vary not only from country to country
but also by industry sector and within companies. Consequently, organizations that are expanding
globally need to be aware of what engages their workforce in different global locations. See How to
Fix Declining Global Productivity.

In looking to engage employees globally, employers should:

View global HR decisions in the context of national culture.

Use valid research—not stereotypes—to align HR practices for a local population with actual
employee attitudes and perceptions.

Remember that the norm for engagement varies widely from country to country, making it critical to
consult data on national norms to interpret employee surveys correctly.

Realize that the elements that create engagement also create the employment brand.

Understand that how the organization conducts its work reflects its organizational culture.

Links between Talent Management and Employee Engagement

September 16, 2014/Archives /by Fisher VIsta

Talent management and employee engagement have become key buzz phrases in business. Each has
taken human asset management to a more specific, more integrated level.

Talent management’s definitions are reasonably consistent. Here are valid examples:
Everything done to recruit, retain, develop, reward and make people perform forms a part of talent
management.

Talent management is an organization’s commitment to recruit, retain, and develop the most
talented and superior employees available.

Talent management means selecting the right people, developing their potential and fueling their
enthusiasm, building their commitment, and also supporting them through periods of change.

Talent management offers value at the revenue end. Customer satisfaction, product development,
and marketing innovation all benefit by being accomplished by talented performers. Talent
management also contributes to expense reduction. Quality improvement, process redesign and
employee retention are results generated when talent works the business.

Among the many, varied definitions of employee engagement, I select this one:

Employee Engagement: the individual’s investment of her/his time, energy, skills, knowledge, and
creativity in the efforts and directions set by the organization.

Simply stated: talent management acquires and supports higher levels of skills and knowledge;
employee engagement increases the value application of the skills and knowledge. Talent generates
revenue and reduces expenses; engagement lets them do that more, do that better.

Businesses now aim to give more attention and action to both talent management and employee
engagement. That attention needs to be well-directed; those actions need to be well-developed.
Let’s look at five links between talent management and employee engagement. These links promise
to increase a company’s success in improving both attention and action.

Better Onboarding Link

A powerful onboarding program introduces talented candidates to the business’ engagement culture
immediately. The individual can actually engage in onboarding activities — rather than sitting at a
desk and thumbing through a binder. A strong program demonstrates employee engagement as the
business lifestyle. Engagement is proven to attract active talent. Opportunities to engage from the
start heighten talent’s appreciation…and engagement. What company doesn’t truly want an
onboarding process that lets new talent “hit the ground running” and then run even faster?

Competitive Advantage Link

Competition for talent is fierce because talent is a leading factor in a company’s competitive
advantage. Recruiting, developing and retaining talent are the tools that build competitive
advantage. Talent management starts with recruiting. Stronger recruiting efforts contribute to
greater talent acquisition. Employee engagement adds to developing and retaining talent. It
demonstrates the company’s appreciation of their value to the company — as it builds their value to
the company. What company does not look for every possible way to gain advantage over their
competition?

Performance Improvement Link

Talent joins a company appreciating the company and its product. As talent engages more fully in
company operations, assignments, projects, that appreciation grows. The greater the appreciation,
the greater one’s commitment to performing with quality. An employee — especially a “talent
employee” — who has the opportunity to perform in ways which she/he sees as valuable
consistently seeks to improve that performance. What company does not want to start with talented
employees and then enjoy seeing them improve on their talent?

Customer Satisfaction Link

Customers naturally prefer to experience quality product and quality service. Research says it is the
people with whom customers interact that determine the customer’s opinion of that quality. Talent
management looks for quality candidates. Employee engagement turns up that quality. Successful
attraction and recruitment combine for the first step. Once talent is hired, employee engagement
strategies increase communication and commitment. These are critical characteristics that satisfy
customers. What company doesn’t want satisfied customers? What company doesn’t rely on its
employees to generate such satisfaction?

Reduced Turnover, Increased Retention Link

If intense effort is made to hire talent, equally intense effort should be expended to retain talent.
Employee engagement is a specific element of talent management insofar as it boosts a company’s
ability to hold on to talented employees. People stay with companies they value. The more an
employee is allowed and encouraged to engage in job, team, and company efforts, the more she
sees the value. People stay with managers they trust. The more managers and employees engage in
continuous communication about expectation, the more trust develops in their relationship. People
stay with companies that offer opportunities for personal, even professional growth. The more your
company provides such opportunities — training, mentoring/coaching, community involvement —
the more growth the employee witnesses. What company doesn’t want quality talent to stick
around?
Employee Engagement and Employee Relationship

Employee engagement refers to a situation where the employees are engaged in their work and
hardly get any time to gossip or spread rumours. It has been observed that an employee engaged in
work tends to avoid fighting with others and thus enjoys a warm relationship with his colleagues.

Most of the time he is busy with his work and stays away from nasty politics or interfering in each
other’s tasks. Both the two terms have a direct relationship with each other. In the real sense,
employee engagement is directly proportional to employee relationship. More the employees are
engrossed in their work; the better the relation among them.

Let us understand the relation between the two with an example:

Michael was heading the marketing and the branding team of a leading firm. He had four team
members reporting to him. Michael being a responsible team leader ensured all his team members
were assigned challenging tasks for them to enjoy their work. The team members were always on
the toes to do something creative everytime. Michael took his lunch with his team members in the
company’s cafeteria and made sure to spend some together every weekend. His team members
never fought with each other, instead enjoyed their work, discussed things among themselves and
came out with innovative ideas satisfying all. Most of the time they were seen glued to their
workstations and hardly had any time for lose talks, gossips, blame games or criticism.

An employee sitting idle the whole day at workplace creates problems. It is rightly said that “an
empty mind is a devil’s workshop”. People with no productive work to do actually look for excuses to
argue and even provoke others to fight. They are involved in all kinds of destructive work and pose a
threat to the decorum and peace of the organization. An employee who finds his work interesting
would never bother whether his colleague is chatting over the phone or dating someone. He would
be more concerned with his work and strive hard to complete it within the desired time frame. He
would utilize his time in completing his assignments to submit it further rather than peeping into his
colleague’s computer or finding faults in others.

An employee who is satisfied with his job profile would always think in the favour of the company
and would stay away from doing anything which would bring a bad name to his team as well as his
organization. He would prefer working rather than wasting his precious time in unproductive tasks.
Engaged and satisfied employees always try their level best to work hard and justify their salary.
An employee who is serious about his work would definitely complete it at a much faster rate as
compared to non serious workers. Chances of mistakes in their work would also be less and but
natural they would earn appreciation from their superiors or team leaders. Their work would be
liked by all and hence they would definitely enjoy a healthy relationship with their superiors and
fellow workers. Employees would be able to complete their assignments on time and thus
impressing the management.

The team leader should ensure that the key responsibility areas of the team members match with
their interests and specialization. It is essential that the employees don’t treat their work as a
burden and look forward to going to office daily. In such cases employees enter the office with a
positive frame of mind and are more adjusting and compromising with each other. They readily help
each other and enjoy a healthy relationship with their fellow team members.

An employee must concentrate on his work rather than fighting with others and spoiling his
relationship with his fellow workers.

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Authorship/Referencing - About the Author(s)

The article is Written By “Prachi Juneja” and Reviewed By Management Study Guide Content
Team. MSG Content Team comprises experienced Faculty Member, Professionals and Subject Matter
Experts. We are a ISO 2001:2015 Certified Education Provider. To Know more, click on About Us. The
use of this material is free for learning and education purpose. Please reference authorship of
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Employee Relationship Management

What is Employee Relations ?

Importance of Employee Relations

Improve Employee Relations

Employee Relationship Management

Role of Communication in ERM

Motivation in Employee Relationship

Role of Attitude in Employee Relationship

Role of HR in Employee Relationship

Role of Managers in Employee Relations

Employee Engagement

Employee Engagement & Relationship

Tips for better Employee Relationship

Healthy Employee Relationship

Individual Qualities for better ERM

Challenges in ERM

After Effects of Poor ERM

Home Library People Management Employee Relationship Management Tips for a Professional for a
Better Employee Relationship

Tips for a Professional for a Better Employee Relationship

For an organization to perform well, it is essential that the employees share a warm and a healthy
relationship among themselves. They must be comfortable with each other for them to enjoy their
work and deliver their level best. Disputes and disagreements only lead to stress and nothing
productive comes out of it.

Let us go through some handy tips for a professional for a healthy employee relationship:

The first and the foremost mantra for a healthy employee relationship is effective communication. A
professional must communicate effectively by carefully putting his thoughts into relevant words to
avoid confusions and better understanding at the workplace. One should never play with words or
speak something which might make the other person feel awkward or out of place. One’s
communication has to be crisp and precise to create an impression. There should be transparency in
speech at all levels for a healthy relationship. Pass on the information as it is.Never manipulate the
truth. Communication is an art.No individual is born with effective communication skills; it comes in
due course of time with practice.

Professionals must depend more on written modes of communication than verbal as it is more
reliable and one can’t back out later. An email is nothing but a reflection of one’s thoughts and
should be self explanatory for the others to respond accordingly. Take care of the style and font of
the mail. One needs to be very careful about the subject line as the other person opens the mail only
when the subject line is impressive and relevant. The mail should be marked to all the employees
who should be a part of the communication with a cc to the team leader for him to be aware of what
is happening in his team. Don’t send mails separately to individuals as it might create a confusion
and eventually a friction among employees.

One should never adopt a casual attitude at work. Be professional in your approach. Learn to be
disciplined. A professional must abide by the policies of the organization for better relations and
peace at work. An individual should not take frequent leaves to ensure timely submission of work.
Don’t unnecessarily ask for favours from your team members. For a better relationship with the
fellow workers, one should not interfere in each other’s work. No one would appreciate if you peep
into your colleague’s computer screen or open something not meant for you. One should be more
concerned with his own work rather than bothering about others. Your organization pays you for
your hard work so one should not waste his time in criticizing or making fun of others. How would
you feel if someone unnecessarily pulls you into a controversy? You would never feel like talking to
him. Avoid playing blame game at work. Learn to own your responsibilities else you would be left all
alone in the office. Backstabbing should be avoided as it is considered highly unprofessional and
spoils the relationship among the employees.

Don’t walk into meetings empty handed. Carry a notepad along with you to jot down the important
points for future reference. An individual can’t remember each and everything thus it is always
advisable to write down somewhere to avoid forgetting things later and earn the criticism of others.
Develop the habit of carrying a planner to mark the important dates. The agenda and the minutes of
the meeting must be circulated among all so that everyone gets a common picture and nobody feels
neglected.

It is essential to maintain the decorum of the office. Remember you are not sitting at your home
where you can shout on anyone. Be polite to everyone irrespective of his designation and level in
the hierarchy. Never use foul words or abusive language against anyone as it lead to severe disputes
among employees. If you do not agree to someone, it is better to sit with him and discuss rather
than arguing and spoiling your relationship. A professional must avoid gossiping and spreading
unnecessary rumours at work.

Employees must help each other at work for a better relationship. One should avoid being jealous
and selfish at work. If someone has done well, do appreciate him. Lend a sympathetic ear to your
fellow workers if they are in trouble. Be a little more adjusting. Things can’t always be the same as
you want, compromise sometimes to your best extent possible. Don’t just rush to your desk and
start working the moment you step into your office. Greet others with a warm smile. Take your
lunch with your team members and do go out once in a while to increase the comfort level.
Celebrate festivals at the workplace where each and every employee can come together and enjoy.
Don’t forget to wish your colleague on his birthday. Bring a nice gift for him as well.

One should intervene immediately in case of conflicts and arguments. Don’t tend to ignore things.
One needs to be loyal towards his organization to be in the good books of the management as well
as to grow professionally. Never misguide anyone. If you are not aware of something, it is better to
stay out of it than misleading the other person.

Last but not the least one should always have a positive attitude at work. Try to be friendly with your
colleagues and don’t always find faults in them. Don’t assume that your colleagues would always
harm you. One should always look at the positive side of the things to avoid stress and maintain a
cordial relationship with everyone at work.

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Authorship/Referencing - About the Author(s)

The article is Written By “Prachi Juneja” and Reviewed By Management Study Guide Content
Team. MSG Content Team comprises experienced Faculty Member, Professionals and Subject Matter
Experts. We are a ISO 2001:2015 Certified Education Provider. To Know more, click on About Us. The
use of this material is free for learning and education purpose. Please reference authorship of
content used, including link(s) to ManagementStudyGuide.com and the content page url.

Employee Relationship Management

What is Employee Relations ?

Importance of Employee Relations

Improve Employee Relations

Employee Relationship Management

Role of Communication in ERM

Motivation in Employee Relationship

Role of Attitude in Employee Relationship

Role of HR in Employee Relationship

Role of Managers in Employee Relations

Employee Engagement

Employee Engagement & Relationship

Tips for better Employee Relationship

Healthy Employee Relationship

Individual Qualities for better ERM

Challenges in ERM

After Effects of Poor ERM

Home Library People Management Employee Relationship Management Don’ts for a Healthy
Employee Relationship

Don’ts for a Healthy Employee Relationship

An organization is a place to work and not a battle field where employees would fight with each
other. One needs to treat his fellow workers well, understand each other’s expectations for a
healthy relationship and maximum output. The employees must be comfortable with each other and
work together as a team.

Remember there is no “I” in a team. Every employee should think about his team first and all his
personal interests should take a backseat. It is important that each and every employee works in
close coordination with each other and decide something which would satisfy all.

Don’t treat your colleagues as your enemy. Learn to respect as well as trust them. Team leaders and
superiors must ensure a healthy relationship among the employees to avoid negativity within the
teams.

Let us go through some important points which must be avoided at the workplace for a warm
relationship among the employees:

Avoid partiality at work. Don’t treat someone well just because he stays near your place or brings
lunch for you daily. Everyone must be treated as one. If someone has done something wrong, it is
the duty of the team leader to correct him irrespective of the relations he shares with him.
Favouritism must not be promoted at the workplace.

Every individual should be assigned work as per their interest and capability. The work should be
equally divided among all. Don’t impose your decisions on your team members. Let them decide on
their own what is correct for them and what is not.

The employees must avoid lose talks and blame games at work. They actually don’t help. Learn to
own your mistakes and find out ways to correct them. It is absolutely natural to commit mistakes.
Every human being does, so no need to panic and pass on the blame to others. It severely spoils the
relationship among the employees. One should not spread unnecessary rumours about any of his
colleagues. If you come to know something about anyone, it is better to discuss with him in private
rather than publicising the whole story. Just think what would you gain out of it?

An individual must never break his colleague’s trust. If your team member has shared one of his
secrets with you, please keep it to yourself only. If the person sitting next to you has expressed his
displeasure over anything, don’t disclose it in front of your boss or others. Avoid nasty politics at
workplace. If you can’t help anyone it is better to stay out of it rather than giving wrong suggestions

Avoid communicating with employees individually. Meetings must not always be conducted one to
one. Call all of them together and address them on an open forum. Let each and every one express
their concerns. Emails must be sent with all the participants in loop and suggestions must be invited
from their side. The communication has to be transparent for a better employee relationship.

Avoid criticism at work. Never make fun of anyone. Pointing mistakes is important but make sure
you do not insult the other person. Sit with him. and make him realize his mistakes. Don’t be rude or
harsh to anyone.

Don’t have separate lunch timings for the employees. Gone are the days when managers and
supervisors used to sit in their closed cabins and special peons were assigned to them. The concept
has changed now a days and everyone is one working for a common goal. The team leader’s position
will not be tarnished if he takes his lunch with his team members. Don’t always discuss work at your
office. If it is your colleague’s birthday, do make it a point to wish him in the morning. He will feel
happy.

Too much of interference in each other’s work is bad and can lead to adverse effects. Don’t
unnecessarily peep into each other’s computer screens. One must respect each other’s privacy. It is
important to do work together but don’t ask too many questions or tend to irritate others. Don’t
always try to find out what the other person is up to. Never ever read anyone else’s notes or open
any courier or envelope not meant for you. If your colleague has asked you to send a mail from his
system on his behalf, make sure you don’t read any of his personal mails.

One should be a little positive for better employee relations. Don’t always assume that the other
person is wrong. Avoid unnecessary cribbing at workplace. If you are not well, it is better to stay at
home rather than going to work and spoiling everyone else’s mood. Try to look at life from a larger
perspective. Finding faults in others must be avoided for a better relation.
Avoid being selfish at work. Try to help others. Don’t ignore things just because it is not related to
you. Understand the other individual’s problem and try your level best to sort it out. Every individual
needs a break and if your team member asks for a leave do allow him but make sure your work does
not suffer. This way your team members would respect you and discuss issues more freely in the
future.

Efforts must be taken to avoid conflicts at work so that employees come closer to each other, work
together and does not lose their focus. They must be cordial with each other for a warm and a
healthy ambience at workplace.

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Authorship/Referencing - About the Author(s)

The article is Written By “Prachi Juneja” and Reviewed By Management Study Guide Content
Team. MSG Content Team comprises experienced Faculty Member, Professionals and Subject Matter
Experts. We are a ISO 2001:2015 Certified Education Provider. To Know more, click on About Us. The
use of this material is free for learning and education purpose. Please reference authorship of
content used, including link(s) to ManagementStudyGuide.com and the content page url.
Employee Relationship Management

What is Employee Relations ?

Importance of Employee Relations

Improve Employee Relations

Employee Relationship Management

Role of Communication in ERM

Motivation in Employee Relationship

Role of Attitude in Employee Relationship

Role of HR in Employee Relationship

Role of Managers in Employee Relations

Employee Engagement

Employee Engagement & Relationship

Tips for better Employee Relationship

Healthy Employee Relationship

Individual Qualities for better ERM

Challenges in ERM

After Effects of Poor ERM

Home Library People Management Employee Relationship Management Qualities in a Professional

for Better Relationship with Co Workers

Qualities in a Professional for Better Relationship with Co Workers

An individual must share a warm relationship with his fellow workers to remain happy and satisfied
at work. Don’t fight with your colleagues and spoil the decorum of the office. You need people
around to talk to, discuss several issues, evaluate the pros and cons of your ideas and finally come to
a solution which would be fruitful to you as well as others.
An individual must have certain qualities for a better relationship with his fellow workers:

One needs to be sensible enough to understand that every organization has a set of policies and it is
mandatory for everyone to abide by the rules and regulations. One can’t go against the policies no
matter whether he likes them or not. One can’t get all the comforts at his office just like home. You
can’t be too fussy at work. If your organization is paying you; they would also expect work from you.
At work you cannot always take leaves whenever you like. There would be times when you wish to
be with your friends, but if your organization needs you, you have to be there at any cost. Excuses
don’t work in such a scenario. Professional commitments are far more important than personal
pleasures. Don’t give your management an opportunity to raise a finger against you.

Stay positive and motivated. Nothing works better than self motivation. Look for reasons to stay
motivated. Remember happiness lies within you. Enter your office with a smiling face. Don’t work
out of any compulsion. If your job is getting stagnant, it is always better to move on. Don’t stick to it
and crib. One must understand that every organization would have some or the other problem, you
can’t leave all of them. You need to adjust somewhere so why not in your present company? Be a
little adjusting and try to be friendly with your team members. Don’t spread rumours or pull anyone
into controversies.

Avoid pretending to be good in front of your boss. Such a habit might earn you a bad name in your
team and your fellow workers might ignore you when you need them. Your work speaks and nothing
apart from that really matters. Don’t try to play politics against anyone just for a promotion or mere
appreciation from your boss. One should never manipulate truth and pass on the information as it is.
Never backstab anyone. Honesty always pays in the long run.

An employee has to be a good communicator for an effective employee relationship. Be transparent

in your communication. Never play with words with an intention to confuse others. If you do not
agree to anyone, don’t simply say a yes. Sit with him and discuss in a way to convince the other
party.

One needs to be firm on his statements. Don’t change your mind quite often. It leads to
misunderstandings and confusions among others.

Be patient and never be rude to anyone. One should speak what is acceptable at the workplace.
Don’t use foul words against anyone. Learn to keep a control on your tongue. Avoid being hyper at
work. It is always better to ignore minor issues rather than fighting with others.

One needs to be disciplined at work. Follow your organization’s policies. Never be late to work. If
your office timing is 9.30 AM, make sure you are there sharp at 9.28 AM. Work for yourself, not for
others. Your boss cannot always sit on your head. If your superior is not there in the office, it does
not mean you will roam here and there. Sit at your workstation, concentrate on your work and leave
on time. Don’t unnecessarily irritate people. If you are not disciplined; no one would appreciate you.
One should respect his superiors as well as his colleagues. Relationships would never improve unless
and until you respect others. Treat all as one.

One should give his team member his desired space. Respect each other’s privacy. Too much of
interference in each other’s work is bad. Avoid staring at anyone’s computer screens or try
overhearing anyone else’s conversation. Don’t open couriers or notepads not meant for you. It
might contain something confidential and the other person may not like it.

One should always keep his superiors in the loop in every communication. If you are sending an
email to an external party make sure a cc is marked to your boss and he is aware of the entire
development. Any information meant for all team members should be downloaded to them in the
correct way.

Avoid being jealous at work. If your colleague has done well, do appreciate him.

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Authorship/Referencing - About the Author(s)

The article is Written By “Prachi Juneja” and Reviewed By Management Study Guide Content
Team. MSG Content Team comprises experienced Faculty Member, Professionals and Subject Matter
Experts. We are a ISO 2001:2015 Certified Education Provider. To Know more, click on About Us. The
use of this material is free for learning and education purpose. Please reference authorship of
content used, including link(s) to ManagementStudyGuide.com and the content page url.
Employee Relationship Management

What is Employee Relations ?

Importance of Employee Relations

Improve Employee Relations

Employee Relationship Management

Role of Communication in ERM

Motivation in Employee Relationship

Role of Attitude in Employee Relationship

Role of HR in Employee Relationship

Role of Managers in Employee Relations

Employee Engagement

Employee Engagement & Relationship

Tips for better Employee Relationship

Healthy Employee Relationship

Individual Qualities for better ERM

Challenges in ERM

After Effects of Poor ERM

Home Library People Management Employee Relationship Management Challenges for a Better
Employee Relationship Management

Challenges for a Better Employee Relationship Management

The relationship between employees working in a common organization is called as employee
relationship. Every employee should ideally be comfortable with others to stay motivated and stress
free. No conclusion has ever come out of disputes; instead it is just a mere wastage of time and lead
to a negative environment at work. The employees should work together as a single unit to come
out with more creative plans and accomplish the tasks at a much faster rate.

Employees enjoying a warm relationship with each other tend to discuss things among themselves
and always think in the favour of their team which eventually benefits the organization also.
Sometimes it is really difficult to satisfy everyone. Someone or the other would have an objection to
ideas leading to major unrest in the team and spoling the relationship among themselves.

Let us go through the challenges to an effective employee relationship and ways to overcome them:

Not all teams can afford to have members of the same sex only. Female employees are also likely to
be there in the team and might not be too comfortable with their male counterparts. A male
employee trying to be friendly with his female team member just to increase the comfort level
between them might not be appreciated by her. She might think otherwise and lose her trust on
him. A feeling of insecurity would crop up and thus spoiling the relationship between them. One
needs to be very careful while dealing with team members of the opposite sex. Think before you
speak and do take care of your limits. Too much of interference and a friendly nature might not work
well. During informal get togethers make sure one does not speak anything which might embarrass
the females. Avoid too much boozing or smoking at parties where female team members are also
invited. They would feel awkward and would never be able to talk to you or discuss things. The
female employees must also understand the corporate culture and should not overreact
unnecessarily. It is absolutely normal to go out for meetings with your boss who is a male.

It is really difficult to meet the expectations of each and every employee. Employees should not
expect monetary benefits which exceed the company’s budget. The moment the management
refuses to offer the desired incentives or perks to the employees they become negative and tend to
spread rumours around. They badmouth their superiors, lose interest in work and hence their
relationship suffers. To avoid such a situation, it is essential for the employees to have realistic
expectations. Don’t ask for something which you yourself know is not possible and might disturb the
budget of the organization. The team leader from the very beginning must prepare an incentive plan
after discussing with his team members. The incentive plan must be same for everyone.

It is human tendency to support someone who speaks well about you or favours you always.

Jerry’s music academy was near Patrick’s apartment. Jerry went with Patrick almost daily and no
doubts always supported him at the workplace. Patrick was the one who had the liberty to take
frequent leaves. Jerry never ever said anything to him which was not at all acceptable to the other
team members. One should never be partial at the workplace. Everyone is working to earn his bread
and butter just like you. No one is special in the organization. If anyone is working hard, the company
is also paying him well. It is always better to avoid taking unnecessary favours from anyone. Don’t
ask your subordinates to pick your son from school, go for a grocery shopping or book your movie
tickets. The moment you ask for favours, the other individual starts taking undue advantages.

You can never change the thought process of any employee. One can never get into anyone’s head
to find out what he is thinking. You might speak something in a casual way but the other person
might misunderstand it and make an issue out of it. One might say something in a light mood but the
other person might take it seriously and start arguing. It is always better to be crisp and precise at
workplace Avoid lose talks at work and don’t discuss things not related to your work.

The superior might not always be accessible to his team members. A team leader might have to go
for an urgent meeting when his team member walks up to him with a query. In such a scenario the
employee should not feel neglected or ignored. It is the team leader’s duty to get back to his team
members once he is free.

Be realistic. Don’t ask any employee to attend his office on his birthday or marriage anniversary. One
should never ask any employee to stay back late at office when he knows the other person has a
party to attend. Understand other’s problems well. The team member should also not ask for leaves
when he is aware of the work pressure.

Remember life is all about adjustments. Don’t always have a negative approach towards life. Learn
to compromise sometimes and make the organization a happy place to work.

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Authorship/Referencing - About the Author(s)

The article is Written By “Prachi Juneja” and Reviewed By Management Study Guide Content
Team. MSG Content Team comprises experienced Faculty Member, Professionals and Subject Matter
Experts. We are a ISO 2001:2015 Certified Education Provider. To Know more, click on About Us. The
use of this material is free for learning and education purpose. Please reference authorship of
content used, including link(s) to ManagementStudyGuide.com and the content page url.

Employee Relationship Management

What is Employee Relations ?

