HRMN 495- Risk Management Audit
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DiversityinHumanResources.pdf
Diversity in Human Resources
What Is Diversity?
The term diversity often generates controversy, confusion, and tension.
What does it mean?
When people refer to diversity, they may be thinking about ethnicity,
race, and gender. However, diversity is much broader than that. Loden
and Rosener (1991) describe the definition of diversity as “otherness or
those human qualities that are different from our own and outside the
groups to which we belong, yet present in other individuals and groups.”
In this view, diversity can apply to anyone you perceive to be different
from you. But measuring diversity relative to yourself can be misleading.
Merriam‐Webster (2020) defines diversity as "the inclusion of different
types of people (such as people of different races or cultures) in a group
or organization." A group of people who are very different from you, but
share most of the same identities and experiences with each other, is
likely not diverse, and diversity is a characteristic of the group, not of any
individual.
Dimensions of diversity include, but are not limited to, age, ethnicity,
ancestry, gender, physical abilities and qualities, race, sexual orientation,
educational background, geographic location, income, marital status,
military experience, religious beliefs, parental status, and work
Learning Resource
Diversity in Human Resources
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UMGC (n.d.). Diversity in Human Resources. Retrieved from https://leocontent.umgc.edu/content/umuc/tus/hrmn/hrmn495/2225/learning- resource-list/diversity-in-human-resources.html#
experience.
How Businesses Benefit from Diversity
There are many arguments for fostering diversity in business, including
the availability of talent, enhancement of innovation, risk avoidance, and
appealing to a global customer base. The business case for diversity is
driven by the view that diversity brings substantial benefits, such as
better decision making, improved problem solving, and greater creativity
and innovation, which in turn contribute to improved product
development and successful marketing to a wider array of customers.
Innovation
It is widely noted that diverse teams lead to more innovation. The logic
behind this is simple: Innovative thinking requires individuals to go
outside of the normal operational paradigms and use diverse perspectives
to reach new and creative ways of thinking. A group of similar individuals
with similar skills is much less likely to stumble across or generate new
ideas that lead to innovation. Similarity can cause groupthink, which
diminishes creativity.
Localization
Some theorize that in a global marketplace, a company that employs a
diverse workforce can better understand the demographics of global
consumers. Therefore, it will be better equipped to thrive than a company
that has less diversity. With global emerging markets demonstrating
substantial GDP growth, organizations need local talent to enter these
marketplaces and communicate effectively. Individuals from a specific
region will be aware of regional needs, and having a similar cultural
background to customers adds considerable value.
Adaptability
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Finally, organizations must be technologically and culturally adaptable in
the modern economy. This is crucial to react to competitive dynamics
quickly and stay ahead of industry trends. Diversity fosters creative
thinking and improved decision making through a deeper and more
comprehensive worldview. These skills are important in adapting to new
circumstances. A company willing to diversify draws from a larger talent
pool and hires individuals with varying skill sets. The value of this,
particularly at the managerial level, is enormous.
The Role of Human Resource Management
When it comes to the workplace, the human resource department has a
great deal of responsibility in managing the overall diversity of the
organization. Human resources should consider diversity within the
following areas:
• hiring
• promotion
• compensation
• training
• employee policies
• legal regulations
• access, which includes language, disability, and other considerations
The role of human resources is to ensure that all employee concerns are
met and that problems are solved as they arise. Human resource
professionals must also pursue corporate strategy and adhere to legal
concerns when hiring, firing, paying, and regulating employees. This
requires careful understanding of both legal and organizational contexts
and meticulous attention to diversity management.
Challenges to Diversity
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There are many individual, interpersonal, and organizational challenges to
achieving diversity in the workplace. Some are in communication or in the
implementation of diversity practices, but there are also challenges that
often arise in a diverse workforce:
• Stereotypes. One challenge is the biases individuals in the
organization may have about others. The tendency to stereotype
significantly narrows people’s worldviews.
• Culture. Managers must understand the customs and cultural norms
of employees and ensure that they don’t violate important cultural
rules. The manager’s role is to change the existing organizational
culture to be one of diversity and inclusion.
