603 assignment

LESSON TOPICS

· Compensation and Benefits

· Compensation Strategy

· Compensation and Benefit Policy

· Non-monetary Rewards

· Monetary Rewards

· Vacation Pay

· Sick Pay

· Family Medical Leave Act (FMLA)

· Holiday Pay

· Comp Time

· Insurance

· Retirement

INTRODUCTION

This lesson covers HR Policies and Procedures. Organizations have HR policies and procedures in place to have consistency throughout. As discussed in Lesson Five, recruiting, retention and termination procedures and policies take into account where, when, why and how positions need to be filled or eliminated. How these policies and procedures are executed will depend on the size and type of organization. Lesson Six continues the discussion and exploration into different HR policies and procedures with a concentration on compensation benefits management and time-off policies.

The processes workers use to communicate with each other are spelled out in the policies and procedures. As with every other lesson, clear communications are necessary and expected. Organizational charts may indicate who works for whom, but policies and procedures dictate how the exchange of ideas should transpire. Policies and procedures can enhance employee relations and help form good working relationships. Policies and procedures often address cultural differences to prevent discrimination and harassment.

Compensation and Benefits

COMPENSATION AND BENEFIT PLANS

Compensation and benefit plans contain monetary and non-monetary elements. The main purpose of a compensation and benefits policy is to provide a competitive advantage to the employer by being able to hire and retain the best talent available. Compensation and benefit plans must contain costs, be equitable, and motivate employees. The compensation and benefits plan should reflect the culture of the owner and the organization. As a starting point, leadership should develop a compensation and benefits philosophy.

COMPENSATION AND BENEFIT PHILOSOPHY

A compensation and benefits philosophy is a statement of the organization's position on employee compensation and benefits. This is similar to a mission and vision statement and could be a component of one of those. The compensation and benefits philosophy statement explains the rationale behind the compensation and benefits strategy. It does not have to be complicated or elaborate, but it should be clear and concise. Let’s look at one element of the compensation and benefits strategy: compensation.

Compensation Strategy

Once a compensation and benefits philosophy is articulated, a compensation strategy can be formulated. To formulate this strategy requires leadership to look internally and externally. A salary survey might be conducted in order to know the salary range for different positions within the company relative to the local economy. Then, based on the recruiting objectives, a decision will have to be made to match, lag, or lead the competition in regards to compensation. This is how an organization determines the external influence on the compensation strategy.

Internal influences would be how different positions compare to each other from a compensation standpoint. This looks at how leadership values the different positions within the organization. In order to ensure equity internally and externally, a few things should be considered. The first is to make sure you have a current job analysis for each position. Second, be sure to have an accurate job evaluation for each position, and third, establish salary ranges for each position or salary grade. The salary range should have a low end, midpoint, and high end. Let’s look into these three areas in a little more detail.

· JOB ANALYSIS

· JOB EVALUATION

· ESTABLISHING SALARY RANGES

The purpose of the job analysis is to determine what is expected of a person in that position. It will provide the details of duties of the position and the result of the data collected in a job analysis can be compiled to write a detailed job description.

Compensation and Benefit Policy

So far, we have covered the importance of a compensation and benefits philosophy and how that helps to create the compensation and benefits strategy. The compensation and benefits strategy is the foundational component used to develop the actual compensation and benefits policy. Before we go any further, let’s look at the different components that make up the compensation and benefits policy. The picture below is a good demonstration of what could go into the policy. Keep in mind, a small company or a company in financial straits may not be able to offer all of the things listed.

There are two categories of benefits; the benefits required by law, such as Social Security and Workers Compensation Insurance and those offered as direct or indirect compensation.

For the purpose of this lesson, we will look at employer provided monetary rewards and non-monetary rewards. Within the monetary rewards, we will divide the discussion between direct compensation and indirect compensation. All of these make up the total rewards or compensation and benefits package.

Non-monetary Rewards

Non-monetary rewards are incentives to employees that do not come in the form of cash. Sometimes these come in the form of perquisites, or perks, as they are referred to. Even though there is no cash incentive with non-monetary rewards, they can still have a significant impact on recruiting, retention, and morale. This is just a short list and there are many other non-monetary rewards are incentives that could make the list. The point is that they provide an opportunity for the employees without a direct cost to the employer.

NON-MONETARY REWARDS CAN INCLUDE:

· Job security

· Telecommuting

· Monthly potluck or themed lunch where everyone brings a dish

· Discount gym memberships

· A small amount of paid time each month to work on a project or passion not related to work

· Flexible work schedule

· In-house training

· A day or afternoon off with pay for completing a project early or under budget

· Quarterly or monthly employee recognition

· Allowed volunteer time – specified number of hours per month or year

Monetary Rewards

Monetary rewards are comprised of direct and indirect compensation. The purpose of the monetary rewards is to influence employee motivation and performance. When administered correctly, this can be a very powerful tool. If not administered correctly, it can be costly in the form of time, money, and resources and can cause morale to plummet and employees to disengage.

MONETARY REWARDS: DIRECT AND INDIRECT COMPENSATION

DIRECT COMPENSATION

INDIRECT COMPENSATION

Vacation Pay

The most common paid time off is annual leave or vacation pay. This usually applies to full-time employees but some organizations offer it to part time employees. This is an easy area to clarify in the compensation and benefits policy. Typically, the number of days or weeks provided is dependent on how long the employee has been with the organization.

For instance, some organizations offer no leave the first year. Others offer it after a probationary period such as 90 days or six months. At that point, employees will earn a set amount of vacation hours per payday, which would equate to a set number of days per year.

A sample policy could read something like this: Employees with 1-5 years of service earn 10 days of paid vacation per year. After five years of service but less than 20 years, an additional five days will be earned for a total of 15 days per year. Employees with over 20 years of service earn 20 days (4 weeks) of paid vacation per year.

Within that policy, there should be a description of how many hours an employee can accrue, how many can carry over to future years, and anything else that would require explanation. If this is not clear, an employee might think that she could save up vacation for several years and then take two months off at one time. The employee may be able to roll over that many weeks, but the organization may limit the amount of time taken at any given time. Regardless of the policy, it needs to be clear and concise.

Sick Pay

Sick pay is another common form of indirect compensation. This could be a part of the PTO bank or it could be separate. Just like vacation time, sick time accrual and use should be spelled out clearly in the policy. In addition to what the company offers, state and federal law may dictate the policy, how it is administered and how it is used. If you live or work in California, the laws are even more complex.

PAID SICK LEAVE