Importance of Employee Relations

Improve Employee Relations

Employee Relationship Management

Role of Communication in ERM

Motivation in Employee Relationship

Role of Attitude in Employee Relationship

Role of HR in Employee Relationship

Role of Managers in Employee Relations

Employee Engagement

Employee Engagement & Relationship

Tips for better Employee Relationship

Healthy Employee Relationship

Individual Qualities for better ERM

Challenges in ERM

After Effects of Poor ERM

Home Library People Management Employee Relationship Management After Effects of Poor
Employee Relationship Management

After Effects of Poor Employee Relationship Management

The relationship among the employees plays an important role in deciding the fate of the
organization. Employees must respect each other and come to each other’s help whenever required
and look forward towards achieving the organization’s targets. If the employees do not enjoy a
healthy relationship among themselves, problems are bound to arise and ultimately their
productivity decreases.

Let us go through the after effects of a poor employee relationship:

One must enjoy whatever he does to deliver his best. Lack of interest and focus result in errors and
delay in the task. Employees involved in constant disputes tend to spread negativity around and
spoil the ambience of the organization. One doesn’t feel like going to office and eventually his work
suffers. He starts treating work as a burden. One feels suffocated at places where individuals sitting
on adjacent workstations do not talk to each other. Your happiness, sorrows, tensions need to be
shared with others.

Imagine a situation where you are constantly fighting with your siblings at home. Would you ever
feel comfortable ? - The answer is no. In the same way if one is involved in constant arguments with
his fellow workers, he would never feel like stepping into the office. One needs to have friends at
work for him to stay motivated in the organization. No individual can work for 8-9 hours at a stretch.
He needs a break and people around for him to relax.

In the current scenario only those organizations can survive where work is done in an innovative
way. Creativity and innovation comes through discussion. Employees must sit together on an open
forum where every employee has the liberty to express his ideas. Every employee comes out with a
unique idea which can be evaluated thoroughly to come out with something that has never been
thought or implemented before. Employees together can contribute their level best in coming out
with something beneficial to them as well as the organization.

One needs to have trusted colleagues at work who can guide him and correct him if he is wrong
anywhere. If one is spending the maximum part of his time in the office, it is but natural to share
some or the other secrets with the team members. If you fight with others, you can’t rely on anyone
and things would be really difficult for you. One has to pretend always and can’t speak his heart out.
Employees not very satisfied and pleased with their work and management tend to change their jobs
frequently. They find it difficult to adjust in such circumstances where one is at loggerheads with the
other employee and thus fail to perform. Employee retention becomes a major problem when
employees do not share a warm relationship with others as well as the management. An
organization invests so much of its time in training the new joinees so that they come at par with the
other existing employees and it’s really sad when the employees leave midway.

If employees have strained relationship with each other, everyone works in his own sweet way and
coordination becomes a concern. Employees are reluctant to share their workload and are thus
always overburdened and unhappy. They fail to accomplish tasks within the desired time frame and
hence the organization suffers. Employees are busy pulling each other’s legs and thus waste all their
time which should be ideally used in productive work. The output of the employees in such
situations is actually a big zero.

Nobody likes to carry tensions back home. Disputes always lead to stress at work and people feel
restless even at home. One can’t enjoy anywhere and is sad always.

Individuals take frequent leaves from work leading to disciplinary problems at workplace. Nobody
bothers to follow the rules and regulations of the organization and the office is a complete mess.
Organizations fail to make profits and as a result come to a situation where they need to be shut
down.

Employees must be comfortable with each other for them to give their hundred percent at work and
stay motivated.

Actionable Ways to Improve Your Employee Relations in 2021

Last Updated On May 22, 2021

Jen Ciraldo

Employee Relations Template

As we transition to a new decade, the evolution of the workplace has put employee relations in the
spotlight. How employees and employers value one another is a key indicator of business success. A
strong relationship delivers better returns.
Companies have been making great strides in this area over the past few years—adopting mobile
technology that includes their employees in internal communications and implementing policies
designed to improve the employee experience.

Want to build a strong company culture? Get the Employee relations policy template. Download
here.

If you’re ready to work on employee relations and don’t know where to start, then you’ve come to
the right place.

Here are 15 actionable ways to strengthen the bond with your workforce in 2021.

Pro Tip: Always include frontline workers in employee relations strategies. A mobile team app
connects everyone and can help keep these valuable employees happy and engaged.

1) Go Digital

Technology. It needs to be the first move you make when refocusing your strategies to put
employees above numbers (and just so we’re clear, when you focus on employees, those numbers
will increase.)

A mobile team communications app is a demonstration of trust, transparency, and inclusion. Read
on to see why a digital workplace can be a game changer for your organization.

2) Build a Centralized Employee Relations Oversight Team

As you begin to implement strategies to prioritize employees, determine the team that will oversee
their implementation, manage conflict resolution, and track the analytics of employee feedback and
engagement.

While this is ideally a team made up of HR managers, expand on this idea to create a task force that
includes managers that represent different departments for a well-rounded representation of your
organization. Meet monthly to brainstorm employee motivation ideas and design strategies based
on data gleaned from your digital workplace analytics dashboard.
Beekeeper analytics dashboard displayed on a laptop computer.

3) Create Growth and Leadership Opportunities

Companies struggle with how to improve motivation. One great way? incentives. Create growth
opportunities for employees. Offer training through your digital workplace that employees can use
to improve their skills, like a project management course to teach skills for supervising a
construction site.

When employees witness colleagues moving up to management they will be inspired to do the same
and stick around to get the training they need to be more valuable to themselves, their families, and
the company.

4) Establish Complete Transparency and Open Communication

Here’s what employees want from internal communications: a voice and transparency. Create
circular communication economy within your company with a workforce app. Give everyone access.
Encourage open communication through a digital workplace and let every employee participate and
contribute.

Transparency and communication are key strategies for driving up engagement. Employees simply
appreciate being included in messaging. They feel valued as a part of the organization which results
in a more loyal and higher-performing workforce.

5) Get to Know What Your Team Truly Wants

Employee satisfaction comes down to understanding what employees want and need in order for
them to be happy at work. Managers and leaders can use workplace tech, like an employee app, to
get feedback with surveys and messaging to make sure employees’ needs are being met.

Create a culture that encourages employee feedback and take action on what you learn from them.

See how Beekeeper helped build a Tight-Knit Company Culture for Wireless Vision

Pro Tip: Survey your employees to see what they need to feel happier and less stressed at work.
6) Make Work Less Stressful

There’s a reason employees take ‘mental health days’ in today’s culture. Employee burnout is real,
with nearly a quarter of the workforce at their burnout breaking point.

A compounding effect is creating a lot of pressure on the collective workforce—little free time,
making ends meet, raising families, work demands.

Create an environment in your company that reduces stress instead of adding to it.

Things that help employees enjoy their work:

Friends in the company

Agency and autonomy

Recognition

Good benefits package

Trust

Flexible work arrangements

7) Support Your Managers

Managers have a huge impact on employee retention rate and engagement. Managers should be
taught to lead with trust and recognition to support employee satisfaction. Give them the support
and tools to do that through training, technology, and information.

8) Resolve Issues Quickly

An inevitable element of employee relations is conflict resolution—from discrimination complaints

to conflicts between workers. It’s essential to have a process and protocols in place to handle issues
swiftly and fairly.

For conflict resolution make sure to:

Create an environment where employees feel safe to speak up.

Resolve issues in a timely manner to lessen the impact to workflows and productivity. Lingering
issues can also lead to an air of distrust in the workplace that can spread like wildfire.

9) Inspire Employee Advocacy

A company’s reputation used to be built on customer experience alone. Now, more than ever,
employees are predominantly shaping a company’s public profile. From word of mouth to online
reviews of employers, your workforce creates your image.

Inspire your employees to champion the brand by prioritizing the employee experience and creating
an inclusive, transparent workplace. Employee advocacy does wonders for talent recruitment and
employee retention strategies, important in this day and age where competition for employees is
fierce.

10) Give Feedback

Create a system of checks and balances in your company by being a champion of constructive, two-
way feedback. Through a digital workplace and in person, employees and managers can develop a
back-and-forth for constant personal and operational improvement.

11) Make Decisions Based on Data

Today’s workplace technology makes it impossible to claim ignorance when it comes to employee
engagement. Detailed analytics are available to track and monitor what’s working in an organization,
where employees are most productive, and areas (and people) that need more support. Make data-
driven policy decisions and implement strategies that drive results.

12) Retention Begins at Onboarding

When your strategizing and brainstorming employee retention ideas, start at the beginning.
Onboarding should be an exciting time for new employees.

Start thinking of retention the day an employee accepts the job offer: be transparent from the get-
go and tell them about what they’ll be doing and opportunities for movement within the company.
Pair them with a mentor to build their work community from day one. Welcome them and make
them happy to be there from the start.
13) Create a Safe Workplace for Everyone

The headlines are filled with long-overdue news stories about workplace discrimination, harassment,
and abuse. It is imperative that leaders create a safe space for every single employee, from top to
bottom.

Have a zero tolerance policy for any acts that make an employee uncomfortable or scared and take
action immediately.

Nurture a community of respect and a culture of diversity and inclusion. Not only will your
employees be happier but they’ll be more productive and innovative when they are welcome,
supported, and cared for.

14) Hand Over the Reins

When you hire an employee to fill a specific role, give them space to own their title. Let employees
make decisions, and let them set goals for accomplishing tasks. Equip them with the freedom, the
tools, and information to be self starters.

Build a rapport that encourages them to seek guidance without micromanaging them. They’ll gain
confidence, expand their capabilities, and work harder when they see what they can accomplish.

15) Be More Adaptable

By now, you’ve hopefully said goodbye to a strict 9-5 policy. (If you haven’t, then move this to action
item to the top of the list.) It’s all about flexible work arrangements now. It ties into so many other
areas of employee relations, like reducing stress in the workplace, autonomy, and retention.

Let employees manage their own schedule on the employee app and coordinate with peers to build
a schedule that works with their lives. As long as their work gets done and is done well, be adaptable
and agile.

As we move into the third decade of the 21st Century, leaders are shifting their efforts to focus more
on the well-being of their employees and their role in business success.
Incorporating workforce technology solutions with strategic initiatives can forge a partnership with
employees built on trust and transparency. Make sure employee relations is on your list..

STRATEGY FOR EFFECTIVE EMPLOYEE RELATIONS

Employee relations, simply defined, is the relationship between employees and employers. Every
company knows they need an effective employee relations strategy, but few do much about it and
many are not sure how to go about forming a strategy.

Employee relations are influenced by many factors, all of which affect the strategic balance between
employers and employees. Building a strong employee relations strategy involves creating an
environment that delivers what people want. Employees want to feel good about what they do and
where they work. Companies want to feel good about productivity, performance and developing
future leaders.

An effective employee relations strategy will impact employee engagement, thus resulting in better
company performance. How do you go about developing effective employee relations? Follow the
advice below:

ADOPT A CONDUCIVE WORKPLACE CULTURE

Employees want to feel good about what they do and where they do it. Decide with your team what
values represent your company and then promote them transparently. Articulate them to every
person in the organization; they will drive expected behaviors. It should go without saying that
leadership must live the cultural platform.

INVOLVE YOUR TEAM MEMBERS

Employees should feel important to your company. Let them willingly accept new responsibilities
and challenges. But, make sure they enjoy whatever they do. Encourage employees to share their
work with each other. This way people tend to talk with each other more, discuss things among
themselves and thus the comfort level increases. Let them work together and make some decisions
on their own. A team leader should intervene only if necessary.

INSIST UPON PROPER COMMUNICATION

Employees need to know what’s going on.Encourage effective communication among team
members. They can’t work in a vacuum and they need an avenue for articulating needs, wishes,
complaints and goals. Poor communication leads to confusion and misunderstandings. The
communication has to be precise and relevant. Be very specific about expectations. Be
straightforward. Written modes of communication must be promoted among the employees for
better transparency. Don’t just communicate to employees; ensure there are flexible ways for
employees to communicate back.

RECOGNITION

Praise the individual for exceptional results and provide suitable rewards. Encourage everyone to
perform well to live up to the expectations of the management team.Put measures in place so
people can be recognized and applauded when they live up to those values.

REGULAR TEAM MEETINGS

Let everyone come together on a common platform and discuss whatever issues on their mind. The
meetings must not be too formal. Leaders should start and end the meeting with a positive tone,
provide updates and get the group involved.

EVENTS

Celebrate birthdays, holiday parties, and other occasions at the workplace. These small initiatives
actually go a long way in strengthening the bond among the employees. Allow them to decorate the
office, their work stations and make all the necessary arrangements themselves. Employees will
actually take the initiative and organize things on their own. Let them enjoy each other and have
fun.

Strong and effective employee relations generally lead to a better performing organization.
Employees want a culture where they are comfortable with each other, share a good rapport and
work in close coordination towards a common objective. A healthy relation among employees
promotes a positive workplace and employees feel happy and satisfied at work. They look forward to
going to work and contributing to the mission, vision and goals of their employer.

For assistance with any or all of your human resource needs, HR Affiliates provides solutions that fit
any company.

Strategies to Improve Remote Employee Relations

employee relations
Liz Strikwerda/June 23, 2021/Human Resources Management

As employers start bringing remote employees back to the office, there is renewed focus on
employee relations. Problems that waned during the pandemic can flare up when employees are
back in physical proximity.

It has never been more important for managers to step up their efforts. Good employee relations
result in lower turnover and higher productivity. There is a lot at stake during this critical rebuilding
stage.

Let’s look at some numbers about labor relations and job satisfaction:

Employee Relations Strategies: 5 Takeaways

Only 42% of U.S. employees look forward to coming to work, compared to 84% of those recognized
by Fortune 100 as “The Best Companies to Work For.” Fortune 100 (requires registration)

The World Health Organization has codified a new type of health condition that threatens the health
of employees. “Chronic workplace stress that has not been successfully managed” is the WHO
official diagnosis. O.C. Tanner

60% of workers report being stressed all or most of their time at worked. (Udemy)

86% of millennials say they would stay in their current job if the company offered career training and
development.

Workers who give their managers a low rating are four times more likely to be interviewing for other
positions than those who don’t. (TINYPulse)

Did you know that less than half of employees surveyed by the World Happiness Report said that
they are happy with their jobs? Are your employees among them?

SHRM estimates that employee turnover costs as much as 200% of an employee’s salary. Since
unhappy employees are more likely to look for another job, that can be expensive for your business!
Fortunately, there are ways that you can help to improve employee relations and satisfaction within
your company. Let’s discuss best practices for the HR manager, line-level managers and business
owners.

Get our latest FREE eBook How to Master Remote Workforce Management.
If you are a manager or business owner with a virtual team, you may be searching for ways to
improve employee relations and manage employees more efficiently. In our new eBook How to
Master Remote Workforce Management, we take a deep dive into hybrid workforce management
and provide actionable insights to help you engage your remote employees.

1. Promote an Open Dialogue

Open dialogue doesn’t simply mean that managers talk to their employees frequently. Open
dialogue describes a work environment where employees aren’t hesitant to give honest feedback to
managers. Open dialog is constructive and transparent. It focuses on problem-solving. Of course, you
need good managers in the first place. Employees who feel that their managers are open, honest,
and trustworthy are far more likely to be less stressed and more happy at work.

Open dialogue helps to prevent employee confusion and unnecessary stress. It can decrease friction
between employees, especially management and employees. It helps to set clear goals and
expectations. When millions of employees were abruptly sent home to work in March 2020 (due to
the pandemic), effective communication became one of the biggest challenges for managers and the
HR department.

Provide a way for employees to express grievances and to resolve conflicts. They need a way to
express themselves openly without fear of retaliation. That doesn’t mean that employees should be
able to rant to the whole office, but there should be a person or an internal process that allows an
employee to bring up problems. Human Resources Management System (HRMS) with an anonymous
feedback feature works well for hybrid workforces. However, it doesn’t do any good if no one
monitors the forum and acts on the issues brought up.

Employees should also be able to ask questions and clarify ideas in a safe space. New policies,
procedures, or expectations, including project expectations, should be communicated both verbally
and in a written format. This allows employees a way to discuss and clarify expectations, as well as a
resource to find clarification. Don’t forget that people absorb new information in different ways.
While some learn best through written words, others learn best by hearing and doing.

remote employee relations

2. Focus on Company Mission and Values

Most people want to be part of something bigger than themselves. This is true for all five
generations currently in the workforce. Millennials, especially, have a desire to be socially
responsible and to benefit the world as a whole. The employee experience at a values-driven
organization can create strong relationships and employee loyalty. Align corporate values with the
way you treat employees.

Express your company values and mission frequently. More importantly, make sure leadership and
management walk the walk. Few businesses have as a mission ‘make more money no matter what.’
Instead, successful businesses have a reason for why they do what they do. Your company fills a
need that was unfilled before. You have hopes and aspirations for how you will help more people.
You have goals and dreams for your business. Share them.

What caused you to come up with your business? Why did you sacrifice many nights and extra hours
to achieve success?

Core values such as honesty, purpose, and quality work help employees to feel like they are part of
something important.

3. Increase the Ratio of Positive vs. Negative Feedback

Regardless of their actual performance, most employees feel proud of their accomplishments. For
this reason, appreciation for a job well-done does more to motivate than does criticism. But it can be
human nature to focus on the negative aspects of employee performance.

Instead, managers and Human Resources should try to focus on the 9 things done right, instead of
the 1 thing done wrong. Many experts suggest providing 2-3 positive points of feedback for every 1
item of criticism and some experts suggest 5-6 positives to every 1 negative.

Employee relations experts recommend the following to help employees feel valued:

Say thank you for big and small things. It can range from a simple thank you card to verbal
appreciation.

Tell employees they are valuable. They need to hear it. Letting them know when they handled a
situation or a customer well helps motivate them to do it again.

Recognize high achievers. Public recognition is a huge motivator for certain personalities. Plus, it has
the added benefit of showing that your company values and goals are important!
4. Inspire and Reward

Consider creating employee goals with employees instead of simply handing them down. Encourage
employees to set stretch goals: goals that are difficult but achievable. When performance
management is a two-way rather than one-way process, employees are more invested.

Google allows their employees to set quarterly goals. The goals must be difficult and measurable.
These goals have resulted in Google tools that we now take for granted. These include a new search
engine and Gmail (as a searchable email). Ideas were brought by employees that changed the face of
Google for the better.

Your employees often have insights or ideas that can make a big difference in their effectiveness or
in the company’s success. Tap into those ideas!

Another way to inspire employees is to reward them. Consider having a gold, silver, bronze incentive
for various achievements. But, make sure that these incentives align with your business values.
Otherwise, you may end up in a similar situation with Wells Fargo, where corporate goals conflicted
with corporate values and incentives won out.

Managers should reward and recognize as soon as a new team member is hired. After all, accepting
an offer is their first achievement, right? It’s never been easier to send a branded welcome kit to
newly hired employees working remotely. See 19 Items Your New Hires Expect to See in Their
Welcome Kit for some great ideas.

5. Offer Career Development

Even lower-level employees can benefit from development. Most employees are happier when they
have a goal or a dream to work toward. Map the career path for each job role at your company.
Consider the skills and unused talents your employees have.

Whenever possible, take advantage of employee skills by adjusting their roles. This will help your
employees develop new skills and will bring added value to your organization.

Other ideas include offering a mentorship program which pairs employees to higher-skilled
counterparts. Rotational training can cross-train team members to fill multiple roles. Tuition
reimbursement or certification programs can also help employees to advance in their career. If you
don’t already have career development, it should be one of your pressing Human Resources issues
to tackle soon.

employee relations

6. Promote Healthy Work-Life Balance

Sometime it can be easy for employers to forget that employees have personal lives that take
priority.

Employees who feel supported at home develop a greater sense of loyalty and strong employee
engagement. It’s not coincidental that some of the most sought-after employee benefits include
things that provide for a better work-life balance. These benefits include flexible work schedules,
paid time off and health benefits that support family wellness.

But, it’s not all about the benefits. The attitude of your managers, when faced with employees’
personal dilemmas, will make a difference. Although employees often value the chance to work from
home, this doesn’t mean you should ask them to take work home. Instead, work from home
capabilities usually means the ability to work from home during a normal work day.

Managers can be supportive when employees need to take time off. (Although they should also be
trained on watching for employee requests that signal potential FMLA use as well.)

7. Use Software to Streamline Redundancy and Eliminate Mistakes

Implementing systems and software can make a big difference. That’s because it helps to automate
and improve communications. Project management applications make it easy for managers and
team members to see what’s required on a project and who’s responsible. Messaging apps can make
communication instant and avoid the stress from unplanned lengthy discussions that often occur
face-to-face.

By implementing the right software, you can eliminate redundant tasks from employees and tap into
their creativity instead. Consider that 10 minutes spent filling out a weekly timecard turns into 520
minutes each year. Instead, employees can clock in automatically. This also eliminates redundant
timesheets data entry by payroll employees.
Other tasks can be streamlined. Through an employee portal, employees can view pay stubs, W2s,
and request time off. They can update personal information and view the employee handbook.

Consider, the stress your employees endure when a key individual takes time off or quits
unexpectedly. Suddenly employees are scrambling to recreate processes or to gain access to critical
systems. Make sure that you have a process down that has recorded key processes. Software allows
the reassignment of authority and makes this easier.

Lastly, software helps you to stay compliant. Non-compliance carries several unintended
consequences. It causes undue stress on employees during investigations, possible gossip and
negativity, and poor public reputation. When an employer endures reputation loss, it causes poorer
relations with employees because they are more likely to feel like their contribution doesn’t make
the world a better place. They are more likely to be unhappy with their employment and more likely
to jump on the bandwagon of dissatisfaction.

Conclusion

If you feel overwhelmed by employee relationship management, don’t worry. Creating an employee
relations policy by starting with even one or two of these ideas will help you to improve employee
relations. The most cost-effective will be to implement software tools. Many of these tools are
inexpensive and provide a swift time to value..

Talent Management

Knowledge Hub

Updated April 9, 2021

Human resources plays many roles in a company. The department manages employee relations,
talent acquisition, payroll, onboarding, and much more. One more duty of HR is talent management.

This is key to keeping your organization moving ever closer to its goals.

Discover:
What Is Talent Management?

The importance of Talent Management

Talent Management Model

Talent Management Strategy

Building Your Talent Management Strategy

The Talent Management Process

The 7 Steps of a Great Talent Management Process

What Is Talent Management?

Talent management is a constant process that involves attracting and retaining high-quality
employees, developing their skills, and continuously motivating them to improve their performance.

The primary purpose of talent management is to create a motivated workforce who will stay with
your company in the long run. The exact way to achieve this will differ from company to company.

Talent management in HR

Talent management naturally encompasses many of the responsibilities of HR.

All the same, it is not enough to expect that just because you have an HR department, you are
managing talent.

You need to have a talent management strategy in place designed just for your company to gain
optimal results.

The importance of Talent Management

The simple answer is because it capitalizes on employees — arguably, the most important asset of
your company.

Talent management helps you maximize the value of employees.

The importance of Talent Management

Source: www.mckinsey.com

As you can see from the graph above, there is widespread agreement that talent management is
effective (or even very effective) at attracting and retaining talent as well as improving overall
performance.

There are a few main reasons why this is the case.

1. It helps businesses improve performance

With top specialists in your organization, you can reach any goal.

Image displays relationship between talent management practices and outcomes: rapid talent
allocation, positive employee experience, strategic HR team and their effect on effective talent
management.

Source: www.mckinsey.com

Talent management is most effective of all when it combines three key components: rapid talent
allocation, positive employee experience, and a strategic HR team.

2. It allows companies to stay competitive

By hiring and developing talented employees, your organization becomes stronger and better
prepared to face changes and risks.

3. It drives innovation

New technologies are always hitting the scene, whatever your industry. Talented employees are able
to find ways to harness the capabilities of new tools and solve problems or come up with original
ideas.
4. It helps form productive teams

The appropriate talent management strategy will allow you to form a more productive team. This is
far more useful than just having a bunch of creative and talented people in your organization.

5. It decreases turnover

When employees feel valued at a company, when they know they will have plenty of opportunities
to grow in the business, they are less likely to seek work elsewhere.

6. It leads to strong employer branding

Talent management brands your company as an employer. This helps you to attract the best
candidates for future hires.

7. It motivates others to grow

Having inspiring talent on your team will motivate other employees and help them grow.

Talent Management Model

Talent Management Model displayed as a circle with its main stages: planning, attracting,
developing, retaining, and transitioning of employees.

Source: expert360.com

Whereas there is no standardized model for talent management, some HR professionals have
proposed excellent models that any company can use.

However you choose to develop your model, it must include the following.

1. Planning

Planning aligns your talent management model in line with the overall goals of your organization.
Only with the correct planning can you ensure that you seek talent with the right skills and
experience. In addition, it assesses current employees to see what is working well for the company.

For instance, if employees with certain characteristics tend to stay at the organization for longer, you
should plan to hire more workers like them.

2. Attracting

It is not always as simple as when one person leaves the company, you start a search for someone
else to fill the role.

For instance, your needs may change or employees may take on new responsibilities. Talent
management ensures that you always have sufficient staff to carry out all your operations and
prevent heavy workloads that could cause demotivation.

The right strategy will attract just the kind of workers you want at your business. Such hires will be
driven, skilled, and seeking to advance within the company.

Attracting talent is all about branding your company as an employer. You’ll need to find ways to
increase visibility in ways that allow you to present company as a best place to work. The main
consideration here is to make your business more approachable.

Even if you choose not to hire someone for a particular position, you still need to create a positive
experience. This will give you the opportunity to hire these candidates for other jobs or use them as
ambassadors to acquire other talent.

3. Developing

The development part of the model involves taking steps to help talent grow within the company.

It should be aligned with the employee development plan and includes identifying roles where
particular employees could move to in the future as well as considering how to expand workers’
skills and knowledge to fulfill new challenges facing your organization.
Talent management also looks at what will keep employees at your company enthusiastic and willing
to go the extra mile. It is necessary to provide employees with value.

Motivation also requires the correct onboarding — to give new hires a great impression of your
company from the very beginning. This will increase the chance that they stay with the company and
work hard.

4. Retaining

Another purpose of talent management is to keep people at your company for longer.

Employees need to continue feeling that the company is an enjoyable, meaningful place to work.

Through training and other types of engagement, employees have the chance to create a career
without leaving the company. You may achieve this by focusing on compensation (monetary and
otherwise) as well as company culture.

5. Transitioning

After hiring and developing their skills, you need to plan for employees’ transitions.