• Communication. Whether via language or cultural signals,
interpersonal communication can be especially challenging. Ensuring
that HR and other managers have access to resources to help avoid
employee misunderstanding or workplace inefficiencies is critical.
While diversity has clear organizational benefits, an additional diversity
challenge comes from mismanagement. The legal framework surrounding
diversity in the workplace also includes rules and regulations for fair,
ethical, and nondiscriminatory hiring practices and pay equity. Managers
and human resource professionals must understand and uphold these
regulations. The legal ramifications of missteps can have high fiscal,
branding, and reputation costs.
Recruitment
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The Job Fair
Recruitment of talented employees is essential to any company’s ability to
achieve success and maintain standards within an organization. Recruiting
is actively compiling a diverse pool of potential candidates for
employment. A good recruitment policy will do this in a timely, cost‐
efficient manner. The ultimate goal of any human resources recruitment
policy is to develop relationships with potential employees before they
are actually needed, while keeping an eye on costs. In some industries,
the constant need for talent creates a highly competitive marketplace for
individuals, and it is important for any manager to be aware of these
factors in developing recruitment programs and policies. As baby
boomers retire, victory in the “war for talent” will depend greatly on
recruitment policies.
Methods
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There are two principal ways to recruit workers: internal and external.
Most companies actively use both methods, ensuring opportunities for
existing employees to move up while bringing in new talent. Depending
on the time frame and specialization required, some methods will be more
effective. With a comprehensive job description for every open position,
the company helps to narrow the scope of the search and attract more
qualified candidates, which contributes to search efficiency.
Internal recruitment is often the most cost‐effective method, since it
relies on existing company resources—the internal talent pool—to fill
needs. The following techniques are common for internal recruitment:
• Advertising job openings internally. Using existing employees as a
talent pool carries the advantage of reallocating qualified workers
familiar with the company’s practices and culture while empowering
people within the organization. It also shows the company’s
commitment to, and trust in, its current employees taking on new
tasks.
• Building networks. This can happen in various ways: first, by asking
employees to recommend qualified candidates. Referrals often
include giving bonuses to employees who recommend a successful
hire. Another method of building industry contacts is through
membership in professional organizations to help create a talent pool
via word‐of‐mouth.
External recruitment focuses on searching outside the organization for
potential candidates to expand the talent pool and create diversity.
Although external recruitment can cost more, adding outside perspectives
to an organization can bring many benefits that outweigh the costs. There
are a variety of ways to recruit externally:
• Online recruitment. Finding a talent pool online is quickly becoming
the preferred way of recruiting, since it reaches many applicants
quickly and cheaply. Through its website, a company can compile a
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list of candidates while exposing them to the company’s values and
mission. To use this method successfully, a company must ensure
that postings—and the process for submitting résumés—are simple
and transparent. Another popular way to recruit online is through
career sites. Fee structures vary and listings can even be free. Job
search sites also have searchable databases of potential candidates.
• Advertising. This may incorporate one or many types, from
newspaper classifieds to radio announcements. In 2004, it was
estimated that companies spent $2.18 billion annually on these
types of ads (Kulik, 2004). Before the internet, this was the most
popular form of recruitment. With the decline in newspaper
readership, classified advertising has changed, but can still help
employers fill jobs locally. Also, print ads often appear online as well
(Heathfield, 2018).
• Job fairs and campus visits. Job fairs are designed to bring employers
together in one location to meet with potential employees.
Employers share the cost of hosting, and the job fairs can attract
diverse attendees. Campus visits are a way to find candidates with a
qualification, like a college education, who are looking for the
opportunity to prove themselves.
• Headhunters and recruitment services. These services are designed
to help compile a talent pool; however, they can be extremely
expensive. The rate for the services provided can range from 20 to
35 percent of the new hire’s annual salary. They can, however, be
extremely efficient in providing qualified applicants for specialized or
hard‐to‐fill positions.
No matter how a company decides to recruit, the ultimate test is the
ability of a recruitment strategy to produce viable applicants. Each
manager will face different obstacles in doing this. It is important to
remember that recruiting is not simply undertaken at a time of need for
an organization but rather is an ongoing process that involves maintaining
a talent pool and frequent contact with candidates.
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Screening Candidates
Recruiting needs to attract not only a large number of applicants, but a
group of individuals with the right skills and attributes for the position.