Your aim at this stage is to keep their knowledge within the company — this is called knowledge
management.

You need to have a plan in place to promote employees or move them to another role, department,
or office. If a worker does decide to leave, you need to know why.

Talent Management Strategy

A talent management strategy is based on the talent management model. It should match your
organization’s goals and clearly define what type of talent you need.

You organize the talent management process based on the talent management strategy.
There are few different types strategies you can choose from.

Strategy #1: Hire Only Top Employees

The advantages of this strategy are obvious:

You immediately receive top talent.

The employees will perform well and probably reach high performance faster.

You are able to grow your company faster.

You are more prepared for challenges and risks.

However, there are some disadvantages:

It’s expensive, and will cost you even more if you end up needing to hire someone else.

It could be more difficult to retain top talent.

The hiring process may take longer, as you’ll probably want to select from a wider pool of
candidates.

It can be challenging to manage team of top talent.

Having too many top performers on a team can lead to competition and result in underperformance.

Strategy #2: Hire Promising Specialists and Develop Them

This second option has a couple advantages:

You can find talent faster. This may be necessary if you are in urgent need for talent and have
insufficient time to search for top employees.

You will likely save money on salaries.

The employee has the potential to become a skilled and loyal professional.

You can hire two, or even three, promising specialists for the same amount as for one top
performer.

The main disadvantages are:

Your company may grow slower.

Compared to top talent, these hires lack of knowledge. This can lead to lower performance.

You may need to hire another specialist if the employee cannot handle the role.

It requires a larger investment in development.

The strategy may fail entirely and you’ll need to revert to option 1.

Strategy #3: Combine Strategies 1 and 2

This quote describes the strategy best:

"Your team’s strength is not a function of the talent of individual members. It’s a function of their
collaboration, tenacity, and mutual respect."

Finally, the pros of combining the two above are:

It gives you the best of both worlds.

It also allows you to take advantage of a combination of new hires and existing talent.

Having top talent and potentially good specialists (e.g. young employees) will help the specialists
grow faster and motivate them.

It leads to knowledge transfer — top talent can teach other employees.

All the same, there is one con:

If you have specific requirements (such as you are in urgent need of growth or if you are on a tight
budget), sticking to a single strategy may be more appropriate.

Building Your Talent Management Strategy

Lastly, before you go ahead and launch your recruitment and talent management strategy, make
sure you include the essential components of a talent management strategy.

1. Know What Is Your Talent Management Strategy Is For

Every organization has its own unique goals. Whether they relate to better performance or higher
revenue, your goals need to be clearly stated and achievable. You also need to know exactly how
employees will play a role in helping you meet your targets.

2. Measure the Results

You need to know how to measure results to see if your strategy is working. Define the metrics you’ll
use and how often you’ll take measurements.

3. Assign Responsibilities

Much of the talent management strategy is down to HR, but other people at your company will also
need to be involved. For instance, C-level executives are responsible for succession planning.

4. Communicate with Employees

Make sure your employees are clear about where they stand and know what is expected of them.
Talk to them about their career goals to ensure that your company is creating the right
opportunities.

The Talent Management Process

Now you have an understanding of why you need talent management and what it involves. Next,
you need to take a look at the talent management process itself and learn how to apply it to your
company.

What Is the Talent Management Process?

The talent management process is how you organize the management of your human resources. It is
how you choose employees, how you hire them, and how (or if) you train them, motivate them, fire
them, and so on.

The 7 Steps of a Great Talent Management Process

The following steps cover what you need to do to develop a continuous talent management process
for your organization.

It covers how to find the most talented people available and then help them stay in your company.

Step 1: Specify What Skills You Need

What is the first step in the talent management process?

Before you can go any further, you must determine what kinds of hires you need and what
requirements they should fill.

Consider if it would be possible to teach existing employees to avoid the need to hire anyone new.

Step 2: Attract the Right People

There are several stages to attracting talent:

Create targeted advertisements and post them on top job sites — HR branding is helpful here.

Plan interviews and other means to identify the best person for the job. In addition to regular
questions, consider using personality assessments, references, and tests that require candidates to
perform in real-life situations.

Hire your top choices.

Step 3: Onboard and Organize Work

Help new employees feel orientated by being ready for them as soon as they enter the company.

Know what tasks you will set them, have training sessions scheduled, and assign current employees
to support new workers settle in.

Step 4: Organize Learning and Development

Remember, it is often easier to develop the skills of your current employees than to hire new talent.

Plus, even if you do hire top talent, they will likely want to learn something in their new role.

Plan ways for your workers to learn and grow, such as through conferences, courses, and a learning
management system to create a learning environment.

Step 5: Hold Performance Appraisals

Checking employee performance regularly allows you to see if workers could manage additional
responsibilities.
This could save you hiring new talent and it may help an employee prepare for a promotion.

Step 6: Strategize to Retain Your Best Talent

Keep employees satisfied at work through promotions, benefits, motivating tactics, ensuring job
satisfaction, and improving company culture.

Step 7: Plan for Successions

Nurture employees for successions, such as for when a senior member of staff retires.

Enable employees to perform to their best through continuous learning opportunities, including
knowledge management.

If an employee decides to leave the company, conduct an exit interview to find out what went
wrong — this will help you prevent the same issue occurring again in the future.

Lumen

Principles of Management

Module 7: Human Resource Management

Employee Development and Performance Evaluations

LEARNING OUTCOMES

Describe employee development approaches.

Describe performance evaluation approaches.

A businessman and businesswoman sitting at a table outside, talking.

The best, most loyal employees are often people who started near the bottom of the organizational
chart and worked their way up the ladder with the help, support, and encouragement of their
manager and their employer. That help, support, and encouragement are all part of employee
development. In a well-managed company, there are systems in place to provide appropriate
development opportunities and resources. In addition, managers are trained to support their team
members with coaching, meaningful feedback, and—in some cases—mentorship.
Managers have an important role to play in ensuring that their employees develop their potential.
Some of the most important things a manager can do for their team members are:

Delegating responsibility rather than fixing problems before they arise.

Being aware of development opportunities as they become available and sharing information with
team members.

Offering or suggesting specific appropriate development opportunities to employees and/or human

resources when and as they are appropriate.

Providing meaningful, actionable feedback to team members regularly.

Including “up and coming” employees in meetings, conferences, and other events where they can
contribute ideas, learn about opportunities, and ask questions.

Formal Employee Development Strategies

In any company, there are employees who are satisfied with entry-level work and those who are
eager to learn, grow, and build their careers. Although training programs are appropriate for both
groups, certain types of training are particularly important for individuals willing to work hard to
improve their career opportunities. These include training opportunities in areas such as leadership,
management, negotiation, and other areas likely to be useful to a new manager.

Formal employee development strategies are often planned and implemented by HR and/or
consultants, online training companies, and universities. Topics taught range from “soft” skills
(interpersonal communication, public speaking, negotiation, leadership skills, etc.) to “hard”
technical skills (coding, accounting, systems administration, etc.). Options include:

On-site or off-site workshops to train employees in areas such as business ethics, communication,
management skills, business writing, public speaking, and management techniques.

Online training programs to build skills in areas such as international business law, marketing or sales
techniques.

Certification programs in areas ranging from software proficiency to legal knowledge to

management in specific areas such as human resources and manufacturing.

Funding for formal coursework in pursuit of postsecondary degrees or certifications in areas such as
business administration, finance, or related fields.
Opportunities to attend conventions and conferences at which employees may attend workshops
and build their professional networks (or in some industries, present their research, products, or
ideas).

Informal Employee Development Strategies

In addition to formal employee development, many corporations offer informal development

options. These often take the form of on-the-job training, shadowing, mentorship, or similar
experiences that allow newer employees to learn from senior staff. In addition, managers may
choose to coach promising employees to prepare them for more challenging opportunities.

On the job training may involve a newer employee watching and then imitating a more experienced
colleague. On-the-job training is fairly standard in hands-on work such as manufacturing, trades, and
restaurant work—but it is also effective in many business situations. In sales, for example, a more
experienced representative might make a sale using specific techniques and then allow the newer
representative to try using that same technique with another potential client. After the interaction is
complete, the more experienced individual might provide constructive feedback.

Shadowing is a technique in which a newer employee literally “shadows” or follows a more

experienced colleague to watch and learn from his or her techniques. As with on-the-job training, a
day of shadowing is usually followed by a conversation during which the learner asks questions to
better understand the techniques demonstrated. Shadowing works well when a specific skill is being
demonstrated; mediation and negotiation, for example, are best understood in a real-world setting.

Mentorship and coaching are generally offered not by peers but by managers who have the
experience and knowledge to advise promising employees. Some corporations offer formal
mentorship programs that match individual employees with mentors who have greater experience
and higher-level positions in a similar field. Other corporations encourage informal mentoring.
Coaching is usually provided by a direct manager who may, for example, wish to support an
employee so that he or she can successfully navigate a tricky or challenging project.

PRACTICE QUESTION

Performance Evaluations

Most companies perform annual performance evaluations. These high-stakes reviews can have a
profound influence on an employee’s career, as they are often the basis on which decisions are
made regarding raises, promotions, and even retention. As a result, they create a great deal of
anxiety, both for employees and for their managers.
Fortunately, it is possible to craft the performance evaluation so that it is relatively painless. At the
same time, a well-crafted evaluation process can also help both managers and employees to review
job descriptions with an eye to making appropriate changes, set goals, and address unnecessary
roadblocks and challenges that sabotage high performance.

The following list covers some of the most popular approaches to performance evaluations. Each of
these has its pros and cons, depending on the type of job and the purpose of the evaluation. Often,
managers use multiple techniques to gain a fuller picture of each employee.

Checklists are helpful in that they allow managers to quickly check off skills, achievements, and
behaviors as they are accomplished. The downside is that checklists provide little meaningful
information about the quality of the accomplishments or any challenges an employee might have
encountered when attempting to complete a task. For example, an employee might have legitimate
difficulty arriving on time if a public transit strike occurred—but a checklist would simply note that
the employee was tardy. Because they’re so quick and easy, though, it’s possible to use a checklist
regularly and compare outcomes over time.

Rating Scales allow managers to rate the quality of an employee’s performance or skills; generally,
the rating scales are 1 to 5 or 1 to 10. This allows a little more flexibility than a checklist, and it can
suggest opportunities for improvement over time. For example, an employee who earns 6 out of 10
for punctuality in January can earn 8 out of 10 in February—thus showing both motivation and
improvement.

Comparative Techniques allow managers to compare individual employees head to head for specific
goals and outcomes. For example, managers might compare the number of sales made, customers
served, income generated, etc. Comparative techniques make it possible to see whether an
individual employee is falling far behind or leaping out in front of his or her peers. Of course,
comparative techniques only apply to groups of employees who have identical goals, resources,
opportunities, and training.

Narrative Techniques are essays describing employee performance. These are generally written by
the employees’ direct managers, though they are sometimes written by the employee himself or
herself. On the one hand, narrative essays take time and energy away from the manager’s (or
employee’s) daily tasks. On the other hand, they can provide the most detailed and meaningful
evaluations, as they are flexible enough to describe individuals’ strengths, challenges, obstacles, and
opportunities.

360 Feedback asks employees’ managers, subordinates, and peers to provide feedback about
performance from every angle. This can be a very useful form of evaluation, as some individuals can
be wonderful managers but have a difficult time interacting with peers or vice versa. By gathering a
wide range of perspectives, managers can pinpoint areas of strength and opportunities for growth.
On the other hand, this approach can be problematic if the employee in question is less popular for
any reason or if a supervisee is unhappy about being disciplined.
Cost Accounting is an approach that is most appropriate for individuals who make direct sales,
produce a manufactured product, or provide direct service. The question asked is: how does the cost
of the employee’s salary and benefits compare to the income this individual generates? By making a
direct cost/benefit analysis, the manager can determine whether the employee is worth the amount
being spent on him or her by the corporation. This type of accounting, however, rarely provides a
complete story about the employee’s abilities or assets. For example, a sales person who takes his or
her time getting to know the client may make fewer sales per week but may generate more goodwill
and recommendations over the long term.

Management by Objectives is a personalized evaluation technique that measures the individual

employee’s achievement by comparing the employee to objectives agreed upon the prior year. For
example, the employee and manager may have agreed on a particular sales objective; at the end of
the year, the employee’s actual sales can be compared positively or negatively to the individualized
objective.

Employee Evaluation and Management, in Detail

Evaluating Employee Performance

Performance evaluation is the process of assessing an employee’s job performance and productivity
over a specified period of time.

LEARNING OBJECTIVES

Explain the human resource responsibility of evaluating employee performance, focusing specifically
on the various available methods

KEY TAKEAWAYS

Key Points

Evaluating performance is the process of assessing an employee’s job performance and productivity.

Performance assessments can create benefits for management and employees through improving
performance, but can also be a stressful, so they must be carefully implemented.
The assessment is conducted utilizing previously established criteria that align with the goals of the
organization and the specific responsibilities of the employee being evaluated.

There are many methods of performance evaluation, such as objective production, personnel, and
judgmental evaluation.

Effective use of performance-evaluation systems includes the selection of the best evaluation
method(s) and effective delivery. The outcomes of performance evaluation can include employee
raises or promotions, as well as employee improvement through identifying weaknesses.

Key Terms

Performance evaluation: The process of assessing an employee’s job performance and productivity.

Performance evaluation, or performance appraisal (PA), is the process of assessing an employee’s

job performance and productivity. The assessment is conducted based on previously established
criteria that align with the goals of the organization.

Various employee attributes can be assessed during this process, including organizational-citizenship
behavior, accomplishments, strengths and weaknesses, and potential for future improvement. The
management of performance plays a vital role in the success or failure of the organization, as human
resources are a significant investment that must provide meaningful returns. An ineffective
performance-evaluation system can create high turnover and reduce employee productivity.

Pros and Cons of Performance Appraisals

Benefits of the PA system include increased employee effectiveness, higher likelihood of improved
employee performance, the prompting of feedback, enhanced communication between employers
and employees, fostering of trust, promotion of goal setting, and assessment of educational and
other training needs. Detriments of the PA system include the possible hindrance of quality control,
stress for both employees and management, errors in judgment, legal issues arising from improper
evaluations, and the implementation of inappropriate performance goals.

Performance appraisal is situated at both the individual employee level and the organizational level
because human resources (HR) conducts evaluations of individuals in light of organizational goals
with the object of improving achievement of these goals. HR relies on a strong performance-
management policy; a proper PA should be able to educate employees on the organization, its goals,
and its expectations in legal ways. This means that antidiscrimination laws and other employment
laws need to shape the PA policy.

Methods of Performance Evaluation

There are various ways human resource professionals can approach assessing performance, though
integrating various perspectives (i.e., collecting the most differentiated data) will paint the clearest
picture. Some examples include:

Objective production: Under this method, direct data is used to evaluate the performance of an
employee. This often relates to simple and quantifiable data points, such as sales figures, production
numbers, etc. However, one drawback of this process is that the variability in performance can be
due to factors outside employees’ control. Also, the quantity of production does not necessarily
indicate the quality of the products. Still, this data reflects performance to some extent.

Personnel: This is the method of recording the withdrawal behavior of employees, such as absences.
This personnel data usually is not a comprehensive reflection of an employee’s performance and is
best complemented with other metrics.

Judgmental evaluation:One of the primary drawbacks of employee performance evaluation is the

tendency for positive feedback despite negative behavior. That is, often people are nice enough to
provide good evaluations for work that isn’t up to par. Judgmental evaluations focus on benchmarks
to more accurately promote constructive criticism (through relative scales). A few examples include:

Graphic rating scale: Graphic rating scales are the most commonly used performance-evaluation
system. Typically, the raters use a 5 to 7 point scale to rate employees’ productivity.

Employee-comparison methods: Rather than subordinates being judged against pre-established

criteria, they are compared with one another. This method eliminates central-tendency and leniency
errors but still allows for halo-effect errors to occur.

Behavioral checklists and scales: Behaviors are more definite than traits. Supervisors record
behaviors that they judge to be job-performance relevant, and they keep a running tally of good and
bad behaviors and evaluate the performance of employees based on their judgement.

Peer and Self Assessments

Often, peer assessments and self-assessments are used to paint a clearer image of performance.
Managers are often less aware of employee efficacy than team members or other peers. In self-
assessments employees have the right to underline what they think their performance is, and why
certain metrics may be misleading. Peer assessments and self-assessments are useful in capturing
this data:

Peer assessments: members of a group evaluate and appraise the performance of their fellow group
members.
Self-assessments: in self-assessments, individuals assess and evaluate their own behavior and job
performance.

360-degree feedback: 360-degree feedback includes multiple evaluations of employees; it often

integrates assessments from superiors and peers, as well as self-assessments. This is the ideal
situation.

image

A manager rating an employee.: Rating an Employee

Structuring Employee Feedback

Effective feedback is structured in a way that provides actionable conclusions to motivate employee
growth through objective assessments.

LEARNING OBJECTIVES

Explore the various formats and structures for providing feedback

KEY TAKEAWAYS

Key Points

Providing feedback involves a wide variety of biases and subjectivity, and as a result it benefits from
structure and strategy.

A common and traditional method for looking at performance via objective production involves
using simple metrics that indicate efficiency (such as sales numbers).

Another common practice is managerial evaluations using behavioral checklists, graphic rating
scales, and comparison among employees.

360 degree feedback utilizes managers, subordinates, colleagues, and self- assessments to paint or
more rounded picture of performance.

Start-Stop-Continue is an actionable and simple model that emphasizes direct feedback on how a
given colleague can improve performance via straight-forward observations and suggestions for
growth.

Key Terms

subjectivity: Judgments based on opinions and intuitions, and therefore not necessarily predicated in
logic or reason.

Why Structure Feedback?

Employee and manager feedback is one of the more sensitive issues in a workplace, and can be
greatly enhanced by careful planning and critical thinking about how to objectively, equitably, and
efficiently discuss employee outcomes and assessments.

As a result, structuring feedback strategically can be a great benefit to both managers and
employees. There are a wide variety of models and structures for providing employee feedback. A
few of the more useful structures for feedback are listed below.

Feedback Structures

Objective Production

The simplest of feedback mechanisms, this essentially looks at basic performance methods such as
output, sales, volume, profitability, or other concrete and objective methods of overall productivity.
As a structural option for feedback delivery, there are some pros and cons to this method. It works
well in jobs where data is readily available and objective, but not so well in jobs relying on more
ambiguous metrics. It is also quite impersonal, and can result in employees feeling like ‘just another
gear in the machine’.

Judgment Evaluation

A much less objective approach would be various formats of judgment evaluation. All this really
means is that an individual or group of individuals will assess the performance of a given employee,
and provide this feedback directly (often in the form of a scale or model). As a result of the potential
subjectivity, it is best to provide training to ensure consistency and informed assessment.

Some assessment formats include:

Graphic Rating Scales: On some sort of relative scale (usually 1-5 or 1-7), employees are assessed on
specific characteristics, accomplishments and behaviors. This is a useful method to observe
improvements over time.

Employee Comparison Models: Two of the main culprits of subjectivity are leniency error and
central-tendency error (judging to favorably and judging everyone the same respectively). To avoid
these, management could be asked to directly compare various employees. This does incur halo
effect errors, however.

Behavioral Checklists and Scales: Certain behaviors can have positive or negative implications, and
monitoring specific key behaviors over a given time frame can be a useful feedback structure as well.
360 Degree Feedback

While managerial feedback is important, it is also important to balance this with the perspectives of
colleagues, subordinates, and those of the individual being assessed (self assessment). In this model,
all work groups and implications of a given individual’s work decisions can be assessed from various
perspectives. Compared to a static top-down feedback structure, 360 degree feedback has
significant advantages in accuracy, objectivity and equality.

Start-Stop-Continue

Often simplicity excels in implementing feedback, and the Start-Stop-Continue model is just about as
simple as it gets. Agile teams and flat organizational structures focus on peer assessments that
leverage models such as this (often coupled with some basic rating scales) to assess employees with
the goal of personal growth. This is done using three points of commentary:

Start: What tasks, habits, and/or behaviors should the employee begin doing to improve?

Stop: What should a given employee discontinue doing to improve performance?

Continue: What does the employee excel in doing, and should continue?

The key advantage of this structure is the simplicity of it. Employees have immediate feedback that
they can actually act on right away.

Skip to main content

Lumen

Boundless Management

Human Resource Management

Employee Evaluation and Management, in Detail

Evaluating Employee Performance

Performance evaluation is the process of assessing an employee’s job performance and productivity
over a specified period of time.

LEARNING OBJECTIVES

Explain the human resource responsibility of evaluating employee performance, focusing specifically
on the various available methods

KEY TAKEAWAYS

Key Points

Evaluating performance is the process of assessing an employee’s job performance and productivity.

Performance assessments can create benefits for management and employees through improving
performance, but can also be a stressful, so they must be carefully implemented.

The assessment is conducted utilizing previously established criteria that align with the goals of the
organization and the specific responsibilities of the employee being evaluated.

There are many methods of performance evaluation, such as objective production, personnel, and
judgmental evaluation.

Effective use of performance-evaluation systems includes the selection of the best evaluation
method(s) and effective delivery. The outcomes of performance evaluation can include employee
raises or promotions, as well as employee improvement through identifying weaknesses.

Key Terms

Performance evaluation: The process of assessing an employee’s job performance and productivity.

Performance evaluation, or performance appraisal (PA), is the process of assessing an employee’s

job performance and productivity. The assessment is conducted based on previously established
criteria that align with the goals of the organization.

Various employee attributes can be assessed during this process, including organizational-citizenship
behavior, accomplishments, strengths and weaknesses, and potential for future improvement. The
management of performance plays a vital role in the success or failure of the organization, as human
resources are a significant investment that must provide meaningful returns. An ineffective
performance-evaluation system can create high turnover and reduce employee productivity.

Pros and Cons of Performance Appraisals

Benefits of the PA system include increased employee effectiveness, higher likelihood of improved
employee performance, the prompting of feedback, enhanced communication between employers
and employees, fostering of trust, promotion of goal setting, and assessment of educational and
other training needs. Detriments of the PA system include the possible hindrance of quality control,
stress for both employees and management, errors in judgment, legal issues arising from improper
evaluations, and the implementation of inappropriate performance goals.

Performance appraisal is situated at both the individual employee level and the organizational level
because human resources (HR) conducts evaluations of individuals in light of organizational goals
with the object of improving achievement of these goals. HR relies on a strong performance-
management policy; a proper PA should be able to educate employees on the organization, its goals,
and its expectations in legal ways. This means that antidiscrimination laws and other employment
laws need to shape the PA policy.

Methods of Performance Evaluation

There are various ways human resource professionals can approach assessing performance, though
integrating various perspectives (i.e., collecting the most differentiated data) will paint the clearest
picture. Some examples include:

Objective production: Under this method, direct data is used to evaluate the performance of an
employee. This often relates to simple and quantifiable data points, such as sales figures, production
numbers, etc. However, one drawback of this process is that the variability in performance can be
due to factors outside employees’ control. Also, the quantity of production does not necessarily
indicate the quality of the products. Still, this data reflects performance to some extent.

Personnel: This is the method of recording the withdrawal behavior of employees, such as absences.
This personnel data usually is not a comprehensive reflection of an employee’s performance and is
best complemented with other metrics.

Judgmental evaluation:One of the primary drawbacks of employee performance evaluation is the

tendency for positive feedback despite negative behavior. That is, often people are nice enough to
provide good evaluations for work that isn’t up to par. Judgmental evaluations focus on benchmarks
to more accurately promote constructive criticism (through relative scales). A few examples include:

Graphic rating scale: Graphic rating scales are the most commonly used performance-evaluation
system. Typically, the raters use a 5 to 7 point scale to rate employees’ productivity.
Employee-comparison methods: Rather than subordinates being judged against pre-established
criteria, they are compared with one another. This method eliminates central-tendency and leniency
errors but still allows for halo-effect errors to occur.

Behavioral checklists and scales: Behaviors are more definite than traits. Supervisors record
behaviors that they judge to be job-performance relevant, and they keep a running tally of good and
bad behaviors and evaluate the performance of employees based on their judgement.

Peer and Self Assessments

Often, peer assessments and self-assessments are used to paint a clearer image of performance.
Managers are often less aware of employee efficacy than team members or other peers. In self-
assessments employees have the right to underline what they think their performance is, and why
certain metrics may be misleading. Peer assessments and self-assessments are useful in capturing
this data:

Peer assessments: members of a group evaluate and appraise the performance of their fellow group
members.

Self-assessments: in self-assessments, individuals assess and evaluate their own behavior and job
performance.

360-degree feedback: 360-degree feedback includes multiple evaluations of employees; it often

integrates assessments from superiors and peers, as well as self-assessments. This is the ideal
situation.

image

A manager rating an employee.: Rating an Employee

Structuring Employee Feedback

Effective feedback is structured in a way that provides actionable conclusions to motivate employee
growth through objective assessments.

LEARNING OBJECTIVES

Explore the various formats and structures for providing feedback

KEY TAKEAWAYS

Key Points
Providing feedback involves a wide variety of biases and subjectivity, and as a result it benefits from
structure and strategy.

A common and traditional method for looking at performance via objective production involves
using simple metrics that indicate efficiency (such as sales numbers).

Another common practice is managerial evaluations using behavioral checklists, graphic rating
scales, and comparison among employees.

360 degree feedback utilizes managers, subordinates, colleagues, and self- assessments to paint or
more rounded picture of performance.

Start-Stop-Continue is an actionable and simple model that emphasizes direct feedback on how a
given colleague can improve performance via straight-forward observations and suggestions for
growth.

Key Terms

subjectivity: Judgments based on opinions and intuitions, and therefore not necessarily predicated in
logic or reason.

Why Structure Feedback?

Employee and manager feedback is one of the more sensitive issues in a workplace, and can be
greatly enhanced by careful planning and critical thinking about how to objectively, equitably, and
efficiently discuss employee outcomes and assessments.

As a result, structuring feedback strategically can be a great benefit to both managers and
employees. There are a wide variety of models and structures for providing employee feedback. A
few of the more useful structures for feedback are listed below.

Feedback Structures

Objective Production

The simplest of feedback mechanisms, this essentially looks at basic performance methods such as
output, sales, volume, profitability, or other concrete and objective methods of overall productivity.
As a structural option for feedback delivery, there are some pros and cons to this method. It works
well in jobs where data is readily available and objective, but not so well in jobs relying on more
ambiguous metrics. It is also quite impersonal, and can result in employees feeling like ‘just another
gear in the machine’.

Judgment Evaluation
A much less objective approach would be various formats of judgment evaluation. All this really
means is that an individual or group of individuals will assess the performance of a given employee,
and provide this feedback directly (often in the form of a scale or model). As a result of the potential
subjectivity, it is best to provide training to ensure consistency and informed assessment.

Some assessment formats include:

Graphic Rating Scales: On some sort of relative scale (usually 1-5 or 1-7), employees are assessed on
specific characteristics, accomplishments and behaviors. This is a useful method to observe
improvements over time.

Employee Comparison Models: Two of the main culprits of subjectivity are leniency error and
central-tendency error (judging to favorably and judging everyone the same respectively). To avoid
these, management could be asked to directly compare various employees. This does incur halo
effect errors, however.

Behavioral Checklists and Scales: Certain behaviors can have positive or negative implications, and
monitoring specific key behaviors over a given time frame can be a useful feedback structure as well.

360 Degree Feedback

While managerial feedback is important, it is also important to balance this with the perspectives of
colleagues, subordinates, and those of the individual being assessed (self assessment). In this model,
all work groups and implications of a given individual’s work decisions can be assessed from various
perspectives. Compared to a static top-down feedback structure, 360 degree feedback has
significant advantages in accuracy, objectivity and equality.

Start-Stop-Continue

Often simplicity excels in implementing feedback, and the Start-Stop-Continue model is just about as
simple as it gets. Agile teams and flat organizational structures focus on peer assessments that
leverage models such as this (often coupled with some basic rating scales) to assess employees with
the goal of personal growth. This is done using three points of commentary:

Start: What tasks, habits, and/or behaviors should the employee begin doing to improve?

Stop: What should a given employee discontinue doing to improve performance?

Continue: What does the employee excel in doing, and should continue?

The key advantage of this structure is the simplicity of it. Employees have immediate feedback that
they can actually act on right away.
Conclusion

While there are countless opinions and models to utilize in structuring feedback, managers should
keep in mind that the purpose of feedback is growth and improvement. Any model selected should
result in actionable conclusions the employee can use to improve.

Employee Pay Decisions

Making pay decisions can be a function of HR; payroll surveys and internal measures can help
determine what is appropriate.

LEARNING OBJECTIVES

Analyze the various methodologies used by HRM to measure, benchmark, and ultimately devise
appropriate pay strategies

KEY TAKEAWAYS

Key Points

Techniques that assist payroll professionals in making their pay decisions include external measures
such as benchmarking (salary surveys) and ongoing reporting that constitute a market survey
approach.

Internal measures such as projections, simulations, predictive modeling, or the use of pay grades
look to the needs of the organization, and the relative value of tasks within it, to make pay decisions.

Variable systems like pay for performance create a policy line that connects job pay and job
evaluation points.

Key Terms

benchmarking: A technique that allows a manager to compare metrics, such as quality, time, and
cost, across an industry and against competitors.

predictive modeling: Predictive modelling is the process by which a model is created or chosen to try
to best predict the probability of an outcome.

Pay decisions refer to the methods used by human resources and payroll professionals to choose the
pay scales of employees. Techniques that assist payroll professionals in making their pay decisions
include:
External measures such as benchmarking (salary surveys) and ongoing reporting that constitute a
market survey approach.

Internal measures such as projections, simulations, and predictive modeling or the use of pay grades
use an organization’s needs to assess the relative value of tasks within it.

Variable systems like pay-for-performance create a policy line that connects job pay and job
evaluation points.

Benchmarking

Benchmarking is when an organization compares its own pay practices and job functions against
those of its competitors. Obvious cautionary points in the use of these kinds of salary surveys include
the inclusion of only appropriately similar peers in the comparison, the inclusion of only
appropriately similar jobs in the comparison, and accurately weigh and combining rates of pay when
multiple surveys are used.

image

Measuring up: Managers benchmark the metrics of their company against those of industry
competitors.

There are two types of salary surveys that can be used in benchmarking: labor market comparisons
and product market comparisons. Labor market comparisons are best when employee recruitment
and retention is a major concern for the employer and when recruiting costs are a significant
expense. Product market comparisons are more salient when labor expenses make up a major share
of the employer’s total expenses, when product demand is very fluid, when the labor supply is
relatively steady, and/or when employee skills are specific to the product market in question.

Within the benchmarking process, the job category and range of pay rates within it are important to
the payroll professional. Certain key jobs are very common to organizations in a given field and have
a relatively stable set of duties. As a result, key jobs are useful in benchmarking since they allow for
more accurate comparison across many organizations. Non-key jobs are unique to their
organizations and are therefore not useful in benchmarking. Job content is far more important than
job title in this context, although it is easy to confuse content for title. Range of pay rates refers to
the variety in pay rates that workers in one job area might receive.

Salary Surveys

The use of salary surveys demands credible survey sources with multiple participating organizations.
Organizations responding to a given survey must be similar to the organization using that survey.
Close attention to job function is also crucial; it is inappropriate to match and compare salaries
based on job title alone.

Internal Measures

Benchmarking uses external measures to make internal pay decisions. Internal measures are also
available in most cases, and include the use of analytic techniques such as projections, simulations,
and predictive modeling in the pay decision-making process. External and internal measures have
very different focuses. External measures ask the market what any given individual should be paid.
Internal measures correlate pay decisions to potential organizational benefits.

Pay Grade System

A pay grade system is simply tiered levels of pay based on position, experience, and seniority. Using
a pay grade system has its own risks that should be backed by strongly predictive internal measures
because 0nce pay grades are in place, the cost of changing and updating them is significant. This can
lead to stagnation in an organization’s pay scale system.

Connected to this problem is the fact that an existing pay scale can reward skill sets that were highly
useful to the organization in the past more than skill sets that are currently needed. Projections,
simulations, and predictive modeling assist in counteracting these issues, as they make use of an
organization’s own internal data to ensure that assessments of value and need are accurate.

Pay for Performance Systems

Variable pay decision systems like pay-for-performance are designed to motivate employees and
ensure intra-organizational cooperation. When designing this kind of system, the first thing to assess
is the personnel goals of the organization (as this kind of system can be tailored significantly).
Interacting with managers across departments can help payroll professionals understand what is
most important to the various areas of the organization at any given time.

Merit and incentive pay programs are common forms of pay-for-performance systems. Promotions
based on performance rather than set time periods are also critical to pay-for-performance schemes.

Incentive Systems for Employees

Human resources professionals assess organizational and employee needs to identify the ideal
incentive systems for collaborative success.
LEARNING OBJECTIVES

Describe the purpose of an incentive system and learn how human resources professionals can
assess organizational needs to select the best one

KEY TAKEAWAYS

Key Points

Human resources (HR) professionals are tasked with using employee and organizational objectives to
identify and implement the best employee incentive programs.

To be effective, incentive systems must address employee skills and motivation, acknowledgement
of employee successes, a clearly-defined set of goals, and a means for assessing progress. Employee
effort increases as workers perceive that they are achieving set goals.

Recognizing which incentive systems are most appropriate for an organization is a primary challenge
for HR professionals.

An incentive system is a business management tool that introduces a structured motivation system
to promote desired employee behaviors. Human resources (HR) professionals are tasked with using
employee and organizational objectives to identify and implement the best employee incentive
programs.

How Incentives Improve Performance

To be effective, incentive systems must address employee skills and motivation, acknowledgement
of employee successes, a clearly-defined set of goals, and a means for assessing progress. These
systems must also be tailored to the needs of the organization. Incentive systems are often
implemented to prevent and overcome poor performance, failure to meet organizational goals, poor
morale, increased turnover, and the stress of increased demands on employees.

image

Carrot and stick: Incentive systems should use the carrot (reward) as opposed to the stick
(punishment) to motivate employees.

Incentive systems are grounded in the idea that employee effort increases as workers perceive that
they are making progress towards reaching set goals. A successful system promotes full employee
participation by offering a wide array of rewards and keeping employees motivated to participate.
The Role of Human Resources

Incentive systems only work when they are closely tailored to the goals of the organization. The
system’s goals must be challenging but attainable, or employees will not be motivated to participate.
It’s counter-intuitive, but research has shown that monetary rewards are ineffective incentives. One
incumbent risk of incentive systems is the moral hazard of encouraging individuals to achieve their
own goals and specific targets rather than improving upon organizational performance as a whole.

Human resources departments must identify the core culture of the organization and create
incentives that match it. For example, a company built on innovation must inspire risk-taking
without any guarantees of success. This means performance incentives and metrics may be relatively
useless (and most likely damaging) to executing the core organizational goals. Instead, HR could
provide incentives like telecommuting or the freedom to devote a percentage of each work day to
independent projects (Google does this).

At the other end of the spectrum, Walmart promotes rigidly controlled operational efficiency. To
reduce employee errors, an incentives system could reward efficiency. The most consistent truck
drivers, for example, could receive a reward for their clockwork performance.

Employee Benefits Management

Employee benefits are non-wage compensations designed to provide employees with extra
economic security.

LEARNING OBJECTIVES

Break down employee reimbursement to describe a variety of direct and indirect benefits captured
by the employee from human resource management

KEY TAKEAWAYS

Key Points

These critical benefits ensure that employees have access to health insurance, retirement capital,
disability compensation, sick leave and vacation time, profit sharing, educational funding, day care,
and other forms of specialized benefits.

The human resources department is the area of an organization responsible for organizing,
implementing, and managing employee benefits across the company.
Benefits and compensation are at the center of HR operations and play a central role in both the
financial capacity and talent management of any institution.

In most developed nations there are laws that govern benefits and agencies that enforce them. HR is
also tasked with understanding the benefits that employees have a legal right to and implementing
them properly.

Key Terms

Compensation: What is expected in return for providing a product or service.

profit sharing: A system in which some of the profit of an enterprise are divided among the workers,
giving them an incentive for profits without an equity interest.

Employee benefits are non-wage compensations designed to provide employees with extra
economic security. These benefits ensure that employees have access to health insurance,
retirement capital, disability compensation, sick leave and vacation time, profit sharing, educational
funding, day care, and other forms of specialized benefits. Receiving these benefits along with one’s
salary is fairly standard in full-time professional employment.

Human Resource Responsibilities

The human resources department is the area of an organization responsible for organizing,
implementing, and managing employee benefits across the company. Human resources (HR) has a
wide range of responsibilities, including hiring, training, assessment, and compensation across the
company. Benefits and compensation, however, lay at the center of HR operations and play a central
role in both the financial capacity and talent management of any institution.

image

HR responsibilities: Human resources departments carry out many services, including data
management, service efficiency, and employee services.

Human resources contribute to the overall employee experience across the span of an employee’s
time with the company. Benefits play an important role in maintaining high levels of satisfaction.
Employee satisfaction is often overlooked in favor of customer satisfaction, but is just as critical to a
healthy business. As a result, HR has a critical task in maintaining high levels of employee satisfaction
to ensure maximum operational efficiency.

Benefits provided by the company, particularly retirement investing and health insurance, ensure
that employees feel taken care of and secure in return for their investment of time and effort. The
safety net provided and maintained by the company is a strong motivator of employee loyalty and
satisfaction.

Legal Concerns

In most developed nations there are laws that govern benefits and agencies to enforce them. HR is
also tasked with understanding the benefits that employees have a legal right to and implementing
them properly. The Employee Benefits Security Administration (EBSA) is the agency in the United
States responsible for administering, regulating, and enforcing many of these benefits. HR also works
closely with the legal department to understand and provide the benefits required by each country
they operate in.

HR is a central element of any successful business because it maintains the most valuable
investment of any business: its people. Employee satisfaction and compensation help companies
achieve high efficiency and strong performance from their employees by administering the
appropriate level of compensation and benefits.

Employee Promotions

A promotion is the advancement of an employee’s rank, salary, duties, and/or designation within an
organization.

LEARNING OBJECTIVES

Evaluate human resources’ role in creating promotion opportunities to motivate employees and
develop upwards mobility within an organization

KEY TAKEAWAYS

Key Points

A promotion is the advancement of an employee’s rank, salary, duties, and/or designation within an
organization.

Promotions can also carry increases in benefits, privileges, and prestige, although in some cases the
promotion changes designation only.

The number of safeguards in place against unfair practices in promotion depends on the public or
private nature of the organization.

Key Terms
Designation: A distinguishing name or title.

A promotion is the advancement of an employee’s rank, salary, duties and/or designation within an
organization. Promotions are often a result of good employee performance and/or loyalty (usually
via seniority). The opposite of a promotion is a demotion.

The Role of Human Resources

Prior to promoting someone, the human resources department of an organization must ascertain
whether the employee in question can manage the increase in responsibilities that accompanies the
new role. If not, additional training may be required to prepare the individual for their new
organizational role.

Incentives of Being Promoted

Internal promotions carry incentives that motivate employee efficacy and ambition. Human
resources can manage internal promotional opportunities and benefits to increase employee
engagement. A promotion might involve a higher designation. This means that the more senior
position has a different title. An example would be a promotion from office manager to regional
manager. A promotion can (and often does) mean an increase in salary. The amount of the raise
varies widely from industry to industry and from organization to organization within a given industry.

Promotions can also carry increases in benefits, privileges, and prestige, although in some cases only
the title changes. In very hierarchical organizations, like the military, the change in rank alone is
significant and brings with it new responsibilities. In the nonprofit sector pay increases are modest,
so the prestige of a promotion is one of its main benefits. In the private sector, promotion can
include substantial salary increases, benefit increases, stock options, and various “perks,” such as a
bigger office or executive parking.

Safeguards and Systematic Equity

Generally speaking, there are more procedural safeguards against preferential treatment in the
public sector as compared with the private sector, where senior managers enjoy broad discretion in
making promotions. Review of promotion decisions and mandates to document such decisions in
personnel files protect against discrimination, bias, and preferential treatment. It is critical for
human resources professionals to understand and describe why a given promotion is occurring,
justifying it both quantitatively and qualitatively.

Employee Transfers
Transfers take place in response to goals, needs, talent, or employee requests; HR evaluates and
executes transfers.

LEARNING OBJECTIVES

Identify when it is appropriate to consider strategic or unexpected interdepartmental transfers

within a human resources frame

KEY TAKEAWAYS

Key Points

Transfers can occur for a number of different reasons and can be initiated by employees or
managers. Types of employee transfers include: strategic transfers, necessity transfers, and talent/
management transfers.

A strategic transfer takes place when an organization is trying to grow a specific segment of its
operations, and needs experienced and trusted individuals to pioneer this process.

A necessity transfer takes place when there is a demand for employees in a different department of
the organization, where a specific skill set is scarce.

A talent transfer usually moves an employee from their original department after it becomes clear
that their skill set is more suited to another department.

Key Terms

strategic: Of or pertaining to strategy.

Scarcity: An inadequate amount of something; a shortage.

necessity: The quality or state of being required or unavoidable.

Evaluating and executing employee transfers is an essential function of human resources

management. Transfers can be horizontal, between departments within an organization, or vertical,
from one level in the organization to another, either up or down. It is useful to view promotions and
demotions as vertical and transfers as horizontal (though they can be vertical as well, to a certain
extent). Transfers can occur for many different reasons; they can be driven by employees or
managers. Types of employee transfers include: strategic transfers, necessity transfers, and
talent/management transfers.

Strategic Transfers

A strategic transfer may take place when an organization is trying to grow a specific segment of its
business. For example, if a car maker wants to strategically grow its quality department to meet the
goal of building safer cars, it may want to train additional staff for a transfer to the quality
department. It is also highly useful to have a few experienced employees who understand the
company better than new employees guide the trajectory of the new project.

Necessity Transfers

A necessity transfer may take place when there is a demand for employees in a department of the
organization where a specific skill set is scarce. This may happen because of layoffs, a change in
company strategy, or a scarcity of a certain type of employee. A necessity transfer usually includes
an incentive, like a raise, to give employees an incentive to put in the training the transfer will
require.

image

A manager rating an employee.: Rating an Employee

Talent Transfers

A talent transfer usually moves employees from their original department after it becomes clear that
their skill set is more suited to another department. It is predicated on the original department’s
ability to absorb the loss of that employee as well as the level of need in the new department. Talent
transfers are more likely to be initiated by employees who perceive that they can contribute more to
a new department.

Finally, employees may also request transfers in an organization for a number of different reasons
(i.e., family or personal requirement, location requirements, change in interest, and working with
different people). The important component from a human resources perspective is making sure
that the employee’s concerns are legitimate and insuring that the transfer will be beneficial for the
organization by assessing the employee’s fit in the proposed transfer location. Making sure that
employees are working where they have the best fit promotes higher efficiency and synergy.

Employee Discipline

Organizations must create strong, clear disciplinary policies; all disciplinary actions should be well
documented and fairly applied.

LEARNING OBJECTIVES
Assess the advantages and disadvantages of the methods outlined to discipline employees in the
workplace

KEY TAKEAWAYS

Key Points

Corrective discipline and progressive discipline are the two most common disciplinary systems.

Progressive discipline provides a general series of steps to complete. Corrective discipline allows
managers to tailor disciplinary action to fit different situations.

Documentation is crucial in employee discipline to protect employee rights and prevent legal action.

There are four main kinds of discipline in the workplace for employee failures and poor conduct:
verbal counseling, written warning, suspension, and termination. Other less common forms of
discipline include demotion, transfer, and withholding of bonuses.

Key Terms

Progressive discipline: Provides general steps that must be completed for all infractions.

Corrective discipline: A corrective discipline system allows managers to tailor disciplinary action to fit
different situations.

Employee discipline problems can be minimized by ensuring that organizational policies are clearly
communicated to employees. Consequences for violating organizational policies must be clearly
communicated so that employees know and understand them. Organizations must create strong,
clear disciplinary policies and enforce them when needed. In addition, organizations must prohibit
discrimination and harassment by creating clear and detailed written policies.

Types of Discipline

Corrective discipline and progressive discipline are the two most common disciplinary systems in the
workplace:

First, progressive discipline sets forth clear but general steps that must be completed for all
infractions. This limits the disciplinary actions that can be taken against an employee by referencing
the employee’s prior disciplinary history. This system has the advantage of eliminating most
disparate treatment claims, since everyone receives the same disciplinary steps regardless of other
factors.

Second, corrective discipline allows managers more flexibility and permits the manager to tailor
disciplinary action to fit different situations. This flexibility does not remove the onus on the
manager and the organization at large to ensure that similar cases are treated equally. Review of
disciplinary actions falls to the HR department to ensure that employees experience no disparate
treatment. This is key to avoiding legal charges of inequitable treatment: HR has a very important
organizational role in preventing long-term issues and potentially high costs.

Documentation of Discipline

Documentation is crucial in cases of employee discipline. If an employee is penalized or fired for an

infraction that the organization cannot document, s/h might file–and win—a wrongful termination
suit. This is particularly true when performance appraisals are not detailed enough.

A lack of consistency in disciplinary procedures is equally dangerous for organizations. If employees

receive different disciplinary responses to the same infraction, the organization can be found liable
for discrimination even when none was intended. Aggravating and mitigating factors should be
considered and documented in each situation. This means that all disciplinary procedures must be
well-documented and fairly applied.

Methods of Discipline

There are four main methods of discipline for employee failures and poor conduct: verbal
counseling, written warning, suspension, and termination. Other less common forms of discipline
include demotion, transfer, and withholding of bonuses.

image

Termination: This cartoon shows a professor being terminated from university employment.
Termination is the last of disciplinary options.

Verbal counseling is typically the first response to an infraction. A verbal warning must be
administered to the employee in private and as objectively as possible. The presence of one
management-level witness, preferably an HR professional, is recommende. Any verbal counseling
must be documented in writing in the employee’s personnel file.

A written warning is usually the next level of discipline and typically follows a verbal warning. After
the employee has received a written warning and has had time to review it, there should be a
private meeting between the manager and the employee and a witness (and the employee’s
representative if s/he has one). Disciplined employees should sign the written warning to show that
they received it, and should be informed that signing the warning does not indicate that they agree
with it. Should the employee refuse to sign, the witness can sign to acknowledge that they observed
the meeting and the employee’s refusal to sign.

The next form of discipline is typically suspension. This is usually unpaid and varies in length. Paid
suspensions can function in practice as inadvertent rewards for disciplinary infractions and should be
avoided. Whether the suspension leads automatically to termination upon the next infraction is up
to the employer. Generally if there are multiple suspensions they should increase in length and
ultimately result in termination. Whatever procedure an organization adopts, it should be clear
about the next step, whether suspension or termination. All of this must be documented in writing.

Termination is the last disciplinary step. Before taking this step a manager should review employee
files to ensure that this is an appropriate step and that similar action has been taken in similar
circumstances before. Some behavior should automatically give rise to termination regardless of
context. Violence and threatened violence, drug or alcohol use in the workplace, bringing weapons
onto organization property, ignoring safety regulations, stealing, falsifying documents, and
abandoning a job (no call, no show for three consecutive days) are all grounds for immediate
termination. Any other course of action puts the organization and other employees at risk.

Employee Dismissal

Dismissal is the involuntary termination of an employee due to incompetence, poor job

performance, or violation of policy.

LEARNING OBJECTIVES

Discuss the common reasons and justifications for employee dismissal from the human resources
management perspective

KEY TAKEAWAYS

Key Points

Common reasons for dismissal include absenteeism, “time theft” offenses (i.e., improper use of
breaks), incompetence, and poor job performance.

Gross misconduct offenses, such as violence, serious negligence, repeated insubordination, fraud in
the job application process (whenever it is discovered), harassment of co-workers, or drug use at
work are grounds for immediate dismissal.

At times, even off-the-clock behavior can impact employment and result in a dismissal.

Under typical circumstances, dismissal is the last step in a chain of disciplinary actions.

Human resources are mediators, who must maintain objective perspectives in assessing the validity
of reasoning behind any and all employee terminations.

Key Terms

gross misconduct: Violence, serious negligence, repeated insubordination, fraud in the job
application process, harassment of co-workers or drug use in the workplace.
Dismissal is the involuntary termination of an employee. It is colloquially referred to as being “fired.”
Dismissal implies employee fault, although this is not always the case. In most states, an employee
can be fired for any reason or no reason at all, as long as they are not fired for a prohibited reason.
Indeed, most dismissals are a by-product of economic conditions or organizational failure beyond
the individual employee’s control (i.e., layoffs).

image

U.S. unemployment, 1995-2012: Layoffs, particularly during recessions, are a common reason for
employee dismissal. The recessions of 2001 and 2008 were both followed with drops in U.S.
employment.

Reasons for Dismissal

Common reasons for dismissal include absenteeism, “time theft” offenses (i.e., improper use of
breaks), incompetence, or poor job performance. Gross misconduct offenses, such as violence,
serious negligence, repeated insubordination, fraud in the job application process (whenever it is
discovered), harassment of co-workers, or drug use at work are grounds for immediate dismissal.

At times, even off-the-clock behavior can impact employment and result in a dismissal. For example,
if an employee is convicted of driving while under the influence, s/he will not be able to keep a job
that requires driving. Other offenses, even if unrelated to job performance, can be seen as a sign of
unreliability on the part of the employee and can result in dismissal. Similarly, employees often
represent organizations outside of work. It is bad PR for an organization’s employees to be in trouble
outside of work.

The Role of Human Resources

Dismissal is almost always the last step in a chain of disciplinary actions. Most workplaces recognize
some sequence of disciplinary consequences, starting with verbal counseling, moving to written
warnings and suspension, usually without pay.

In extreme circumstances, however, employees can be summarily dismissed. Regardless of the

circumstances of the dismissal, organizations must document all infractions carefully and be
consistent in their application of disciplinary measures including dismissal. Organizations that dismiss
some employees for a particular infraction but not others leave themselves open to legal liability,
even in right-to-work states.
Human resources departments are tasked with managing this process, and must ensure complete
coordination of company policy with state or federal law. If the dismissal is seen as harassment-
based or founded in discrimination, the organization’s unethical acts will have significant legal
ramifications and costs. Human resources professionals are mediators who must remain objective
when assessing possible employee termination.

LICENSES AND ATTRIBUTIONS

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Employee Relations

What is the definition of Employee Relations?

The definition of employee relations refers to an organization’s efforts to create and maintain a
positive relationship with its employees. By maintaining positive, constructive employee relations,
organizations hope to keep employees loyal and more engaged in their work. Typically, an
organization’s human resources department manages employee relations efforts; however, some
organizations may have a dedicated employee relations manager role. Typical responsibilities of an
employee relations manager include acting as a liaison or intermediary between employees and
managers, and either creating or advising on the creation of policies around employee issues like fair
compensation, useful benefits, proper work-life balance, reasonable working hours, and others.
When it comes to employee relations, an HR department has two primary functions. First, HR helps
prevent and resolve problems or disputes between employees and management. Second, they assist
in creating and enforcing policies that are fair and consistent for everyone in the workplace.

To maintain positive employee relations, an organization must first view employees as stakeholders
and contributors in the company rather than simply as paid laborers. This perspective encourages
those in management and executive roles to seek employee feedback, to value their input more
highly, and to consider the employee experience when making decisions that affect the entire
company.

Employee Relations? Definition, Concept, and Trends

What Is Employee Relations? Definition, Concept, and Trends

The success of an organization lies in two major aspects – its employees and management. Despite
being one of the most important features of a business, the prevalence of major employee relations
(ER) issues stop any organization and employees from budding achievement.

An antidote of communication, better management skills, and proper employee engagement in the
business proceedings helps overcome the detrimental stature of any company.

Table of Contents

What does employee relations mean?

What are examples of Employee Relations?

What do employee relations professionals do?

What is the employee relations process?

Why are employee relations important?

What are the types of employee relations?

How to enhance employee relations?

What does ER mean in HR?

What are the employee relations trends?

Conclusion

What does employee relations mean?

1. Employee relations meaning and definition

Employee relations definition states “any industrial relationship between the organization and its
workers or employees, concerning physical, emotional, contractual, and practical efforts by the
employer to maintain a positive relationship with its employees.”

WHAT IS THE ROLE OF EMPLOYEE RELATIONS?

Simply put, employee relations are strategically created a positive atmosphere for the employees
with the hope to keep them loyal and more engaged at work. Most organizations employ a
dedicated employee relations manager who plays the role of an advisor, mediator, and compensator
to employee issues.
Essentially, the role of employee relations manager is to elude better relationships between
management by working on certain policies, developing mutual respect, trust, and marinating
transparency.