After obtaining a substantial, qualified applicant base, managers need to
identify those with the highest potential for success. Selecting the best
person for the job is critical (Pfeffer & Veiga, 1999). Selective hiring helps
prevent costly turnover of staff and increases the likeliness of high
employee morale and productivity.
When screening candidates, managers need to consider their “fit” with
the company culture and their attitude, not just their technical skills and
competencies. To evaluate fit, it is important for managers to create a list
of criteria for each job before beginning recruiting. Each job description
should be associated with a list of critical skills, behaviors, or attitudes
that will help evaluate job performance later.
Some companies, including Southwest Airlines, hire primarily based on
attitude. “We can change skill levels through training. We can’t change
attitude,” says former Southwest Airlines CEO Herb Kelleher (O'Reilly &
Pfeffer, 2000).
Managers strive to identify the best applicants at the lowest cost.
Companies have a range of methods for screening potential employees.
Managers must determine which system will generate the best results.
Their effectiveness and costs vary.
Besides reviewing basic biographical information about candidates,
companies may conduct background checks or require testing. Because
the latter steps can be costly, applicants are screened before a formal
interview. Equal employment opportunity (EEO) guidelines require
screening processes to be valid, reliable, related to critical aspects of the
job, and nondiscriminatory. Following EEO guidelines helps companies
avoid litigation.
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Interviews
The best interviews follow a structured framework with each applicant
asked the same questions and all candidates rated using the same
process. Since the skills and attributes necessary to succeed in the
position will have already been spelled out, the questions should relate
directly to the job requirements. This helps managers compare apples to
apples, so they can avoid prejudice and ensure that all interviewees are
treated fairly.
Structured interviews help managers avoid illegal questions, such as
asking whether a candidate is pregnant. Many companies choose to use
several rounds of screening with different interviewers to discover
multiple facets of the applicant’s attitude or skills and to develop a more
well‐rounded opinion from multiple perspectives. Involving senior
management in this process signals to applicants that the company is
invested in each new hire and that the culture values all team members.
There are two common types of interviews: behavioral and situational. In
a behavioral interview, the interviewer asks the applicant to reflect on
past experiences (Janz, 1982). The questions are designed to determine
whether an applicant would be a good match for the job, based on
experiences and behaviors in previous positions. Here are two examples
of behavioral interview questions:
"Describe a time when you were faced with a stressful situation. How did
you handle it?"
"Tell me about an instance where you showed initiative and assumed a
leadership role?"
A situational interview requires an applicant to explain how that
individual would handle a series of hypothetical situations. Situational‐
based questions evaluate judgment, ability, and knowledge (Latham &
Saari, 1984). Before a situational interview, it is a good idea for the hiring
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manager to consider possible responses and develop a scoring key. Here
are two examples of situational interview questions:
"You and a colleague are working on a project together. Your colleague
fails to do his agreed portion of the work. What would you do?"
"A client approaches you and claims that she has not received a payment
that supposedly had been sent five days ago from your office. She is very
angry. What would you do?"
Selection Tests
For some companies, understanding the applicant’s personality, values,
and motivation for wanting the job is a critical part of the hiring decision.
Although technical aptitude is required, the candidate’s attitude is often
just as important. Under these circumstances, companies may use
behavioral assessments and personality profiles. The goal of these
assessments is to predict how an individual will interact with coworkers,
customers, and supervisors.
The International Personality Item Pool (IPIP) and Wonderlic are popular
tools that provide an analysis of an applicant’s personality, attitudes, and
interpersonal skills. It is critical that these tests be administered, scored,
and interpreted by a licensed professional. Other assessments may
include cognitive tests, which measure general intelligence; work sample
tests, which demonstrate the applicant’s ability to perform specific job
duties; and integrity tests, which measure honesty.
Background Checks
Background checks are a way for employers to verify the accuracy of
information provided by applicants in résumés and applications.
Information gathered in background checks may include employment
history, education, credit reports, driving records, and criminal records.
Employers must obtain written consent from the applicant before
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conducting a background check. Any information gathered in a
background check should be relevant to the job.
Improving the Process
Employers may use just one or a combination of the screening methods
to predict future job performance. Whichever option they choose, it is
important for companies to evaluate not just the candidates, but the
effectiveness of the hiring process. Using specific metrics provides a
benchmark for future performance and a way to measure the success of a
particular method.
Success in hiring means bringing employees onboard who will
successfully perform their jobs and fit the organizational culture.
Ineffective hiring leads to high turnover, low employee morale, and
decreased productivity.
Research shows that the “degree of cultural fit and value congruence
between job applicants and their organizations significantly predicts both
subsequent turnover and job performance” (Pfeffer & Veiga, 1998). Thus,
companies need to assess their hiring for technical success as well as
cultural fit. Evaluating the hiring process will help ensure continuing
success and protect human capital—often a company’s most important
asset.
Training, Development, and Rewards
Introduction
In the late Middle Ages in Europe, craft guilds allowed master craftsmen
to employ young people inexpensively in exchange for food, lodging, and
formal training. A young person would spend at least seven years as an
apprentice, supervised by a master craftsman, before being released to
work independently. Although apprenticeship has changed along with the
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rest of the education and training landscape, the need for workers to
acquire and master workplace skills still exists.
Training
Training is teaching or developing, in oneself or others, skills and
knowledge in specific competencies. The goal of training is to improve a
worker’s capability, capacity, productivity, and performance—to help a
worker perform a job better. It requires an investment of resources
—including both time and money—to develop, implement, and evaluate
training programs.
Benefits
Training can be a source of competitive advantage for a company. The
primary benefit results from an accumulation of smaller ones. Training
provides greater skill and knowledge to employees, improving job
performance. This, in turn, creates greater efficiency, fewer errors, and
higher productivity. The result is lower costs and higher profits. Both the
company and the employee can realize rewards.
A well‐trained employee acquires a competitive advantage as a worker.
By participating in training, employees can deepen or expand their
existing skill set and increase their understanding of the organization. A
well‐trained employee may be able to take advantage of internal
promotion opportunities and is more marketable in the wider economy.
Here are some other potential benefits (Duening & Ivancevich, 2003):
• increased job satisfaction and morale
• higher employee motivation
• more efficient processes that lead to financial gains
• better capacity to adopt new technologies and methods
• more innovation in strategies and products
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• reduced employee turnover
• enhanced company image and reputation as a “great place to work”
• risk management (e.g., through training about sexual harassment and
diversity
Needs
The need for training exists in every business. However, the nature of
training varies with the type of business and the operations involved. For
example, a manufacturing company’s workers may need technical skills
training, while an insurance company may emphasize customer service
training. How do you determine training needs? The process begins with
a training needs assessment, or a systematic and objective analysis of
both employee and organizational knowledge, skills, and abilities,
including gaps or areas of weakness.
Generally, training needs assessments are conducted in a three‐step
process.
1. Identify the need. An assessor will seek to answer why the needs
assessment is being conducted, what the desired result is, the issues
to be addressed through training, and whether training can resolve
the issues
2. Perform a gap analysis. This involves comparing current knowledge,
skills, and abilities with company standards. Training assessors may
use HR records, interviews, questionnaires, or observation to identify
gaps.
3. Assess training options. The assessment ends with a list of options
for training that management can evaluate based on criteria such as
cost and duration.
Not all training is the result of a needs assessment. Unforeseen
circumstances may create an immediate need for training. For example,
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consider the example of Wells Fargo in 2016, when federal regulators
discovered that employees had, unbeknownst to their customers, secretly
created millions of unauthorized bank and credit card accounts to boost
sales figures and generate fees for the bank. The bank fired 5,300
employees and put in place a rapid training and retraining program to
mitigate the legal consequences. Other situations that might compel a
company to conduct impromptu training are changes in laws and natural
disasters.
Types
In general, there are two types of training: on‐the‐job and off‐the job. In
either case, the goal is the acquisition of knowledge, skills, and
competencies that will improve capability, capacity, and performance.
On‐the‐job training occurs in the workplace using the tools, equipment,
documents, or materials that are required on the job. It is most commonly
focused on technical or skills training.
Off‐the‐job training happens off site. Businesses often view this as a
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disadvantage, since every day spent in training is a day away from work.