What are examples of Employee Relations?

Understanding employee relations is crucial for the company’s human resource management.
Employee relations gone wrong may cost a bad reputation and dismantling a company despite
gaining monetary success. Here are a few employee relations examples that may act as a guide to
understand the significance;

› EMPLOYEE RELATIONS PROGRAM EXAMPLES

• Lack of training on basic people management competencies

• Lack of building a feedback mechanism to help employees provide to their managers

• Not setting an attendance goal, track group attendance, post-completion stats, and reward the
best performing group

• All-day gossiping

• Neglecting communication with management

• Appearing alcoholic or drug problem that affects work progress

• Lack in accepting constructive criticism

› EMPLOYEE RELATIONS ISSUES EXAMPLE

• Watching sexually explicit material on the company intranet

• Getting into disputes with co-workers

• Issues with personal hygiene

• Violating safety rules

• Lack of communication with managers

• Insufficient problem-solving skils

• Late for meetings or unreachable

• Lack of discipline and work-desire

• Creating a gender-discriminatory ambiance

› EMPLOYEE RELATIONS STRATEGY EXAMPLES

• Involving team members

• Workplace bullying affects employee performance

• Declining or ignoring employees’ pay raise request. This affects overall work performance and
demotivates employees

• Poor handling of issues like cultural differences, unfair treatment, and mishandling and not
procuring to individual personalities and needs

• Substandard policies and partiality towards an individual employee or a group

Do you know, the HR manager has to spend 60-70% of their time in solving penetrating issues like
sexual harassment, annual leave disputes, abusive behavior, and bullying? These workplace conflicts
impact negatively your organization.

What do employee relations professionals do?

Every organization is aware of the example of employee relations issues. Additionally, each
employee wants to feel great, secured, and homely in the workplace. Overall productivity,
performance, and a positive work environment are the result of smart work strategy. HR
management has to work hard to build strategies for better work ambiance. Employee relations
scenarios are critical, but here are a few methods that will help the professionals in evaluating their
employee relations strategy.

How to improve employee relations?

› PROMOTE COMMUNICATION

Communication breaks all barriers. Although this is known to all, yet some organizations tend to
overlook this key factor. Establishing better communication is the foundation of employee relations.
The management has to find out ways to interact with its team members, work labors, and union
leaders. Convey important notices, crucial updates about the company’s development, share the
organization’s vision and develop bonding with the employees. The relationship must be in such a
way that no one is afraid to speak or ask any questions with the management.

› RECOGNIZE, APPRECIATE, REWARD

Valuing employees and appreciating them solves 80% of employee relations issues. Show your
employees that you care and give them opportunities. A smart HR professional knows that
celebrating co-workers and appreciating them is the best solution for handling employee relations
issues. Having a small weekly team-celebration, regular encouragement, public recognition are the
keys to building strong employee bonding. Employees feel good when their achievements are
discussed, clapped on, and talked about in the team meetings.

› TREAT EVERYONE EQUALLY. STOP BEING PARTIAL

Partiality is one of the major employee relations examples. If you want to build strong bonding with
your employees then treat everyone equally and don’t play favorites. Staffs give their best when
they hear equally appreciating comments. Creating a partiality-free work environment truly enables
the employees to participate and thrive to work hard in giving out their best performance.

› TRAIN, INVEST, OFFER CAREER DEVELOPMENT

Office staffs, industry workers, and your team members are the elementary part of your business.
Investing in them, for example holding learning and training programs, employee skill upgradation
program, peer monitoring, employee wellness programs, and many more. Depending on the size
and type of business, the options here are endless; what matters is treating your staff well and helps
them develop themselves. Hiring a peer coach or establishing an L&D department for the team
enables a 360-degree performance revolution among them.

› TRUST AND SHARE THE COMPANY’S VISION

Trust your people! What can a company do without its employees? Expectation, reliance, and trust
are three strong pillars of a successful business. When you convey your expectations and your vision
with your staff, trust them. Try managing your team through weekly discussion meetings, graphing
out work processes, and help them head towards goals. When your employees understand what is
expected of them, and that they can approach you whenever needed, then let them be.

› MAKE THEM FEEL VALUED

It doesn’t take much to say a simple “thank you” or compliment someone. When you focus on your
employees’ achievement rather than criticizing their flaws, it reflects your concern towards them.
Taking corrective actions and focusing their strengths helps in making them feel valued. This also
helps the staff in working with a renewed sense of responsibility towards the company.

What is the employee relations process?

The employee relation process is the steps followed by the management after mutually agreeing
upon the employee union. Employee relations process steps help in regulating how management
handles the employment process, issues, and industrial relations with its staff.

The main employee relations process flowchart involves the following three steps;

› CONCILIATION

Dispute resolution is of course the main objective of any HR management. The aim is to collectively
bargain with the employees and preferably reach a satisfactory agreement by both parties.
Conciliation is one of the most important parts of the employee relations process that helps in
reconciliation between both the parties-employer and employee. The management either appoints
a third party as Conciliators or chooses to solve the issues by themselves. This process aids in
building a bridge through mutual compromise.

› ARBITRATION

Arbitration is defined as the last resort for reaching a settlement when disputes cannot be solved in
any other way. This process is carried out by appointing an arbitrator who legally solves issues
prevailing between employer and the employees by bringing them to consent on a final verdict.

› MEDIATION

Mediation is making recommendations to the employer and the staff union. Here, the employer is
free to agree upon any suggestion or reject the same. Mediation means the employer retains full
control of the situation and may choose to opt for an informal employee relations process over legal
suggestions.

Apart from the above stated formal employee relations process, the HR manager may choose certain
informal processes as well. The role of employee’s relation manager is significant. The issues
prevailing in the company gives an insight into negative behaviours procuring in the workplace. The
management has to closely monitor and document the issues to provide effective measures in
sorting them out.

Here are the fundamental employee relation process steps that help to measure the effectiveness of
the solutions;
› CAUSES OF ISSUES

Finding the cause of each issue is the initial goal of a manager. The employer has to find out the
reasons behind issues, whether the problem was addressed before? This helps in finding out
behavioral changes among employees, a lack of leadership action, and measure the transparency of
communication. Resurfacing the cause may help in hitting the main issue and establishing correct
employment process solutions.

› PROCESS

Thorough notes, documentation, and process need to be charted to solve employee relations issues.
The process involves trying out various formal measures to solve issues- conciliation, arbitration, and
mediation. Reviewing an issue through mutual agreement may be one of the best measures to
consider.

› LEGAL RESOURCE

When the process lacks mutual agreement, legal resources may be the final step to solve employee
issues. The employee and the employer may choose to take legal advice if they feel that the
complaints are not handled properly. Employees who provide friendly work ambiance and let the
employees feel heard and valued may typically solve problems without getting involved legally.

› OUTCOME

When the issues and complaints are closed, it is understood that employee relations have developed
positively. When the staff members are satisfied with the process, the effective outcome depicts re-
joining to work. However, if the employees are unsatisfied and dispute prevails, they may choose to
resign. Whatever the cause may be, the employer must try to keep its subordinates content and
handle them smartly.

Why are employee relations important?

Building a strong relationship between employer and employees is the ultimate key to a successful
business. The importance of the employer-employee relationship is discussed in chapters of
Management studies as well. This association is an art which monitors and manages the relation
between team members and develops a healthy work environment. The prime motive of the leaders
is to eliminate conflicts and encourage work-bonding among the staff.

Here are the benefits of employee relations;

› DEVELOPMENT AND GROWTH

A harmonious association between the management and staff members leads to productivity and
work efficiency. Consistent motivation and better communications eliminate the barrier between the
two parties. When employees are positive, they will put their best efforts to make projects
successful. The importance of employee relations also helps in using the resources to its maximum.

› REDUCES CONFLICTS

Conflicts, labour clashes, management encounters are some of the major employee relations issues
prevailing in companies. When the workplace is serene, friendly, and efficient, the conflicts are
reduced. Fewer rattles result in concentration on work and boost productivity. Investigation,
Coincilation, Mediating are some of the basic steps that help in conflict reduction and foster
employer-employee relations.

› INCREASE IN REVENUE

A happy and healthy association will have a positive impact on the growth of revenue. When
workers are engaged and motivated, they result in better customer satisfaction, better products, and
services; hence increase sales and profits.

› EMPLOYEE LOYALTY

Employee loyalty plays a vital role in business development. Termed as “a most valuable asset,”
employees cannot be just let to go for petty issues and misunderstanding. Providing a healthy
workplace and helps in building strong bonding between the owner and his workers. Investing in
developing employee relationship management and gaining employee loyalty in return is the biggest
achievement for the business.

› EASY DELEGATION

When your employees do not listen to you and there is a lack of understanding, it becomes difficult
to delegate tasks and expect better returns from them. Building a healthy workplace relation
squeezes distance between the boss and his staff. It becomes easier to acknowledge and understand
each other’s strengths, weaknesses, and expectations. However, the employer must consider few
points while delegating tasks and avoiding misinterpretations. Few points are;

• Take responsibilities for the faults of your employee

• Delegate task according to their ability

• Do not take away credits for the task accomplished by others

• Assign challenging and motivational tasks

What are the types of employee relations?

As a business owner, the employer holds responsibility for advising, educating, and supporting
employees and develops healthy, interactive relations with them. It not only encourages productivity
but also enhances morale. The common types of employee relations issues revolving in and around
the company are as follows;

› CORRECTIVE ACTION

When the employee is served with verbal warning or documentation, this is known as corrective
action. Irrespective of the person, the warning is issued against the misconduct of citing companies'
policies and rules.

› SUPPORTIVE ACTION

Another enhanced type of employee relations is taking supporting action towards employees facing
personal issues outside the workplace. This type of relation is developed through regular
communication and having an open-door policy. Encouraging workers to discuss their problems
which directly affect their work quality may help in building better employee relations. Adjusting
work timings, scheduling tasks, making referrals for useful resources helps in developing supportive
employee relations.

› RULE AND POLICY INTERPRETATION

When you hire new staff, it is important to make them aware of the company’s policies and build a
healthy relationship. The association in its initial stage immunes trust and eliminates further chances
of discrepancies. Encourage employees to follow rules, and stop them from violating the policies.
Interpreting specific company guidelines procures is causing further workplace discrimination and
advancing employee relations scenario.

How to enhance employee relations?

Most employers assume that the role of an employee relation manager is to sort co-workers conflict
and interpret company policies to the staff. However, they must not forget that every employer
must learn how to improve human relations in the workplace by using various employee relations
strategy.

› BE A MENTOR, A COACH, AND A GUIDE

To enhance employee relations, an employer has to upgrade himself to present himself as a role
model for his team. Helping others to develop their skills is an unforgotten gift to your employees.

› INSPIRE AND MOTIVATE

To develop employee relations best practices a boss has to develop his skills and become a humble
motivator for his sub-ordinates. The best leader is not the one who is perpetually pushing and
criticizing, but he rolls up his sleeves and pitches in with the team. Employer-employee relations can
build only when the leader is inspiring and knows how to bring out the best.

› EMOTIONALLY CONNECT AND BE POSITIVE

When the employer is angry, annoyed, and frustrated, he spreads negativity within the company.
The employees are always scared of approaching the employer and hence, spoiling the relationship.
Emotions are one of the vital parts of the employee relations strategy. The employer has to connect
emotionally with his staff, spread positivity and must have an optimistic approach.

› ASK FOR EMPLOYEE FEEDBACK

This might come as a surprise with a question “who asks for employee feedback?” Well, it is one of
the most forbidden topics in books on how to improve human relations in the workplace. If you want
to enhance good team relations, you must give equal importance to your employees as to your
customers. Ask your employees about the services and goods they produce, talk about company
policies, and adopt changes accordingly. Your employees are an integral part of the company and
like any other family member, you just can’t ignore them.

What does ER mean in HR?

ER or employee relations in Human resources are a function commonly dealing with improving
employee morale and solving workplace issues. This revolves around generating satisfactory output
and gaining productivity through building a healthy work ambiance. Now the question arises “How
can HR improve employee relations?”
A Human resource manager must be well-versed with the company’s policies and has the right to
take disciplinary actions. The manager cannot compromise on work productivity and disciplines,
however, must try all possible practices to build a healthy employee relation. A fully-staffed Human
resource management department has an employee relation manager who knows how HR can
improve employee relations.

Employee relation is important because HR strategy and organizational success largely depend on
the company’s workforce and its productivity.

What is the difference between HR and ER?

Although Human resource and employee relations are both related to employee betterment and
company success, these departments are segregated in terms of performance and solving employee
issues. Here are a few points to understand employee relations vs human resources;

• The HR department primarily works on two main functions- preventing and solving employee’s
issues and assisting in creating work policies. However, Employee relations in Human Resource are a
department that focuses only on developing staff issues.

• An HR hires employees and makes them aware of company policies, but an Employee relation
manager puts effort into interpreting the policies and guiding the staff in following the rules and
regulations.

• Workplace issues are an everyday employee relations scenario. The problems range from
complaining about employee discriminatory actions to inappropriate working conditions. ER in HR is
capable of handling all the issues by it.

• A company where employees are represented by worker unions, the labour relations specialist is
responsible for handling management

issues, bargaining on the agreement, mediating, and arbitration.

• Measuring labour satisfaction is another ER specialist job. The human resource manager overlooks
workers' emotional satisfaction and issues after appointing an ER officer. Analyzing survey and
administrating personal issues is a job run by ER specialists.
• Performance management is largely checked and monitored by the Human resource department.
However, keeping an individual monitor is processed by an ER specialist who is well-versed of each
employee's condition.

• Monitoring performance issues, taking actions, ensuring the supervisors, and educating employees
the overall performance scheme is carried out by the ER manager.

What are the employee relations trends?

As the year 2020 is about to end, there has come a huge revolution within the Human resource
management and employee relations trends. According to many Fortune companies’ executives, the
employee relations trends 2020 will be about embracing new HR technology, strengthening
workforce capabilities, improving candidate experiences, and ensuring data security.

Emerging trends in employee relations management

› EMPLOYEE ASSISTANCE PROGRAMS

With the evolution in the work atmosphere, companies are also working on developing employee
assistance programs. Employee development is one of the most important employee relations
trends in 2020. Organizations are now acting on mentoring employees, providing adequate training,
and assisting workers. They teach labourers in utilizing resources, smart usage of valuable tools, and
avoid legal problems.

› INTRODUCTION TO ARTIFICIAL INTELLIGENCE IN RECRUITMENT

The year 2020 is all about AI-driven solutions. There is immense provision for innovation in
industries like Finance, marketing, banking, transportation, and others. Time-saving Chatbots, AI-
powered recruitment platform, faster candidate screening will empower human resource
management in utilizing the time in solving candidate issues. AI also ensures quality hiring which will
further improve productivity by appointing a talented workforce.

› AUTOMATED FEEDBACK TOOLS TO IMPROVE RELATIONS

One of the emerging trends in employee relations management is using employment engage tools to
carry out the survey, employee opinions, and feedbacks. Employees play a pivotal role in the
organization’s development. Providing them an open tool to convey opinions and concerns
motivates them in staying connected with the company. Additionally, these feedback tools help
management understand employee’s vision, and take corrective plans accordingly.

› DATA ANALYTICS TO TRANSFORM EMPLOYEE RELATIONS

Using data-driven analytics will play a powerful role in upcoming years. The trend will help HR
professionals in retaining top talents for the company. Predominantly, Data analytics will help
management in carrying out the following;

• Reducing employee turnover by hiring the most talented people

• Boosting employee performance

• Motivating and diverting employees to stay positive and process improvement

• Increasing talent development and workforce planning

Conclusion

Enforcing smart systems and analyzing proper talent is one of the top priorities of every company.
Strong and efficient employee relations lead to better performance and workforce productivity.
Every individual staff looks forward to working in a comfortable place with a healthy atmosphere.
The owner has to work has in developing a work culture that promotes positivity, discipline, and
coordination among people working in the organization. When your staffs are happy, they look
forward to contributing towards the vision, mission, and goals of their establishment.

Having effective employee relations is a difficult job. However, following emerging trends, proper
planning, promoting safety, assisting employees, training, and upgrading work techniques are few
ways to building healthy employee relations.

PERSPECTIVES ON THE EMPLOYMENT RELATIONSHIP AND CONFLICT

Info: 3317 words (13 pages) Essay

Published: 1st Jan 2015

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Introduction

Today industries have undergone a great change in terms of the kind of personnel they deploy as
they look for maximization of their production and profits. There is keen selection of means of
production especially specialized labor and therefore this means that today’s employer is much
more focused on what he needs in the process of production (Fredman & Gillian 1989, p.48). There
are increased agreements and dispute procedures which used to be forced on the unions by
employer association some time ago, but the bargaining ability and freedom has called for
diversification of employers’ functions and restructuring of the pay agreements (Bach & Sisson
2000).

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Management of the businesses has also changed with regard to today’s need and is being performed
by board of governors (Guest 1991, p.153). There are two aspects of employer relationship namely;
market relations and managerial relations. A market relation refers to terms and conditions on which
labor is hired and is economic in character. Managerial relations refer to deployment of labor force
by the management and how this deployment is to be done. Before trade unions, individual worker
could chose to work or go elsewhere if he or she is not satisfied with employer’s terms of work. And
because an individual worker was weaker than the employer, there came a regulated work market
with trade unions where employees are allowed to collude with fellow workers for a collective
bargaining. The primary justification of trade union is that it protects the worker in the economic
aspect of his employment (Gintis 1987, p.68).

In job regulations, employers and employees adopt an agreement contract. These contracts have
rules over a wide variety of work places. They contain an individual interest which necessarily
ignores the economic reality behind the bargain because the parties are simply not equal
(Wedderburn 1986, p.8). This one sided interest of contract of employment is the bone of
contention in the workplace relationship.

The contract requires the employer to pay wages, provide work, exercise care and cooperate while
employees are expected to obey reasonable order, exercise reasonable care and competence,
maintain fidelity, honesty, protect confidential information, be accountable and not to sabotage
employers business among other provisions. These provisions are just mere protection on
managerial rights. However, the actual cooperation of legal rights in work places depends on the
power, knowledge and organization of the parties as well as on the statute book (Edwards 1987,
p.15).

The agreement of work must take into consideration that what is offered by the worker to the
employer is the capacity to work, which only the capitalists make maximum use of, but the output
benefits only the capitalists (Braveman 1998, p.37). This paper seeks to examine the three
perspectives that have been a wide reference regarding industrial relations, their take on how these
conflicts may arise and how they are solved under each system. In the discussion we will also seek to
see how managers under these perspectives seek to gain control for effective management.

The perspectives

There are three perspectives on the employment relationship that can contribute in analyzing the
nature of conflict in work place: Unitarism, Pluralism and Marxism. Most writers and theorists have
written on these schools of thought and have used them from different perspective to analyze social
issues. Here they will be used to test their take on the nature of conflict in the workplace and the
way managers or human resource managers seek control and effective guidance in exercising their
vested authority.

Unitarism

This is the system whereby a focus is placed upon one source of authority without negotiation. It
assumes a kind of partnership teamwork in its operationalization. In a unitary system, members are
expected to strive as a unit and pursue a common goal and every unit component does its part to
the best of its ability (Fox 1966, p.2). Members are expected to exhibit discipline, royalty and
effective communication because the organized body is supposed to be an integrated and
harmonious whole. Following the centralized leadership members accept their place and function
and this means antagonist groups and rivalry in leadership are not accommodated.

Unitarism holds the idea that conflict in the work place should be a two way because the Leaders,
who expect loyalty and respect from members, must first exhibit and demonstrate the same to
individual members. According to Fox (1966, p.3), the success and impetus of the team inheres from
personal relationship and just like a football team there is no divided spirit especially with
management authority. In this system also, it is believed that the structure and the organization of
work and purpose is unitary and individual employees or trade unions are not expected to challenge
the management. Worse still is that trade unions are perceived to be an illegitimate entity that
sabotages the balance of the whole unit and. As Unitarism assumes that workplace conflicts are non
existent due to the organization and symbiotic relationship among workers and managers, the idea
of trade unions is conceived to be foreign.
Unitary system therefore denies conflict in workplace and just assumes that the conflicts are only
due to personal differences, faulty communication and works of inciters from without. Managers in
this system believe that workers conflicts can be managed within the system than involving trade
unions (Fox 1966 p.10). Unions are seen as achieving nothing for employees but sabotaging
progress, pushing up cost and constantly frustrating the owners of production enterprise in the guise
of resolving workplace conflicts (Fox 1966, p.11).

The ideology also endeavors to integrate employees into organization based on employee
commitment to quality production, customer need and job flexibility.

It therefore serves three purposes in the management; self reassurance as an instrument of

persuasion and as a technique of seeking legitimization of authority. Adopting the unitary view of
industrial organization is one of manager’s tactics. This gives a motivation that harmony of purpose
exists. Ideology also is a persuasive instrument in which employers persuade their employees and
public at large; that industry is a harmony of cooperation which only trouble mongers choose to
disrupt (Fox 1966, p.5). This way they make their work easier by convincing their employees and
winning public support, should management be challenged by their workers. Moreover,
management creates a situation where their interest and those of other employees are similar and
legitimizes the regime. Therefore drawing from this assumed legitimacy, their government sanctions
and cruelty become legitimate (Edwards, 2003, p.34).

In their bid to gain authority under this perspective, managers are also likely to adopt measures that
are aimed at debilitating trade union and favoring the company and this triggers further resentment
from the trade union (Fox 1966, p.11). Moreover, Managers holding Unitarism perspective belief
that collective bargaining, negotiation and reconciliation encourage the wrong attitude between the
two sides in industry. They therefore term any resistance and conflicts to be due to stupidity, wrong
headedness or outdated class rancor and they work toward inculcating such ideology to their
subordinates who by following the ideology are easily controlled (Fox 1966, p.12). Managers also
utilize conformist innovation whereby they focus on acquiring expertise that will enable them to
demonstrate a close relationship between their activities and organizational success criteria
(Thornley, 2003a, p.83). This is mostly attained through specialization in personal management. This
influences the reaction of workers and their management becomes easier.

The assumptions of the unitary position, with its emphasis on managerial prerogative, and its
attempt to deconstruct realities of divergent work group attitude and values in the interest of
“strong unified team” renders it weak under modern conditions especially in their obsolete view on
the nature of conflict in the work place. Unitarism’s view on the nature, cause and how to handle
workplace conflict is utterly conservative and time tested. This organized labor is challenged when it
comes to the process of organizing and assigning work to members as well as sanctioning the labor
force. The failure to consider common interest leads to faulty communication or misunderstanding
and at that time conflicts at workplace become a challenge.

Pluralism

Pluralist perspective is a system with a political analogy whereby many groups with divergent
interests and beliefs act as one organization, and the government depend on their consent and
cooperation. The final authority in pluralism lack moral bargain to arrive at final decision without
relying on members’ unity (Clegg 1979, p.454). In this system, trade unions are legitimate
institutions that represent collective interest of the workers and are granted powers to challenge
management. There is therefore minimal authoritarianism because conflicts in the work place are
viewed at as inevitable and as a phenomenon that is bound to occur without question.

Pluralism views Industrial relations as much stable and adaptable as a result of collective agreement
and it is very difficult for the management to sabotage trade unions unlike in the Unitarism (Clegg
1979, p.454). In the regulation of pluralism, conflicts induced by the trade unions are indispensable
so the question of how to contain them triumphs over how to constrain the unions operations.

In pluralist view, the organization is seen as a plural society with related but separate interests and
objectives which should be tamed to a kind of equilibrium through conflict if workers are
expropriated. Fox (1966, p.3) analyses that the running of a pluralism system is aimed at striking a
balance of member’s activities of the group for the highest degree of freedom. This is done in line
with general interest of the society as it is.

The system is kept alive by the fact that sectional groups with divergent interests aim for a common
goal and are mutually depended. Under this view, managers are expected to deploy many tactics in
their professional functions should they expect to gain any accepted authority. These involve
organizing work people and technical resources, shareholders, customers, the government and the
local community. Managers who hold this perspective dearly seek to acquire some control through
acting in the best interest of all stakeholders.

Pluralist workers and other stakeholders, on the other hand, maintain their relations with managers
as their source of information to deliver their goods and services to their satisfaction and to
minimize work place conflicts (Clegg 1979, p.455). The effectiveness of managers under pluralism in
their job is also, highly determined by their good relation with those who negotiate with them on
behalf of the workers. Therefore it can be deduced that pluralism views workplace conflicts as
indispensable and as a part of work relation hence trade unions are unavoidable institutions. Under
this perspective the only way managers can be at ease is to strike a balance between their interest
and that of workers by establishing good rapport with negotiators. In many organizations with
pluralist approach, managers involve collective negotiations, procedures of dispute settlement,
formal and informal consultation as tools of their power control.

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Marxism

Marxism in its proper form is a general theory of society and social change with implications for
analysis and industrial relations capitalism. Marxism has since its inception served as a tool for social
research into power relations and a discourse in which other phenomena and reality are examined.

Class conflict, a macrocosm of work place conflict, according to Marxists is there to stay within the
system as far as profit is made out of exploitation of labor by the owners of production. Class
divisions that inhere in society are closely intertwined with the bourgeoisie structure of industry and
a wage labor (Hyman 1975, p.28). The capitalist, according to Marxism, has introduced social
features that dominate labor process which is a property of the worker and this forces the worker to
sell their labor power together with their interest. This alienates labor from the owner and makes it
to be controlled by the capitalist. Karl Marx, the initiator of Marxist’s school of thought, noted that
one’s labor is equal to his or her humanity and one would be dehumanized once someone else
controls his or her labor (Braveman 1998, p.39). Since the owner of labor is powerless and the buyer
powerful there is a possibility of expropriation of the worker by the employee and hence trade
unions are formed.

Trade unions in Marxism are legitimate vehicles in challenging the excesses of property owners
whenever they disrupt the distribution of national products as a result of power differences.
Marxism therefore holds that workplace conflicts are bound to be there but measures should be put
to tame them. Trade unions are therefore looked at as institutions that conjure up as a result of
painful exploitation of employees by the owners of means of production and therefore as a
collective bargaining person (Clegg 1979, p.455). A long history of conflicts has proved that they can
be contained if positively perceived and handled. Marxism is the ultimate conflict theory that
criticizes Unitarism and pluralism because of their leniency on handling workplace conflicts.
Research demonstrates that Marxists and pluralists differ in their industrial relation analysis and
further in their definition of its subject matter and nature (Hyman 1975, p.20). What is common in
both schools of thought is that both are concerned with conflict and stability acquisition. This means
in both perspectives conflict in workplace is unavoidable just as in any other sphere of social life.
In most work places management asserts its authority and control down wards from above while
work groups assert their independence and control upwards from below (Coffey & Thornley 2009,
p.93). This reverse expectation is the one that projects a conflicting point where balance has to be
struck radically to the benefit of neither of the side. According to Clegg (1979, p.454) Marxist
account of industrial relation has that, trade unions may become integrated in the institutions and
operations of capitalist society.

This strategy, which managers under Marxism may deploy to gain authority, is the greatest evil that
can bedevil trade unions under Marxism because once that is accomplished unions cease to act as
instruments of social class welfare. This integration may assume terms as economism, incorporation
and institutionalization. As much as this is not consistent with trade unions’ objective it does not
favor the employee who is supposed to be represented.

Collective bargaining employs freedom for workers to organize independent trade unions to bargain
independently and effectively with the employer. To get rid of persistent subordination, workers
have freedom to organize autonomous trade unions (Wedderburn 1986, p.7).

Integration of trade unions into capitalist society, midwifed by managers, influences all
representatives, who interact with managers and employers’ association, to forfeit their duty to
serve employees. To avoid this trade unionists are not advised, under Marxism to make a binding
agreement with their employers.

In Marxism it is expected that conflicting employee and employer prefer a settlement of their
differences in an amicable manner close to each party’s objective. This settlement is mostly to be
achieved after a series of meetings (Clegg 1979, p.453). As the two sides also push each other to the
wall, they must keep in mind that they are mutually depended on each other and that collective
bargaining is the backbone of their industrial relations.

This however does not imply that trade unions representatives always yield to the pressures of the
enterprise. Marxism believes that workers’ ability to deliver their labor productively lies in the
damage they cause to their employers whenever they strike. Further institutionalization of trade
unions makes them not to be seen in the old goggles as tools of radical protest and revolt (Clegg
1979, p.454). Trade unions in Marxist setting are aligned to a political party with wider support,
greater funds and more activists. Marxism therefore entrenches politicization of workers by action
that workers must learn to deploy the mass power of the union as an instrument of revolt should a
need arise (Clegg 1979, p.454).
Conclusion

However, debates on Marxism, pluralism and Unitarism no longer dominate in the labor market
today but a new orthodox under the promising enterprise duped human resource management
(Guest 1991, p.149) for managers to control power at the work place they adopt enhanced
motivation and commitment at work that leads to high performance and therefore managers are
expected to dig into it.

Rules in an employment sector are either procedural or substantive and do not just follow some
theorized routes as those established in Marxism, Unitarism or Pluralism. This is usually found in the
spirit of collective agreement that is usually constituted in a body of rules. The Procedural part of the
rules deals with matters as which methods are to be used and the means that are deployed when
settling disputes that arise from places of work (Flanders 1975, p.86). This very part also deals with
facilities to be provided to the representatives of parties who enter the agreement.

Substantive part on the other hand pronounces the rate of wages, working hours among other terms
of employment leaving exploitation as the last thing to be forced. The substantive rules of collective
bargaining regulate the marketing interpretation and enforcement of such rules (Flanders 1975,
p.87). However, each of the set of rules, whether substantive or procedural regulate different sets of
relationships. Collective relations that involve representative organizations are under the procedural
rules.

The worker is subject to managerial relation whereby authority and subordination come to play with
respect of who is who in the work place. The employee is usually placed at a position where he will
exercise his powers in a limited way with regard to the hierarchy of power (Flanders 1975, p.88).The
powers are born of organization of the management with an aim of attaining the goals of the
enterprise. Here the employees interact with fellow employees and management as they share
interests, sentiments, beliefs and values for the common purpose (Flanders 1975, p.89).

In conclusion conflicts in the work place are indispensable but what should take precedence is how
to solve them. Trade unions are meant to solve the conflict between the employer and the
employee but there are other problems that management will have to deal with. The three
perspectives offer their take on the industrial relation but their survival is depended on the culture
of the society and how they will be interpreted by those involved. What is very important in this case
is a balance that will maintain stability in the work place that every party will be satisfied.

Types of Employment Relationship: In-depth

Printable version

Summary

The determination of an individual’s employment status is not always straightforward and there is
no single definition. Employment tribunals and HMRC may consider different factors in deciding the
issue. This topic explores the distinctions in statute and common law between an employee (who
works under a contract of employment), a worker and an independent contractor. This topic
examines each of these in turn, including the tests established by common law to determine
employment status. It also considers the atypical types of contract that have grown in popularity in
recent years, notably part-time and fixed-term contracts, zero-hours contracts, apprentices and
individuals employed by employment agencies.

In Practice

Definitions and Rights

This section looks at the employment status and rights of:

an employee

a worker

an independent contractor.

Employment tribunals and HM Revenue & Customs (HMRC) may consider different factors in
deciding an individual’s employment status. This means that, even if a person does not have
employee status with HMRC, he or she may nevertheless be able to prove employee status for the
purposes of employment rights (or vice versa).

The distinction between employees, workers and independent contractors is important because
employees have a much greater range of rights than others, and in particular (subject to a service
qualification) have the right to claim unfair dismissal and to receive a redundancy payment, if made
redundant.

Employee Status
The Employment Rights Act 1996 defines an employee as “an individual who has entered into or
works under (or where the employment has ceased, worked under) a contract of employment”. The
legislation goes on to define a “contract of employment” as a contract of service (or apprenticeship)
whether expressed (orally or in writing) or implied.

Employees’ main Employment Rights

The main employment rights enjoyed by employees are summarised below, some of which are
subject to a period of continuous qualifying service with the employer. An employee has the right to:

a written statement of terms and conditions

statutory sick pay

continuity of employment on transfer of an undertaking

maternity, shared parental, paternity and adoption leave and pay

time off to care for dependants

minimum notice periods

protection against unfair dismissal (subject to the employee having had at least two years’
continuous employment)

(on request) a written statement of reasons for dismissal

the right to request flexible working after six months’ continuous service

redundancy rights and statutory redundancy pay (subject to two years’ continuous employment)
equality of treatment for fixed-term employees in certain respects.

Factors required for Employee Status

The following factors (some of which are derived from the HMRC leaflet IR56/NI39: Employed or
Self-employed?) are likely to mean that the individual has a contract of employment, ie that he or
she is an employee. The points below are not in any particular order.

The person is required to work regularly unless he or she is on leave, eg holiday, sick leave or
maternity leave.

He or she is required to work for a minimum number of hours each week.

He or she is fully integrated into the organisation.

A manager or supervisor exercises direction and control over the person’s work, including how it
should be done.

The individual cannot send someone else to do the work in his or her place.

The employer deducts tax and National Insurance contributions (NICs) from the individual’s wages.

The employer’s disciplinary and grievance procedures are applied to the individual.

The company provides the materials, tools and equipment for the person’s work.

If the individual needs assistance to do the work, the company (rather than the individual) will hire
the necessary staff.
The individual does not take any degree of financial risk in working for the company.

The person works only for the company, or if he or she does have another job, it is a completely
different type of work.

The individual’s contract, statement of terms and conditions or offer letter uses terms like
“employer” and “employee”.

These are important factors but it should be stressed that courts and tribunals have reiterated
repeatedly that there is no definitive checklist that decides employee status. All relevant factors will
be taken into account in order to determine the status. This is sometimes known as the “multiple
test”. There is often a fine line between the status of different individuals.

Nevertheless, for an individual to be an employee, the following factors must apply.

There must be a contract between the individual and the company.

There must be “mutuality of obligation”, ie the company must be obligated to offer work and the
individual obligated to perform the work that is offered.

The individual must be obliged to perform the work personally (duty of personal service), ie he or
she cannot have authority to provide a substitute person to do the work.

The employer must exercise a reasonable degree of direction and control over the person’s work —
the greater the overall control and direction that the employer has over the individual, then the
more likely it is that he or she will be categorised as an employee.

In Johnson Underwood v Montgomery and O&K Limited [2001] IRLR 269, the Court of Appeal stated
that mutuality of obligation and control are an “irreducible minimum” necessary to create a contract
of employment. In practice, if any of the four factors above does not apply, the individual will not be
an employee of the company — although he or she may be a well worker (see below).
Employee Shareholders

A new type of employment status was introduced in September 2013: employee shareholder.
Employers may offer employee shareholder status to new and existing staff — although existing staff
cannot be forced to agree to this change in their employment status as the arrangement is
voluntary.

Under this scheme, the employee gives up certain employment protection rights, namely the right to
claim unfair dismissal, the right to a redundancy payment, and the right to request flexible working
and time off for training) in return for shares in the business worth at least £2000. Employee
shareholders also have longer notice requirements (16 weeks) if they intend to return to work early
from maternity, adoption or shared parental leave.

The process for offering or accepting a job on employee shareholder status is different from that
relating to other employment contracts. The employee shareholder status will not have legal effect
unless certain conditions are met, including that the individual must receive independent legal
advice on the proposed agreement with a “breathing space of seven days” for him or her to consider
the offer.

However, this scheme has not been used much and, following the removal of tax exemptions from 1
December 2016, it is effectively dead in the water. It is now an unattractive option for individuals
although any scheme entered into prior to 1 December 2016 will still benefit from the tax
exemptions.

Employees and Office Holders

There is a further distinction between employees employed under contracts of employment and
office holders. Office holders (eg an organisation’s directors) may or may not be employees of the
organisation. The factual details of the relationship should be examined on a case-by-case basis to
determine if the director is also an employee. The greater the control that a director has over an
organisation and the more shares he or she holds, the less likely it will be that he or she will be
found to be an employee by a tribunal.

Workers

The definition of a “worker” is broader than that of an “employee”.

The Employment Rights Act 1996 says that a person is a worker if he or she has entered into or
works under a contract of employment or some other contract, and undertakes to do or perform
personally any work or services for another party to the contract who is not his or her client or
customer. Such a contract is often known as a “contract for services”. Some freelancers may work
under this type of contract.

It can be seen from the definitions that all employees are workers; but not all workers are
employees.

The three definitive factors to look for are whether the individual:

has a contract (whether written or oral, express or implied)

is obliged to provide his or her services personally

is not in business on his or her own account.

Workers’ Employment Rights

A worker’s statutory rights are summarised below. There are no qualifying periods required before a
worker can benefit from these rights.

Paid annual leave.

Rest breaks and rest periods.

The National Minimum Wage (NMW).

Equal pay for men and women.

Health and safety protection.

Not to be discriminated against because of any of the “protected characteristics” set out in the
Equality Act 2010, ie age, disability, gender reassignment, marriage and civil partnership, pregnancy
and maternity, race, religion or belief, sex and sexual orientation.

To be accompanied at disciplinary and grievance hearings.

Protection in the event of whistleblowing.

Trade union activities.

Equality of treatment for part-time workers (compared to equivalent full-time workers).

Employees also enjoy all these rights.

Workers can be classified into the following categories.

Agency Workers (“temps”)

The agency who finds the individual work pays his or her wages and the company who hires the
individual through the agency pays a fee to the agency for the work. Agency workers are considered
in detail in the Agency Staff topic.

Short-term Casual Workers

Short-term casual workers hired directly by the employer (often with a written contract and usually
paid through Pay As You Earn (PAYE), with tax and NICs deducted) are not usually part of the
permanent workforce but supply their services on an irregular or flexible basis or have a “minimum
guaranteed hours” or “zero hours” contract — for further information on these topics see below.

Freelancers and Contractors

There are occasions when those who are self-employed for tax purposes may be classified as
“workers” for employment rights purposes — including when a self-employed person is personally
providing a service under a contract for a party that is not his or her direct client. However, an
individual cannot be a “worker” if he or she is self-employed and the contractual documentation
provides a genuine right entitling the individual to “substitute” someone else to do the work.

Members of Limited Liability Partnerships

In May 2014, the Supreme Court ruled that members of limited liability partnerships are workers for
the purposes of the Employment Rights Act 1996 — which gives them entitlement to statutory rights
and protections including rest breaks, annual leave, part-time workers’ rights and whistleblowing
protection.

The Independent Contractor

Individuals who operate as self-employed independent contractors have few employment

protection rights (and are taxed differently). In general, independent contractors will be the people
who run their businesses for themselves. Any contract that they enter into is likely to be a contract
between their business and a client or customer — which is more akin to a commercial contract than
an employment contract.

An individual is likely to be classed as an independent contractor if he or she:

has to put in bids or give quotes to obtain work

does not work under the direct supervision of the organisation with which he or she has contracted

submits invoices for the work he or she has done

is responsible for paying his or her own NI and tax

is VAT registered

is not granted holiday pay or sick pay when not working

provides his or her own staff where necessary to help him or her perform the work

operates under a contract (sometimes known as a “contract for services” or “consultancy

agreement”) that uses terms like “self-employed”, “consultant” or “independent contractor”.

Independent contractors do, however, have protection for their health and safety and, in some
cases, protection against discrimination under the Equality Act 2010.

The construction industry has a special scheme for self-employed contractors and subcontractors
called the Construction Industry Scheme (CIS).

Employment in the Gig Economy

In the so-called “gig economy”, work is characterised by companies engaging self-employed

individuals on a short-term and temporary basis. A company often uses a technology platform, which
allows the service providers to offer their services to customers at low cost.

The Office of Tax Simplification (OTS) has defined the gig economy as “an environment in which
temporary positions are common and organisations contract with independent workers for short-
term or on-demand engagements”.

Those who provide services in the “gig economy” are traditionally categorised by the company as
self-employed but UK tribunals and courts have put the spotlight on this business model. They have
increasingly been prepared to look behind the written documentation, examine the reality of the
contractual arrangements, and rule that these individuals are not independent contractors but
“workers” entitled to a range of employment protection rights — notably the right to the NMW and
to holiday pay and eligibility for auto-enrolment into a workplace pension. See the Court of Appeal’s
ruling in Pimlico Plumbers v Smith [2017] EWCA Civ 51, in which it ruled that the degree of control
between the two parties made their relationship incompatible with that of a genuinely self-
employed person. This is unlikely to be the last word on the issue.

As a result, wrongly classifying an individual as self-employed could lead a company not only to the
employment tribunal but also to considerable potential liability for tax and NI.
These legal developments have potentially huge implications for present employment models in the
gig economy, not least a considerable increase in staff costs that could make some enterprises
uneconomic.

Acas has published new and updated guidance to help employers understand employment
arrangements in the modern workplace, especially in the gig economy.

Umbrella Companies

An umbrella company is a company that will act as an employer to agency staff who work under
fixed-term contract assignments. The umbrella company will normally sign a business-to-business
contract with the recruitment agency and the agency will sign a contract with the client. The agency
will invoice the client for completed work, the client pays the agency and the agency then pays the
umbrella company. This money becomes the umbrella company’s income.

The umbrella company deducts the necessary tax and NICs, including employers’ NI, and any other
deduction necessary before paying the worker through PAYE.

Labels and Intentions

It is open to the parties to a contract to agree that an individual is to be an employee, a worker or an

independent contractor. Although this is likely to be a significant factor in determining the
employment status of that individual, it will not be conclusive. A tribunal will look behind the labels
and intentions of the parties. The label of “self-employed”, for example, may merely be a device to
prevent the individual from being entitled to employment rights — or it may just be wrong.

In Autoclenz Ltd v Belcher [2011] UKSC 41, the House of Lords provided precise guidance for courts
and tribunals in determining employment status when the nature of the arrangement between the
parties is in dispute. The question at issue is the true agreement between the parties. The courts and
tribunals should focus on the reality of the relationship between the parties, which might not be
reflected accurately by the written documentation.

Where there is room for doubt as to whether an individual is an employee or a worker, the employer
should — to be safe — treat the person as their employee and deduct income tax (at the basic rate)
and NICs and pay the individual net of these. This offers some protection in the event of an HMRC
investigation.
Of equal significance is the fact that if a person who was deemed to be self-employed is found to be
an employee, then he or she becomes eligible for benefits arising from employee status, including
the right to make a claim for unfair dismissal.

IR35

IR35 (named after the HMRC press release in which the rules were announced) was introduced in
1999. It is sometimes known as the “intermediaries legislation”. This set of rules governs an
individual’s tax and NICs where he or she is contracted to work through his or her own personal
service company or other intermediary (such as an agency). He or she pays taxes in a similar way to
employees, irrespective of the personal service company or other intermediary that he or she works
through.

Part-time Contracts

Under the Part-time Workers (Prevention of Less Favourable Treatment) Regulations 2000,
employers must not treat part-time workers less favourably than full-time workers employed on the
same type of contract. Part-time employees and workers thus have the same rights to contractual
benefits as comparable full-time employees and workers (on a pro rata basis). Such contractual
benefits include pay, holiday entitlements, occupational sick pay, access to company facilities and so
on.

This does not mean that a part-time worker’s benefits must always be identical to those of a full-
time worker — the law simply prohibits unfavourable treatment because of the individual’s part-
time status. An employer will have a defence to a claim if the less favourable treatment of a part-
timer is unconnected to the fact that he or she works part-time or if the treatment is justified, eg if
there is a genuine business reason for the different treatment.

A part-time worker must compare himself or herself with a full-time worker who carries out the
same or broadly similar work under the same type of contract, who works at the same
establishment and who has similar relevant qualifications, skills and experience. Where there are no
suitable comparators at the establishment where the part-timer works, he or she may cite a
comparator at another establishment of the same employer.

Where a full-time worker moves from full-time work to part-time work, he or she has the right to
enjoy the same terms and conditions (on a pro rata basis) as those he or she enjoyed when working
full time.
A part-time employee who feels that he or she has been subject to unfavourable treatment may ask
the employer for a written reason for the unfavourable treatment. The employer must provide the
employee with a response within 21 days of the request being made.

Fixed-term Contracts

Fixed-term contracts are contracts that specify when the contract will end, which can be on a
specified date, when a specific task or project comes to an end or on the occurrence (or non-
occurrence) of a specified event (for example on the return to work of an employee who has been
on maternity leave).

The Fixed-term Employees (Prevention of Less Favourable Treatment) Regulations 2002 require that
fixed-term employees are not treated less favourably (on a pro rata basis) in respect of their pay and
other contractual terms and conditions than comparable permanent employees of the organisation,
unless the employer can objectively justify the treatment. These regulations apply only to
employees, not to workers.

If an employee completes four years’ continuous service under a series of consecutive fixed-term
contracts, or has his or her fixed-term contract renewed after four years’ continuous service on a
single contract, the employee will be considered as permanent unless the fixed-term status can be
justified.

A fixed-term employee who considers himself or herself to be a permanent employee on this four-
year basis is entitled to ask his or her employer to confirm in writing that the employee’s contract is
no longer fixed term. The employer must respond within 21 days of the request. If the employer
does not agree, then it must justify (give reasons) as to why it believes the contract remains fixed
term. For more information, refer to Fixed-term Contracts in the topic Contracts of Employment.

Notice

While there is no requirement to have a notice clause in a fixed-term contract, it may in some
circumstances be advisable to have one as it allows an employer to end the relationship before the
expiry date should it be genuinely necessary to do so. A project may, for example come to an early
end. If there is no notice period in the contract allowing the employer to give notice and end the
contract early, the employee may be able to claim damages to cover his or her losses for the
outstanding period of the contract.

Less Favourable Treatment

Employees on fixed-term contracts have the right not to be treated less favourably than comparable
permanent employees in relation to:

terms and conditions of employment (eg pay and bonus schemes) unless there are objective reasons
for the less favourable treatment

training, promotions and transfers.

Employees on fixed-term contracts also have the right to be informed of any permanent vacancies
that arise within the organisation.

Termination of a Fixed-term Contract

Where a fixed-term contract expires and is not renewed, then this is regarded as a dismissal in law.
However, provided that the reason for the dismissal is the expiry of the fixed-term contract (and not
some other reason), and provided that the employer has acted reasonably, the dismissal (if
challenged) is likely to be fair. One essential action that the employer must take is to consult with
the employee in good time before the expiry of the contract, so the potential effects of the non-
renewal of the contract can be explained and explored, together with any other opportunities within
the organisation.

If the employee has at least two years’ continuous service with the organisation when the contract
expires and is not renewed, then he or she will be entitled to a statutory redundancy payment.

Job Share Contracts

Job share contracts occur where two part-timers share one full-time job. Benefits and pay are pro
rata according to the number of hours worked. Variations to standard contracts will be necessary
and clarification on the following areas will be required.

Allocation of bank/public holidays (must be shared on a pro rata basis).

Procedures for work handover.

Procedures for covering the absence of one employee.

Requirements to attend meetings, courses, etc outside of normal working hours.

Consideration should also be given to what would happen if one partner leaves the organisation or
moves to another role. Options might include whether the remaining partner would be offered the
choice to move to full-time working or whether a new job share partner would be sought.

Temporary Contracts

Temporary contracts are no different from open-ended contracts other than that the nature of their
work is short term.

Temporary employees are therefore entitled to the same rights and benefits as permanent
employees and may be protected by the Fixed-term Employees (Prevention of Less Favourable
Treatment) Regulations 2002. See Fixed-term Contracts above.

However, certain employment rights require the employee to have a minimum period of continuous
service in order to qualify, namely the right to claim unfair dismissal (two years), the right to
statutory redundancy pay (two years), the right to request flexible working (six months) and the right
to maternity, paternity, adoption or shared parental pay (six months).

Annualised Hours Contracts

The basic principle of annualised hours is that, instead of defining working time in terms of a
standard working week, the number of hours to be worked is averaged over the year. In its simplest
form, the calculation of annual working hours is based on the number of weeks in a year multiplied
by the number of hours in a working week less the number of holidays and public holidays.

Further variable elements such as shift arrangements and overtime will add complexity to the
calculation. Whatever formula is chosen, it is essential that this should be reflected in the contract of
employment.

As with traditional contracts based on normal working hours, annualised hours contracts should
specify whether employees will receive overtime pay for working additional hours.
In addition, an annualised hours contract should make clear:

the number of hours an employee will be expected to work in any given period

the procedure by which employees are to be notified of this

any “protected” periods, ie periods when employees will not be required to work

any “rest” periods and periods when the employee is “on call”

procedures to enable employees to notify their employer if their particular shift is inconvenient, eg if
the employee has booked holiday which falls within one of the rostered periods

provision which allows the employer to vary the arrangements upon notice.

Annualised hours’ contracts may also have an impact on other contractual terms and benefits such
as holiday arrangements and payment structures and these should also be specified.

Homeworking Contracts

The number of employees working from home is steadily increasing. Employers should always
consider if the job and the job holder are suitable for homeworking.

Homeworkers may be employees of the company or may be workers. This will depend on a wide
range of factors (see above).

In general, the particulars of employment for homeworkers follow the standard form for all
employees but also take account of the particular position of homeworking.
Even though homeworkers typically enjoy a degree of flexibility as regards how and when they do
their work, this will not necessarily prevent the person from being an employee of the company. For
this to be the case, however, there must be minimum obligation on both sides (ie to provide work
and to do the work provided). For example, although the hours of work may not be specified (eg
where payment is by piecework alone), there must be some minimum obligation on the employee to
complete the tasks allocated within a certain timeframe.

A deductions clause allowing the employer to make deductions from wages if work is not of the
required standard will enable the employer to impose certain standards of quality on the
homeworker.

The performance management of homeworkers should be consistent with that of office-based staff.
Regular face-to-face reviews are helpful and can assist this process.

It is also prudent to set out the system of work and arrangements relating to the provision of
equipment and insurance in some detail and ensure that homeworkers are aware of the main
provisions of the Health and Safety at Work, etc Act 1974 and that a risk assessment is undertaken.

Acas has produced a guide to help both employers and employees deal with the implications of
working from home.

Zero-hours Contracts

A zero-hours contract is generally understood to be a contract between an employer and a worker

where the:

employer is not obliged to provide any minimum working hours

worker is not obliged to accept any work offered.

Payment is only made for work that is carried out.

Legal Definition
Zero-hours contracts were given a legal definition under s.153 of the Small Business, Enterprise and
Employment Act 2015. A zero-hours contract is defined as “a contract of employment or other
worker’s contract under which”:

the undertaking to work or perform work is an undertaking to do so conditionally on the employer

making work or services available to the worker

there is no certainty that any such work will be made available to the worker.

Exclusivity Clauses

Section 27A(3) of the Employment Rights Act 1996 states that a provision in a zero-hours contract
that prohibits the worker from doing work under any other arrangement (an exclusivity clause) is
unenforceable. An exclusivity clause would be where an employer seeks to restrict a zero-hours
worker from working for other employers. Subsequent regulation provides that individuals on zero-
hours contracts may not be dismissed or subjected to a detriment for working elsewhere in
contravention of an exclusivity clause.

There is no qualifying period to bring an unfair dismissal claim for this reason. Remedies include
compensation from an employment tribunal.

The Department for Business, Energy and Industrial Strategy (BEIS) has published guidance on how
zero-hours contracts should be used. The guidance is aimed at employers and provides information
on employment rights, appropriate use of such contracts, exclusivity clauses and best practice.

Casual Contracts

Casual contracts are generally used where an employer requires workers to work on an “as and
when” basis. Such contracts are particularly common in the hospitality and catering industries.
Individuals are not required to be available for work or accept work and are free to turn work down.
As a result, there is no mutuality of obligation or continuing contract and the individuals cannot be
categorised as employees (see Carmichael v National Power plc).

If workers undertake to work on a regular basis, however, continuity could result or mutuality of
obligation could be implied, leading to an employer-employee relationship.
The key factors relating to casual contracts are as follows.

Whether a casual worker is an employee or not depends upon all the circumstances of the particular
case.

Where work is of a truly casual nature, workers are free to turn down work if they choose to do so.

The absence of mutual obligation — on the part of the organisation to provide work and on the
worker to accept work — means that normally the contract of a casual worker will be a contract for
services rather than a contract of employment.

During periods when the casual worker is not working, no contract remains in force.

Casual workers will, therefore, be excluded from many employment protection rights.

Even where there is no mutuality of obligation it is open to a tribunal to find that over the course of
several years a contract of employment may be implied, in particular if — through custom and
practice — the individual pattern of working has become regular and it is expected that he or she
will continue to be available on that set pattern.

If organisations have a regular need for casual labour, it is advisable to:

maintain a list of individuals who are prepared to take on casual work

offer jobs on a rotating basis

avoid approaching the same workers repeatedly.

Casual workers who are not employees do still have some rights (when working), namely protection
against unlawful discrimination under the Equality Act 2010, rights under the Part-time Workers
(Prevention of Less Favourable Treatment) Regulations 2000, the right to paid holidays and to the
NMW and the right not to have unlawful deductions made from their wages.

Volunteers

Volunteers carry out unpaid work for organisations such as charities, voluntary organisations or
fundraising bodies. They usually have a volunteering agreement and a role description rather than a
contract of employment and a job description.

Volunteers are not entitled to the NMW as they are not paid for their services, but they are often
paid for their travel and lunch expenses. Such volunteers are not regarded in law as either
employees or workers. The position might be different if the expenses were in reality payment and
the individual attended work on a regular basis under the control of a manager.

Interns

Interns are graduates or students who spend a fixed amount of time working to gain skills and
experience in a particular industry or sector. Students often have to do an internship as part of their
further or higher education courses.

An intern’s employment rights will depend on his or her employment status: if an intern is classed as
a worker, then he or she will normally be entitled to the NMW. However, if the internship is part of a
UK-based further or higher education course (eg a sandwich course) lasting less than a year then
interns are not normally entitled to the NMW.

Internships should not be confused with work experience, which involves a person spending a
limited period with an employer to learn about working life and the working environment.

Agency Workers Regulations 2010

The Agency Workers Regulations 2010 apply where agency workers are supplied by an agency to a
hirer (ie a client of the agency) to work “temporarily for and under the supervision and direction” of
that hirer.

The main feature of the Agency Workers Regulations 2010 is the requirement of “equal treatment”
for agency workers after they have worked for 12 weeks on a particular assignment with the hirer.
“Equal treatment” covers basic working and employment conditions, namely:
pay

hours of work

holiday entitlement.

An agency worker is essentially entitled under the regulations to benefit from the terms and
conditions that are applicable to equivalent permanent employees as if they had been directly
recruited by the hirer.

Additionally, certain rights apply from day 1 of the agency worker’s assignment. These include the
use of the hirer’s facilities, such as canteen, childcare and transport facilities that are available to
permanent employees. The agency worker has the further right from day 1 to be informed of any
available vacancies within the hiring organisation.

The agency worker can request information about relevant terms and conditions from either the
agency or the hirer.

The BEIS has published non-statutory guidance on these regulations. They contain some helpful case
studies.

Rights of Agency Workers

The issue of whether agency workers are employed by their agency, their hirer or indeed by anyone,
has been the subject of much case law.

Agency workers are not generally entitled to the benefits enjoyed by employees, other than rights
under the Working Time Regulations 1998 and the right to the NMW. They are also protected by
discrimination legislation (the Equality Act 2010).

Agency workers are usually either the employee of the agency or are self-employed and contract out
their services to the agency, which then places them with a client or end user. They are rarely
employees of the end user and this would generally only occur if there was a contract in place
between the agency worker and the end user. There have been many cases challenging the
contractual position of agency workers, but the decision in the case of James v Greenwich London
Borough Council [2008] EWCA Civ 35 CA effectively determined that, in the absence of a contract
between the agency worker and the end user, there is no employment relationship between the
two.

See the Agency Staff topic for full information.

Apprenticeships

An apprenticeship is a way for young people and adult learners to earn a wage while they train in a
job and to gain a qualification.

There are now three types of apprenticeship.

Traditional or “common law” apprenticeship.

Framework apprenticeship.

The approved English apprenticeship.

Traditional or Common Law Apprenticeships

Apprentices were traditionally governed by common law. As a result, it was often difficult to get rid
of an apprentice as their agreements were not terminable by notice. Indeed, if an employer
dismissed an apprentice, it could be held liable for wrongful dismissal and compensation for financial
loss and status.

These types of apprenticeships are now rare in England and Wales — they have been superseded (by
the types of apprenticeships outlined below) but can still be found in Scotland and Northern Ireland.
Apprentices are afforded the same level of protection from dismissal as any other employee working
under a contract of employment. The essential elements of the apprenticeship agreement required
by legislation are described below.

Framework Apprenticeships

Employers can use an apprenticeship agreement to take on apprentices. This is a distinct concept
that substantially differs from the original concept of a deed of apprenticeship which was
traditionally used to take on an apprentice. If the correct format is used and the apprentice is
enrolled on an accompanying training framework, then employers can treat such individuals in much
the same way as “normal” employees and they are considered to work under a contract of service
(effectively a contract of employment).

What an Apprenticeship Agreement must Contain

An apprenticeship agreement must include the following.

A written document (known as a written Statement of Particulars of Employment) containing the

terms of employment (or equivalent, ie a written contract or letter of engagement) in accordance
with s.1 of the Employment Rights Act 1996. See the Contracts of Employment topic for full
information on this.

Reference that the person (the “apprentice”) undertakes to work for another (the “employer”)
under the agreement.

A statement of the skill, trade or occupation to which the apprenticeship relates.

A statement that the agreement is governed by the laws of England and Wales.

A statement that the agreement is entered into in connection with a qualifying apprenticeship
framework.

The Frameworks available can be found here.

All apprenticeships for 16–18-year-olds must last a minimum of 12 months.

Employment Status — Apprentices

Section 35 of the Apprenticeship, Skills, Children and Learning Act 2009 provides that an
apprenticeship agreement, which satisfies the prescribed conditions, should be regarded as a
contract of service and not a contract of apprenticeship for common law or statutory purposes.

An apprentice who works under an apprenticeship agreement in the prescribed form will be
considered as a fixed-term employee and he or she will be covered by the normal rules of unfair
dismissal. An apprenticeship agreement can be terminated without the termination amounting to a
breach of contract, as would be the case for a traditional apprenticeship.

Employers should take appropriate steps to consult with any affected apprentice about the ending
of the fixed-term contract and ensure that he or she is made aware about any permanent
employment opportunities in the employer’s organisation.

Employers should not forget their commitment to help the apprentice to train or learn a skill and as
such should consider whether they can refer the apprentice to another employer in cases of
redundancy or dismissal for any other reason.

Employers must be mindful of a potential claim for age discrimination and should always be cautious
when considering selection for redundancy if they are targeting apprentices.

Pay

Employers pay the apprenticeship rate of the NMW to apprentices under age 19 and to older
apprentices in the first year of their employment. Once an apprentice is over 19 and has completed
a year of his or her apprenticeship, he or she is entitled to the NMW at the rate applicable to his or
her age group.

Continuity of Service

If an employer keeps an employee on or after the apprenticeship has come to an end, there will be
continuity of service.
Approved English Apprenticeships

Since May 2015, an employer can offer an approved English apprenticeship provided that this is
within a sector for which the Government has published an approved apprenticeship standard. The
scheme creates a single, standard set of qualifications. The employer is required to provide the
training to assist the apprentice to achieve this standard.

As with the type of apprenticeships outlined above, an apprentice on an approved English

apprenticeship agreement is governed by a contract of employment. The agreement should contain
the basic terms of employment. A probationary period is recommended.

The Apprenticeship Levy

From April 2017, as part of the Government’s plan to increase the quantity and quality of
apprentices, UK employers with a pay bill of over £3 million are required to pay an apprenticeship
levy. The levy aims to fund some three million apprenticeships in England by 2020. It is estimated
that less than 2% of employers will be liable for the levy.

The levy will be charged at a rate of 0.5% of the employer’s pay bill and met through monthly PAYE
contributions. There is an annual allowance of £15,000 to offset the levy.

Employers who are not liable to pay the apprenticeship levy are required to make a 10%
contribution towards the cost of training.

Apprenticeships that started before the date of the first levy payment (April 2017) will continue to
be funded for their full duration through the Skills Funding Council.

These arrangements do not apply in Wales, Scotland or Northern Ireland which have their own
funding arrangements.

Apprentice targets

With the introduction of regulations on 31 March 2017 under the Enterprise Act 2016, the
Government is able to set apprentice targets for prescribed public bodies (for example, NHS Trusts,
local authorities, police and rescue services, and some educational institutions). It has stated that at
least 2.3% of the workforce in public sector bodies in England will have to be apprentice starts each
year.
Targets for large public sector employers (ie with 250 or more employees) in England came into
force from 1 April 2017.

Extra funding for employers taking on apprentices

In the period covering 1 August 2020 to 31 January 2021, businesses will be given £2000 for each
new apprentice they hire under the age of 25. They will also be given £1000 for every apprentice
taken on who is aged 25 and over. This is in addition to the existing £1000 payment the Government
already provides for new 16‒18-year-old apprentices and those aged under 25 with an Education,
Health and Care Plan.

As part of the Spring Budget, it was announced on 3 March 2021 that this incentive payment will be
increased to £3000 for taking on apprentices of all ages.

Applications for the payment opened on 1 September 2020, and can be applied for after employers
add new apprentices to their apprenticeship service account. The first payments will be made from
January 2021 and will be paid directly into employer’s bank accounts.

Kickstart scheme

Overview

The Kickstart Scheme was announced in July 2020 and is aimed at creating new high-quality jobs to
help 16–24-year-old unemployed people on Universal Credit. The Government is investing £2 billion
into creating thousands of state-funded jobs for young people who are at risk of being in long-term
unemployment. The aim is to provide opportunities for young people to enter the workplace,
especially as many of those in this age bracket may have lost their jobs as a result of the 2020
coronavirus pandemic.

The scheme is being run across several industries in England, Scotland and Wales and is open to all
employers who meet the minimum requirements for offering the scheme. Chancellor Rishi Sunak
has urged every employer, big or small, to hire as many Kickstarters as possible. This scheme will
cover participants' expenses for six months if employers take them on into new roles.

The scheme will be delivered by the Department of Work and Pensions (DWP) and will be open until
December 2021 — with the option of it being extended. It consists of a young person being taken on
and asked to work a minimum of 25 hours per week, paid at the National Minimum Wage (NMW), at
the least, and provide key training in skills that will help them to progress in their career. The
Government covers 100% of relevant NMW for 25 hours per week, as well as National Insurance
contributions and employer minimum auto-enrolment pension contributions. Employers are free to
top up this payment if they wish.

The Government will also pay employers £1500 towards set up support and training for those on the
Kickstart placement. This payment can also be used to pay for uniforms and other costs necessary.
Employers who take part in this scheme are permitted to hire a second Kickstart participant into the
same role after the first participant has completed their six months placement.

While the Kickstart Scheme is not an apprenticeship, the Government has expressed that
participants can move on to become apprentices at any time during or after their Kickstart
placement.

Employers, as well as supporters of the Kickstart Scheme, who wish to promote the roles they are
offering through the scheme or promote the scheme itself, can utilise the tools provided by the
Government which aim to present a consistent message across the UK.

Application process for the kickstart scheme

The assessment criteria being used to determine if an employer's application for a grant under the
scheme has been successful applies to the whole of the UK.

The minimum eligibility requirements for employers to be considered for the scheme are:

employers must be prepared to offer at least 25 hours a week to participants, for at least six months,
who are paid at the appropriate National Minimum Wage for their age group

employers must demonstrate at application stage what employability support they will provide to
participants to give them the transferable skills needed to continue into gainful employment,
training or education, such as teamwork, organisational or communication skills

employers must also demonstrate that the jobs they are offering are quality placements —
meaningful and suitable — that will benefit the participant in future
employers must show how they plan to monitor the progress of participants to the satisfaction of
the compliance and quality requirements for the scheme — covering participants' safety, employer
liability insurance, risk assessments for the vulnerable, and Disclosure and Barring Services for
16/17-year-olds

lastly, employers must show how publicity activities, such as branding, will comply with the DWP
publicity requirements.

Employers should also be able to demonstrate how they will help employees to develop their skills
and experience in areas such as:

support to look for long-term work, including career advice and setting goals

support with CV and interview preparations

supporting the participant with basic skills, such as attendance, timekeeping and teamwork.

Previously, employers who were unable to offer at least 30 job placements particularly smaller
businesses who only wanted to offer one or two placements, needed to partner with other
organisations to reach the minimum placement requirement through a Gateway. However, this
minimum requirement is no longer necessary. Employers in this situation can still apply through a
Gateway if they choose to.

Applications can be submitted via the Government website. When making an application, employers
will need the following to hand:

Companies House reference number or Charity Commission number

the organisation address and contact details

details of the job placements and their location

supporting information to show that the job placements are new jobs and meet the Kickstart
Scheme criteria — see above

information about the support the organisation can give to develop employability skills of young
people.

To submit an application, click here.

Using the Government’s Traineeship Scheme

What is the traineeship scheme?

Traineeships, introduced in 2013, offer education, training, and work experience to young people
who may lack certain skills and experiences that employers look for in job applicants. Their aim is to
provide young people with a pathway into employment or education. As traineeships involve unpaid
work placements, they should not be confused with apprenticeships.

In July 2020, the Government announced that it would be reforming and expanding the traineeships
programme to help young people in England., regardless of background, who are most at risk of
unemployment due to the coronavirus pandemic. This new scheme opened in September 2020.

Eligibility for undertaking a traineeship

The core target group for traineeships in 2020 to 2021 are those who:

are not employed and have little work experience but would like the opportunity to gain these key
skills

are aged between 16–24 and have up to, and including, a full Level 3 qualification (equivalent to A-
Level qualifications)
have a reasonable chance, based on the employer’s belief, of getting into employment within six
months of completing the traineeship.

Traineeships are not intended for:

the most disengaged young people, who require very intensive support.

those who already have the qualifications, skills and experience needed to start an apprenticeship or
find work

those already in employment.

What do traineeships provide?

Traineeships are designed to help young people in acquiring skills and confidence to get, and sustain,
employment opportunities in the future. While not a new concept, the Government has pledged
30,000 new traineeships in England as part of its plans to stimulate business growth and
employment following downturns seen as a result of the pandemic.

From September 2020, traineeships should involve classroom-based tuition in maths, English, digital
skills, and CV writing, provided by the training provider. This is coupled with “high-quality” 70 hours
(minimum) of unpaid work experience placements provided by employers. To incentivise employers
to offer these placements, the Government is providing a £1000 payment per trainee for up to 10
trainees (see Employer Incentive Grant below), in 2020–2021. There is no limit on the number of
traineeships an employer may offer, however, the incentive payment is due for only 10 traineeships.

Qualifications

Traineeships must provide young people with key maths, English, and digital skills to a certain
qualification level (if they are not already at that level). Maths and English qualification levels that
trainees should achieve are:

a functional skills Level 2 qualification for 19–24-year-olds

a GCSE grade 9-4 (A*-C) for 16–19-year-olds.

Employers must follow the rules on providing and delivering traineeships as set out by either (or
both) the Education and Skills Funding Agency (ESFA) for 16–18-year-olds or the Adult Education
Budget (AEB) funding rules 2020 to 2021 for 19–24-year-olds. Employers who partner with existing
qualified education or training providers can liaise with them about this, otherwise employers must
ensure that they meet the requirements as set out by the ESFA and/or the AEB.

Benefits for employers

Employers can benefit from this traineeship scheme in a number of ways, including in the following
ways:

flexibility — can be industry specific and allows employers to tailor the programme to their business
needs as well as the specific trainee

it is government-funded

the current workforce will be given the opportunity to gain, or improve on, training and mentorship
skills

it can help towards increasing productivity in the workplace

employers are inherently contributing to the battle against increased rates of youth unemployment

employers will already be familiar with the individual before hiring them as an apprentice

the incentive grant — see Employer Incentive Grant below.

Becoming a traineeship employer

Employers seeking to offer work placements as part of this programme for the first time must work
in collaboration with training providers. They can either contact a relevant training provider directly,
or receive assistance from the National Apprenticeship Service. A full list of training providers is
available on the Government website.

Employers and the training provider should work together to ensure that the work offered by the
employer provides the experience that young people require to develop their employability skills.
This can be tailored specifically to each young person alongside other elements of the traineeship.

How the work placement will be structured should be confirmed before a traineeship is offered to
any individual. Once a plan is in place for the traineeship, it can be advertised through the
Government website.

Prior to placing an individual with the placement company, the training provider will provide work
preparation training which may include direct training on the expected role they will fill during their
placement.

When offering a traineeship work placement, employers need to provide:

safe, meaningful and high-quality work experience

a minimum of 70 hours of work experience — but no more than 240 hours for benefit claimants —
over the duration of the traineeship (maximum of one year) and as agreed with the traineeship
provider

constructive feedback and advice to the trainee

an interview for an apprenticeship or job in the business at the end of the traineeship if one is
available

an exit interview at the end of the traineeship with meaningful written feedback if no job is
available.

Employer incentive grant

Employers can apply for a £1000 traineeship incentive grant under a new initiative, for delivering a
70-hour minimum work experience placement as part of a traineeship programme. It is available
from 1 September 2020 up to, and including, 31 July 2021.

Employers can take on as many trainees as they wish but will only be able to claim a grant of up to a
maximum of 10 incentive payments. Multi-sited employers who wish to offer traineeships across
England can do so and claim the £1000 grant per trainee per region, up to a maximum of 10 trainees
in each region.

This cash incentive can also be claimed for all work placements that have been completed since 1
September 2020. This means that the placement could have begun prior to this date.

Employers can claim the incentive by sending an application via the Government’s website after
each placement has been completed. Claims must be made by 21 October 2021 — this is also the
deadline for employers to send details of the outcome of the traineeships they completed by 31 July
2021.

Although employers have until 21 October 2021 to make this claim, it is strongly advised that they
do so as soon as the placement is finished.

What role do training providers play?

Training providers must ensure that the Individualised Learner Record (ILR) is updated correctly on a
monthly basis and submitted to the Education and Skills Funding Agency (ESFA). All details provided
here much match what the employer provides when they submit their application for the incentive
payment.

Once the ILR is completed, providers will then need to provide the employer with the Unique
Learner Number and the work placement postcode specified on the ILR. Once submitted, the ESFA
will use this information to conduct the required checks for approval of the payment.

Employment status of a trainee

Some employers may liken traineeships to apprenticeships; however, it has been made clear by the
Government that a traineeship is not a job. Traineeships are meant to help young people develop
the skills they need for sustainable employment. This means that individuals on placement are not
considered employees, workers, or apprentices.

Employers are therefore not under any legal obligation to pay their trainees for the work experience
hours, meaning they are exempt from National Minimum Wage rules. Providers may decide to pay
the trainees and can set the amount themselves — eg contributions to a trainee’s accommodation,
food, or travel costs, though this is optional.

Since a trainee is not technically “employed”, they are also not entitled to any of the statutory
employment rights afforded to employees and workers, such as rights to annual leave and sick leave,
etc.

Duration and working hours

The Government has explained that the duration of a traineeship will depend on the participant but
that they can last between six weeks and 12 months. Most traineeships are expected to be
completed within six months, however for those starting a traineeship in 2020‒2021, up to 12
months will be allowed to accommodate learners who are further away from the labour market or
who require further support.

Before offering a traineeship, employers will need to ensure that they can offer the experience that
young people require to develop their employability skills.

The employer and the provider will agree:

the days the trainee works

how the programme will be delivered.

Programmes can be adjusted to make sure the employer and the trainee get the most out of it.

They can be tailored specifically to each young person alongside other elements of the traineeship;
however, activity hours cannot exceed those set out in the funding rules.
Achieving a successful traineeship

For a traineeship to be considered successful, trainees would have undertaken a minimum of 70

hours of work experience over between six weeks and 12 months; the work must be of high quality,
and trainees must have received a certain level of qualification (see What do traineeships provide?
above).

Trainees should have also progressed to one of the following outcomes by the end of a traineeship:

an apprenticeship

other forms of employment

further education.

Where none of the above outcomes is achieved, it is expected that trainees will have significantly
increased skills and work experience that they can showcase on a CV which will allow them to find
work in the future. Employers should help trainees to get in contact with organisations that can
assist them in their search for work.

Interviewing and feedback

Employers should endeavour to provide trainees with a real interview where an apprenticeship or
other work is available. If this is not possible, employers should conduct formal exit interviews with
their trainees to give them the necessary experience and practice for the future, along with
constructive written feedback about their time on the placement.

Written feedback on how the traineeship went should also be provided to trainees who go on to
start an apprenticeship or other work.

List of Relevant Legislation

Employment Act 2002

National Minimum Wage Act 1998

Employment Rights Act 1996

Trade Union and Labour Relations (Consolidation) Act 1992

Working Time Regulations 1998

List of Relevant Cases

Lee v Chung [1990] IRLR 236 PC

Hall (HM Inspector of Taxes) v Lorimer [1994] IRLR 171, CA

Clark v Oxfordshire Health Authority [1998] IRLR 125, CA

Autoclenz Ltd v Belcher [2011] UKSC 41 SC

Cable & Wireless plc v Muscat [2006] IRLR 354, CA

Flett v Matheson [2006] IRLR 277, CA

Department for Work and Pensions v Webley [2005] IRLR 288, CA

Giles v Cornelia Care Homes ET 3100720/2005, unreported

(1) Coutts & Co plc (2) Royal Bank of Scotland v (1) Mr Cure (2) Mr Fraser EAT/0395/04
James v London Borough of Greenwich [2008] IRLR 302, CA

Pipe v Hendrickson Europe Ltd [2003] All ER (D) 280, EAT

Carmichael v National Power plc [2000] IRLR 43, HL

Esso Petroleum Company v (1) Jarvis and others (2) Brentvine Ltd EAT/0831/00

Berwick Salmon Fisheries Co Ltd v Rutherford [1991] IRLR 203, EAT

Nethermere (St Neots) Ltd v Taverna and Gardiner [1984] IRLR 240, CA

Ford v Warwickshire County Council [1983] IRLR 126, HL

Airfix Footwear Ltd v Cope [1978] IRLR 396, EAT

Ready Mixed Concrete v Ministry of Pensions and National Insurance [1968] 2 QB 497

Pimlico Plumbers Ltd v Smith [2017 EWCA Civ 51

Further Information

Organisations

Department for International Trade (DIT)

https://www.gov.uk/government/organisations/department-for-international-trade

DIT is responsible for developing and delivering UK industrial strategy, promoting competitive
markets and ensuring that the UK has a reliable, low-cost and clean energy system.
Employment Lawyers Association

http://www.elaweb.org.uk

The Employment Lawyers Association’s members are qualified barristers and solicitors who practice
employment law in the UK, and organisations engaged in the practice of employment law.

legislation covers the employment relationship?

JUMP TO:

1. What is employment legislation?

2. When do I need to think about employment law?

3. What are the primary pieces of legislation?

4. How can I resolve a dispute with my employee?

5. What happens if I get taken to a tribunal?

6. When do I need a solicitor?

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We often read about big pay-out employment tribunals in the papers, but the reality is these are far
and few between. However its easy to get concerned by the stories in the press. This article goes
through some very basic aspects of employment law.

What is employment legislation?

Employment legislation covers the different statutes or acts that set out the legal entitlements
employees have to certain conduct, benefits and rights from their employer or their employment.
Anyone working in HR will be trained in employment legislation and how it relates to all aspects of
work. It is part of what we refer to as civil rather than criminal law.

Criminal law covers issues between the state and a wrong doer whereas civil law deals with issues
between two parties and in this case it is between the employer and the employee.

The employment relationship is governed by a variety of different statutes and acts that are
regarded as employment law.
Employment law gets updated every year from minor to major changes. If you retain the services of
a solicitor, then they will be able to keep you informed of any changes and how they effect you. If
you don’t have a solicitor then the ACAS website has an employment law update with a timetable of
the changes that are due to come into effect.

When do I need to think about employment law?

The table below shows the different stages of an employee life cycle and the laws that apply during
these stages.

Employee stage Laws to be aware off

Recruitment Equality Act 2010, Rehabilitation of Offenders 1974, Data Protection Act

Pre-employment checksSafeguarding Vulnerable Groups Act 2006, Immigration, Asylum and

Nationality Act 2006

Employment offer Employment Rights Act 1996, The Fixed-term Employees (Prevention of Less
Favourable Treatment) regulatiobs 2002, The Part-time Workers

Training and Development Equality Act 2010, Employment Rights Act 1996, Education and Skill
Act 2008, The Employee Study and Training Regulations 2010

Change in personal circumstances Employment Rights Act 1996, The Flexible Working
Regulations 2014, Employment Act 2002

Performance Management Equality Act 2010, Employment Rights Act 1996

Industrial Action Trade Union and Labour Relations (Consolidation) Act

Mergers and Acquisitions The Transfer of Undertakings (Protection of Employment)

regulations 2006

End of employment Employment Rights Act 1996, Equality Act 2010, The Trade Union and
Labour Relations (Consolidation) Act 1992, The Collective Redundancoes and the Transfer of
Undertakings (Protection of Employment) (Amendment) Regulations 1999

What are the primary pieces of legislation?

Equality Act 2010

One of the most significant pieces of legislation to govern the employment relationship is the
Equality Act 2010. In summary the Act sets out nine protected characteristics that it is illegal to
discriminate on. It is illegal to discriminate on the following grounds:

Sex

Religion or belief

Pregnancy and maternity

Race

Sexual orientation

Marriage and civil partnership

Gender reassignment

Disability

Age.

Employment Rights Act 1996

This is the Act that governs the majority of the employment relationship, including but not limited to
entitlements around:

Contracts of employment

Pay

Dismissal and Grievance

Time off

Pensions

Study and Training

Maternity, Paternity, flexible working

Termination of employment.

Health and Safety at Work Act 1974 (HSWA)

This is the main piece of legislation covering occupational health and safety. The HSWA can
sometimes seem daunting not least because if you are in breach of Health and Safety legislation you
can find yourself having to pay significant compensation or in extreme cases facing Corporate
Manslaughter charges.

Essentially you need to ensure that you do everything reasonable and sensible to ensure that your
employees are protected from harm and their health, safety and welfare is not put at risk.

The Health and Safety Executive enforces the HSAW and provide a lot of useful guidance on their
website.

Data Protection Act 1998 (DPA)

In your business you will keep a lot of records and many of these will be about your employees. You
will have information such as CVs, address details, bank details, maybe even details regarding their
health. The DPA controls the use and storage of personal information. There are key data protection
principles that must be followed by all employers.

Working Time Regulations (1998) & The Working Time (Amendment) Regulations 2007

These stem from a European Union directive on working time and are enforced by the Health and
Safety Executive and fall under Health and Safety legislation. The legislation sets out some key
requirements around:

maximum number of hours a person can work

limits on night work

health assessments

time off

rest breaks

annual leave.

It is unclear whether the UK will continue to maintain Working Time Regulations now it has left the
EU.
AAT Business Finance Basics - mobileFIND OUT MORE

How can I resolve a dispute with my employee?

The majority of disputes can actually be resolved internally and most guidance and legislation
encourages you to try to resolve the situation within your business before seeking help and advice
externally.

Disputes within the workplace can happen for a variety of reasons. Some of the issues include:

unfair treatment

poor communication

bullying and harassment

increased workload

ineffective management

poorly defined job roles.

Conflict within the workplace should be treated at the earliest stage possible. This will prevent the
situation from escalating and will save on time, money and stress in the long term.

If a conflict should occur, the first step would be to talk to your employee. This should be done with
sensitivity: give the employee an opportunity to express themselves, ask any questions calmly and
listen to what is being said. It could be that there has been a simple misunderstanding or mistake
that can be resolved quickly.

If the matter can’t be sorted out informally, there a various options you may want to consider.

keep a record of relevant events, including times, dates and details

keep copies of anything relevant to the complaint – e.g emails, meetings, etc

consider getting help from a third-party. This could be in the form of mediation, conciliaton or
arbitration

there is a wide range of guidance and advice available on www.acas.org.uk and www.cipd.co.uk.
Disputes and conflicts within the workplace will happen, but steps can be taken to ensure they are
kept to a minimum:

talk and listen to your staff. Encourage an open culture where staff feel comfortable at voicing
opinions

have clear discipline, grievance and disputes procedures in place. Ensure staff are aware of these
procedures

train any managers on the process of handling disputes and conflicts with staff.

What happens if I get taken to a tribunal?

There’s useful guidance via GOV.UK that sets out all the things you need to know and do if you are
being taken to a tribunal.

If you lose the tribunal, it’s important to remember that employment law is about compensation
rather than punishment as it sits within the principles of civil rather than criminal law. Therefore,
key things the tribunal might instruct you to do are:

Require you to give your employee their job back

Pay compensation and or damages to your employee for any injury to personal feelings or loss of
income

Pay any witness expenses for your employee

Pay your employees tribunal fees.

Employee Voice: How are you going to implement it?

Andrew Marritt September 16, 2018 Employee Voice

Miscellaneous Blog Image V05-01.png

In July 2018 the Financial Reporting Council published its long-awaited update to the UK’s Corporate
Governance Code. We’ve seen considerable coverage of this in the legal press but very little for HR.
This seems strange given that those in HR are likely to have to implement it.

The new regulation applies to firms with over 250 employees in the UK.

What the regulation states and what it doesn’t

The new UK Corporate Governance Code states:

For engagement with the workforce, one or a combination of the following methods should be used:

a director appointed from the workforce;

a formal workforce advisory panel;

a designated non-executive director.

If the board has not chosen one or more of these methods, it should explain what alternative
arrangements are in place and why it considers that they are effective.

The challenge with all of these methods is how to capture the views of the employees, to synthesise
them and provide them to whichever party that has been designated to include them in the board
decision process.

Of course the workforce is highly unlikely to have an uniform voice. Therefore it is essential to
capture this diversity of ideas. The formal approach used to decide how to handle potentially
conflicting ideas isn’t part of this article.

The challenge of upward communication

As an executive you’d like to hear about all the issues that need your attention. By ‘your attention’ I
mean that either they’re things that you don’t want to be surprise with when presented from
another source or things that for whatever reason need you to take action (maybe because they are
cross-organisational or need your level of authority).

The problem that you’re faced with is twofold:

Only a proportion of the topics you need to hear about will reach you ‘undistorted’

Due to communication windows it will take time for these topics to reach you.

Let’s take the example of a business with 8 layers between the executive team and the folks who
deal with the customers.

If a high 80% of topics that you need to hear about get through each level then this implies you’ll
only hear about 21% of topics

If a more realistic 50% get through each level you’ll hear less than 1% of all issues

Of course you’ll probably hear about the the wrong topics. Because many of the issues might seem
‘too petty’ they won’t be raised. However if 500 people across the organization have this issue it
probably demands your attention. Small and widespread often doesn’t get through, whereas big and
niche often does. Often the real value is in fixing small and widespread issues.

The other key issue - one that we frequently see and one that is well-researched in the academic
journals - is that employees often don’t raise issues - so called ‘Employee Silence’. It can be more
difficult raising issues up through the chain, where it might threaten their managers than to raise it
confidentially to a central point. The sort of issues here might be to do with cultural risks such as
poor incentives or behaviours.

Unlocking innovation

Executives often think about this as needing to facilitate ‘whistle-blowing’ or raising of issues. This is,
of course, important but these instances are rare and high value - the ‘rare and niche’ that I
mentioned earlier. In truth these cases need special channels and need to be treated differently than
other forms of employee voice.
The real challenge is not how to find the rare event with a clear channel, it’s finding the diversity of
opinions and ideas about something widespread.

Often the true value in integrating employee opinion into decision making is to understand the
distribution of ideas and opinions from a large population. It’s about asking all of your employees
about a decision and understand the breadth and distribution pattern of the responses.

Of course some of these ideas will be truly innovative and potentially super-interesting but often
you’re trying to get a good grasp of the top ideas.

The need for qualitative information

There is a time for getting quantative information - mostly when you already know the problem and
are looking to understand the scale of it. If you know all possible options, a closed question might be
the best way of putting a number on it.

In most instances however you don’t know all aspects of the problem, or haven’t identified all the
possible solutions. When you’re at this exploratory stage then it’s best to ask open questions.

Sufficient, reliable, relevant and useful

Adopting a concept that comes from internal audit:

Information is sufficient when there is enough of it to come to an unbiased and dependable view of
the topic. If you’re asking all your employees about a subject and a meaningful number of
employees raise an issue then it’s probably sufficient.

Information is reliable based on the source of the information. Customer perception data from
people working day-in and day-out with customers is potentially more reliable than information that
comes indirectly. Information that can be validated is more so.

Relevant information is information that relates directly to the question explored. When we ask
open questions to employees relevant information is that which relates to the topic. We need to
down-weight information that we’ll receive but doesn’t help us answer the question (some people
have something that they will raise regardless of the question asked).

Useful information is information that helps an organization meet its goals. If the information was
about an old reporting system which has since been phased out, it probably wouldn’t be useful
(because the issue has already been dealt with.)

Employee feedback provided via free text can be all of these things, though it might gain extra
reliability if linked to existing data. It’s important when reviewing the summarised feedback that
managers assess it against these 4 lenses.

The need to synthesise

Once you’ve decided to ask your employees a series of open questions about a key topic or decision,
what do you need to do?

For many of our clients if we ask a couple of open questions we’ll get on average 20 words per
question per employee. This means for each question with 50,000 responses you’ll be faced with 1
million words.

The problem is that you probably need to present less than 1,000 words to your executive team,
ideally 1 side of A4 paper.

How do you do this?

Technology to the rescue

Historically, analysing a large amount of free text was a long, expensive process. The quality that
you’d get out of this also was probably lower than you’d imagine. Getting 80% agreement between
reviewers is pretty good. It’s really hard for reviewers to be consistent throughout a review.
Identifying a new category means having to start again.

There are several different capabilities that you need to have, most importantly the need to
understand themes - context rich descriptions - rather than topics. Historically this level of
understanding has been hard yet with the progress of text analytics over the last couple of years the
best machine learning approaches can match human performance in many tasks.

What you will need your technology to do

When considering an algorithmic support to enable you to collect and understand Employee Voice
you need to ensure that your text analysis tool can deliver several key capabilities

1) Ability to ask any question, and to analyse the responses

We do not believe that Employee Voice - the ability to let employees contribute to decision making -
is possible without being able to ask and understand questions about the decision you need to
make.

The first, and arguably the most important requirement for any Employee Voice technology is that
you can ask any question, and the system can theme the answers with a decent level of accuracy.

This might seem obvious but it’s not. The best text analytics approaches work on very narrow types
of text. A system might be great at parsing a CV but couldn’t understand a shopping list for example.
To get the level of accuracy that you need we think you probably need to have a model fine-tuned at
a question level.

2) Themes not topics

As mentioned before it’s important to understand the themes - how people describe their views -
not the topics. So ‘more transparent communication’ instead of simply ‘communication’.

The algorithms should provide summaries the answers. Only if you can understand the underlying
meaning just from reading the theme label then it’s probably good enough.

3) Identify notable and unusual answers

Another key aspect is the overall pattern of themes, both in terms of overall distribution and ‘hot-
spots’ of feeling across the organization and employee population. Often you’ll need to identify the
rare comments that might bring genuine innovative ideas (or tell you about a problem you really
need to deal with).
4 Track asking and answering of questions

For compliance purposes you will want to be able to show who was asked, when they were asked,
how the feedback was analysed and how the information was integrated in the decision making
process. Technology is well-suited to this task.

A process for working with Employee Voice

We do not believe that technology alone will enable firms to meet the requirements of using
Employee Voice in decision making. However whichever way (or ways) businesses decide to use to
bring voice into business decisions it’s clear that technology can significantly improve the cost,
responsiveness and quality of the process needed to maximise benefits and demonstrate
compliance.

What we constantly hear from Workometry clients is that when executives experience the benefits
of being able to consult their organizations quickly and effectively they want to use it more and
more. We hope that this new regulation helps elevate employee voice into a standard business
practice.

Taking it further

Earlier this year we published a Guide to Employee Voice. It includes a set of useful resources and
documents for anyone trying to understand best practice in this area.

Try Workometry

If you do have thousands (or even hundreds of thousands) of free text answers from your employees
let us show you what is possible.

Employee Voice: Why You Need to Listen (Especially to Remote Workers!)

Written by Stuart Sinclair | Jun 8, 2021 9:45:00 AM

Everyone wants to be heard. This is true for all kinds of relationships, whether personal or
professional. When a person feels their voice has been heard and their views have been taken into
account, they feel satisfied and connected.
This is why the employee voice is so important. The employee voice exists where everyone in the
organisation feels they have a say in the decision-making process, where they feel heard and
listened to, and their views are taken into account and acted upon. Ensuring that your employees
feel that they have a voice within your company and that that voice is listened to is key to your
employee engagement efforts. Without a robust employee voice strategy, you risk increasing the
disconnect between employer and employee.

But, with the rise in remote working, the employee voice is at risk of being ignored and forgotten.
With teams scattered over physical distances, the lack of daily connection and the reliance on video
calls rather than actual meetings, many workers are starting to feel as though they are no longer
heard. Research suggests we need to step up our efforts. According to Willis Tower Watson, while
60% of employers have increased employee listening efforts during the pandemic, few use formal
listening approaches. In fact, just 31% conduct employee surveys.

Addressing issues surrounding employee voice will enable you to better engage with your team and
encourage innovation in the workplace. In short, it creates a culture that will serve to underpin the
success of your company.

What is employee voice?

Before we delve into tackling the problem, first, we need to die down the employee voice definition.
Essentially, employee voice is how individuals communicate their opinions and ideas to their
employer and how these views are then utilised to influence the company moving forward.

This means that employee voice is a lot more than simply providing your employees with a way in
which to communicate. It provides your team with a range of platforms and opportunities to
connect and actively engage with what your team has to say by utilising their views to guide
strategic plans and company direction.

Clearly, with a large proportion of staff currently working from home, these platforms and
opportunities need to be tailored to fit their circumstances. It could be that the employee
engagement model that once worked so smoothly is no longer as successful at reaching remote
workers. This is when you need to explore new channels of communication. It’s worth exploring the
many benefits of employee engagement software, which will help you reach out to every staff
member, even those hard to reach workers.
The benefits of employee voice

When an employee feels able to share their views and concerns with an employer, the benefits can
be far-reaching. By encouraging your team to share their opinions and ideas, you create the
potential for your employee voice mechanisms to have a real impact. A strong employee voice and
engagement programme can have the following benefits:

It will drive innovation

It will provide an early warning for emerging issues

It will identify training needs

It will increase work engagement

It will increase organisational engagement

According to research by Forbes, employees who feel their voices are heard are 4.6 times more likely
to produce their best work. The link between employee voice and organisational performance is
well-documented. This direct correlation between employee voice and productivity is a clear sign of
the impact that an employee voice strategy can have on your business and why it is one of the
essential drivers of employee engagement.

As the Gallup research demonstrates, a highly engaged workforce will not only be more productive,
they will also be less likely to take time off. High attendance levels are always at the top of the
priority list in every employee engagement strategy. This is especially relevant for your remote
workers, who are under greater strain and more likely to experience burnout.

The five types of employee voice

Implementing employee voice systems into your company culture is essential to improving
employee engagement levels. However, identifying the best ways to promote employee voice within
your organisation may be a challenging prospect. The employee engagement ideas outlined below
will ensure that your employee’s voices are heard, loud and clear, whether they’re office-based or
working from home.

1. Surveys
Utilising surveys to check on specific company areas is a simple and effective way to encourage your
employees to have a voice within your company. Scheduling surveys that use a mix of multiple-
choice and written responses will enable your team to fully express their views and ideas, provide
you with a clear understanding of any issues, and insights into how to move forward. This form of
listening is ideal for remote workers, who can no longer raise issues with their manager over the
water cooler.

Implementing an employee engagement app is an effective way to circulate and manage an

employee engagement survey. A robust system will provide you with detailed tracking and analytics
on your surveys, giving you the insights that you need to drive change within your organisation. By
using an app, you’ll find that it’s easy to reach every single employee, wherever they are based.

2. Innovation meetings

Introduce meetings that are purely designed to encourage innovation. Encouraging employees to
come up with their own ideas and solutions to problems is one of the key employee engagement
best practices. These meetings are often best led by an employee who is not part of the leadership
team and can be done on a rota basis. Getting the right management choice and employee voice is a
crucial element.

This is a great way to improve employee engagement amongst your remote workers. Set up an
online meeting and ask your team to come armed with an idea, no matter how big or small. For
these meetings to work, you must be inclusive of the entire team. Otherwise, your team may feel
that only certain voices matter, negatively impacting employee voice and employee engagement
levels.

3. Feedback

Inviting your team to give regular feedback is a tried and tested way to encourage employee voice
and keep your finger on the pulse of your company. This information can then be used to guide
company policies and direction. Consider using a designated platform such as an employee app to
reach out to employees and gather your answers.

Keep in mind that some employees may find it difficult to use their voice and share opinions if their
name is linked to their views. It may be worth considering giving your employees the ability to share
feedback anonymously to get an accurate picture of your organisation.
4. One-to-ones

Regular one-to-ones are essential to increase employee engagement levels and promote employee
voice. Providing your employees with the opportunity to guide their own development and share
any challenges or ideas with you in a confidential setting will ensure that they feel listened to and
valued.

Just because you can no longer call employees in for a personal meeting doesn’t mean that these
essential catch-ups should be cancelled. Schedule your online meetings as usual, and you’ll find out
any issues before they become significant problems. According to Forbes, 20% of remote employees
say they lack a sense of belonging since the pandemic. It’s important to keep listening.

Allow your one-to-ones to be guided by your employees so that they can realise their full potential.
Giving your team the autonomy to identify training needs and career progressions paths will show
them how much you value their opinion.

5. Company-wide discussions

Scheduling in organisation-wide meetings to encourage innovation and idea-sharing is key to

increasing employee voice and engagement levels. Use these meetings to ask your team what they
think the company’s direction should be and what steps are needed to be taken to get there.

While the traditional conference is no longer possible, large-scale online discussions that include
every employee have proved enormously successful. In fact, the virtual company-wide meeting is
one of the key employee engagement trends of 2021. Now is the time to bring everyone together as
a whole company, making sure everyone feels included and listened to.

Too often, companies fall into the habit of making plans and creating strategies without the input of
the people who will be working to achieve these objectives. Encouraging your team to have a voice
and guide high-level strategies will show your employees just how much you value their opinions
and help you identify new and innovative ways to progress your company.

Using the employee voice to implement change

Utilising the strategies above will provide you with a solid foundation to encourage employee voice
across a remote and dispersed workforce and identify innovation and issues. However, an employee
voice strategy is only as effective as your follow-through. If you don’t make a conscious effort to
compile the insights you receive and use them to guide company policies, plans or culture, your
strategy will come across as an empty effort to tick a box rather than a genuine desire to improve
employee engagement.

Introducing software such as an employee engagement platform will provide you with the solution
you need to keep track of engagement levels and promote employee voice. A successful platform
will give the employees numerous communication channels to offer feedback, allow employers to
create and circulate simple yet effective surveys, and provide detailed insights and analytics into the
pulse of a company. Implementing a solution such as this will underpin your employee voice and
employee engagement efforts, enabling you to realise a culture of innovation, knowledge and
interaction.

HighPerformance

Barriers to Growth

What other things could impedeyour organization's ability to growand/or execute its strategy?

Culture ofEngagement

Does your organization have a culture that motivates, empowers, challenges, and respects
employees?

Motivatingand Relating

Do managers motivate their employees to give their best? Are managers building strong
relationships and developing a cohesive team?

StrategicAlignment

Do employees understand where the organization is headed and how they contribute to the
organization's success?

ManagingExecution

Are managers clearly defining expectations, holding employees accountable and focused on
delivering results?

Beyond the Two Core Engagement Factors

High performance organizations, and highly engaged employees, also excel in these areas:

Strategic Alignment: Do employees have clarity of purpose and direction? Do employees understand
how the work they do contributes to the organization's success? Strategic Alignment ensures that
employees have clarity of purpose and direction, and that their efforts are focused in the right
direction. If those efforts are not focused in the right direction, they could be wasted.
Managing Execution: The most effective managers excel at the people skills, but they also provide
clear expectations, hold people accountable, and stay focused on delivering results.

Leader and Manager Competency is measured as part of the employee survey via upward feedback.

For a more complete assessment of manager competency, we recommend using a 360 Degree
Feedback Survey.

Who should be involved in employee engagement initiatives?

Research shows that many organizations struggle to bridge engagement survey results to its financial
impact on the organization. It is important to understand how engagement affects a company’s
bottom line.

A high-performing workforce is necessary to remain competitive, even survive. Developing programs

to raise levels of employee engagement must be intentional, have meaning, purpose based on
survey results.

HR can lead the charge to create an effective employee engagement strategy, but it needs to be
embraced by the entire organization. There is a clear gap between the optimism of upper
management and what middle managers experience with their teams. To understand the whole-
organization picture, it’s essential to have an effective, multi-directional communication strategy in
the organization. Effective communication is one of the most important factors that is most likely to
bring company success. Organizations that thrive are able to articulate and communicate what
success looks like – as individual employees, teams and departments, and the company as a whole.
This increases engagement organization-wide.

Employee Engagement Dynamics

Drivers of Engagement - What matters most?

Employee engagement surveys provide organizations with invaluable information. Knowing whether
employees are engaged or disengaged is only the first step. You also need to be able to take action
on the results. You need to understand the key drivers of engagement and disengagement, and you
need to be strategic in order to be able to plan activities or initiatives that will have the greatest
impact on increasing engagement.

The elements that drive engagement are usually similar across most companies, but the specific
concerns and level of importance are unique and specific in every company and even in different
demographic subgroups within a company.
We employ two techniques that enable you to identify the key drivers of engagement in your
company and to understand what to focus on and how to improve in those areas.

1. Priority Level - we look at the statistical patterns across all groups in your organization to
determine which items are impacting overall engagement within each demographic group. Items
with low scores that are strongly linked to engagement are the areas where you will want to focus
your change initiatives and engagement strategy.

2. Virtual Focus Groups - next, we ask targeted follow-up questions at the end of the survey that ask
employees to provide examples of problems as well as suggestions for how to improve. Once you
have identified an area that needs improvement, you can turn to the comments where you will often
find detailed information that provides the specific what, why, and how so you can take action.

Pockets of Discontent - An employee engagement survey can identify "at-risk" demographic groups
within your company

Even companies with high overall levels of engagement will have areas that are struggling. These
problem areas can have a big impact on company performance, with high levels of localized turnover
and employee apathy.

Benefits of Employee Engagement that Work

28 NOVEMBER, 2018

14 Benefits of Employee Engagement that Work

Before explaining the benefits of employee engagement, a quick recap on what employee
engagement means. It refers to the emotional attachment employees have with their organization.
According to a dictionary, it is the “emotional connection an employee feels towards his or her
organization, which tends to influence his or her behaviors and level of effort in work-related
activities.”

But why is it important? Why should you make your employees engaged?

The Benefits of Employee Engagement

Below mentioned are some benefits of employee engagement that are effective and actually work.

Benefit 1: Increases Productivity

Engaged employees = Increased Productivity.

A study by Gallup revealed that connected teams are 21% more productive. Like all other
companies, making employees productive must be your end goal too. So, engaging employees can
be your first step to creating a productive workforce.

Engaged employees like what they do and find their work meaningful. An engaged workforce will
work harder, faster, and with much more enthusiasm. Moreover, Gallup’s report for the American
workplace shows some exciting results. Satisfied employees are 40% more productive than
dissatisfied employees. And, engaged employees are 44% more effective than happy employees.

Benefit 2: Improves Retention Rates

Research by Gallup in 2017 showed that 51% of employees are planning to leave their current jobs.
Some reasons are lack of recognition, internal office conflicts, lack of pay raise.

Employees join a company with expectations and desires. And when you fail to provide those, they
start looking for better options. Therefore, engaging employees helps reduce the cost of turnover
and improves retention.

Recommended Read: Top 26 Employee Retention Strategies for the “New” Work World!

Benefit 3: Increases Revenue

benefits-of-employee-engagement-1-2

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Engaging your employees will increase your revenue. Aon’s 2018 global engagement report shows
interesting results. It shows that every 5 point increase in engagement level leads to a 3% increase in
revenue.

When employees feel engaged, they naturally go the extra mile to achieve. They finish their work
faster and their capacity to finish tasks also increases. Higher engagement levels increases a
company’s revenue. Exactly two and a half times more than a company with lower engagement
levels.

Benefit 4: Happy Employees, Happier Customers

In the words of the great Richard Branson,

Clients do not come first. Employees come first. If you take care of your employees, they will take
care of the clients.

To improve your customer service, increase your engagement level. Engaged employees take less
leaves, are more attentive and friendly. All the things required for building good customer
relationships. Such employees also great advocates and always put the company’s best face forward.

Benefit 5: Lowers Absenteeism

A couple of absences are appropriate- sickness, unforeseen events. But repeated absences can be a
result of dissatisfaction and disengagement. Increased absences hamper the productivity and
performance of the employee. This in turn affects the company’s bottom line.

Providing your employees with a good work-life balance is integral to lower absenteeism. Good
vacation policies, wellness programs are great strategies to reduce employee absenteeism.

Benefit 6: Makes them Loyal

benefits-of-employee-engagement-2-1

(Source: Unsplash)
A long term benefit of keeping employees engaged is that it makes them loyal.

Kyle LaMalfa, Loyalty Expert and Allegiance Best Practices Manager, says that employee engagement
is the most important component of loyalty. As per the definition, engaged employees are
emotionally attached to the organisation. And when they will be emotionally attached, they’ll
naturally be loyal. Well, just engaging them won’t make them loyal to you. Appreciation, autonomy,
decentralized power distribution are some ways to earn their loyalty.

Benefit 7: Better Quality of work

Employees who feel engaged always put in their best while doing something. These employees are
much more motivated than others. They do each task with the same amount of dedication and
precision.

Since they enjoy their job, they’re much more efficient in their work. They constantly come up with
new ideas, learn from mentors, work in teams. Furthermore, they work to up skill by taking courses,
attending seminars and such.

Benefit 8: Employees Work Harder

These employees work harder than others. They are better focused at work and feel connected to
their work environment. Moreover, research by Dale Carnegie also shows that engaged employees
outperform others by 202%.

When employees don’t feel connected, it’s unlikely they would wish to put in efforts. Connected or
engaged employees clock in for long hours, get their work done on time.

Benefit 9: Positive Vibes

benefits-of-employee-engagement-3-1

(Source: Unsplash)

Highly engaged employees bring spirit and energy to the workplace. Their motivation and drive to
succeed don’t take long to catch up with others. Such employees motivate others to achieve their
tasks. Such employees are a lot more active in taking up lessons and participate in activities.
These employees are poles apart from actively disengaged employees. Actively disengaged
employees work actively to deteriorate the work environment. But engaged employees work
towards building the company’s culture.

Benefit 10: Employees are Innovative

These zealous employees are at their best when engaged. They continuously come up with new,
dynamic ideas which can help build the company’s image. Since they are so involved with their work,
they always find new ways to make work enjoyable.

In fact 78% of employees whose companies encourage them to be innovative and creative are more
loyal to their organization. It gives them the autonomy to make decisions and be creative with their
work.

Benefit 11: Drives Employee Advocacy

A major benefit of employee engagement is that they naturally become company advocates. They
feel a sense of pride in being a part of the organization. Therefore, they actively promote the brand.
They talk about the products and brands to their family and friends.

Moreover, a person is more likely to buy a product or take up a course when their friends tell them
about it. And with the influence of social media on the present generation, now is the perfect time
to make employees your advocates. Give them the reason to feel pride for associating with your
company.

Benefit 12: Employees Offer Positive Suggestions

benefits-of-employee-engagement-4-1

(Source: Unsplash)

These are employees who are genuinely concerned about the organization.

They take active participation in company meetings to understand more about the company. They
involve themselves with the company. In addition to that, they offer suggestions to advance the
company’s growth.
Benefit 13: Cost saving

We all know that hiring new employees costs time and money. A study by Deloitte says, “the cost of
losing an employee can range from tens of thousands of dollars to 1.5-2x their annual salary.”

This works in two ways. When employees leave a company, the cost of hiring and training a new
employee is high. Another situation is when an existing employee does his work halfheartedly but
still takes the fat paycheck.

Benefit 14: Intrinsically Motivated

Engagement levels increase when employees are intrinsically motivated.

Some employees don’t work for a hefty paycheck. They do it because they enjoy their work. Their
work fulfills them internally. It aligns with their beliefs and aspirations. Therefore, engaged
employees are mostly intrinsically motivated. They share an emotional connection with their work.