However, this type of training has the advantage of allowing people to
concentrate more fully on what they are learning, away from workplace
distractions. It is proven to help people acquire and master new concepts
and ideas.
Professional Development
Professional development is different from training in that it goes beyond
basic qualifications, like technical skills, and is designed to update and
upgrade—as well as maintain—skills throughout one’s working life.
Professional development includes knowledge and skills attained for both
personal development and career advancement. It encompasses all types
of facilitated learning opportunities, ranging from college courses to
conferences and workshops.
Those who take part in professional development run the gamut from
teachers to military officers. They may pursue these opportunities
because of an interest in lifelong learning, a sense of moral obligation, or
to
• maintain and improve professional competence,
• enhance career progression,
• keep abreast of new technology and practice, and
• comply with professional organization requirements.
Many professions, such as accounting, law, and engineering, require
annual professional development to renew a license or certification.
Professional development approaches include consultation, coaching,
communities of practice, lesson study, mentoring, reflective supervision,
and technical assistance. Professional development may include formal
vocational education—typically postsecondary or technical training
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leading to a qualification or credential to obtain or retain employment. It
also may include preservice or in‐service professional development
programs. These programs may be formal or informal and geared toward a
group or individual participation.
Some companies provide resources for professional development, with
the understanding that it can help develop or enhance process skills
—sometimes referred to as leadership skills—as well as task‐based skills.
Process skills include effectiveness skills, team‐functioning skills, and
systems‐thinking skills.
The twenty‐first century has seen significant growth in online
professional development. Content providers are using technology in
innovative ways, incorporating collaborative platforms such as discussion
boards and wikis to maximize participant interaction. These content
providers offer training on topics from sexual harassment awareness to
promoting diversity in the workplace. The ability to customize training for
a business or industry has placed providers in a position where they can
supplement or even replace other forms of training. Businesses can
purchase access for as many or as few employees as necessary, reducing
training costs. Thus, businesses can provide more training and
professional development opportunities to their employees for less
money and at more convenient times for both the employer and
employee.
Human resource management is all about increasing employee
performance to the highest level within a particular role in the
organization. Consequently, the importance of training to the
organization and as a key function of HR management should not be
understated.
Performance Appraisal
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Purpose
Performance appraisal (PA), or performance evaluation, is a systematic
and periodic process of assessing an employee’s job performance and
productivity against preestablished criteria and organizational objectives.
The evaluation includes organizational citizenship behavior,
accomplishments, potential for future improvement, strengths, and
weaknesses. A PA is typically conducted annually. However, the
frequency and policies surrounding evaluations vary widely from
workplace to workplace. Sometimes an employee will receive an
evaluation when a probationary period ends and then regularly thereafter.
Usually, the employee’s supervisor (and frequently, a more senior
manager) is responsible for evaluating the employee, including a private
conference to discuss the evaluation. The conference may include
feedback, counseling and development, discussing compensation and job
status, and disciplinary decisions.
Historically, performance appraisals have been used by companies for
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many purposes, including salary recommendations, promotion and layoff,
and training recommendations (Kulik, 2004). In general, “performance
elements tell employees what they have to do, and standards tell them
how well they have to do it” (US Department of the Interior, 2004). This
broad definition, however, can allow for appraisals to be ineffective—or
even detrimental—to employee performance. “Second only to firing an
employee, managers cite performance appraisal as the task they dislike
the most,” and employees generally have similar feelings (Heathfield,
2007). One key item that is often forgotten during the appraisal process—
by managers and employees alike—is that the goal is improvement, not
blame or harsh criticism (Bacal, 2003).
Process and Components
One significant problem in creating an appraisal process is that no single
method suits every organization (Kulik, 2004). Establishing an appropriate
process involves significant planning and analysis to provide quality
feedback to the employee. The most crucial task is determining the job
dimensions for evaluating employee performance compared with
accepted standards that affect the performance of the team, business
unit, or company. SMART objectives can be validated, and thus are useful
here.
An evaluation process typically includes one or more of the following
components:
• An assessment of how well the employee is doing. Sometimes this
includes a scale rating indicating strengths and weaknesses in key
areas (e.g., ability to follow instructions, complete work on time, and
work with others effectively). It’s also common for the supervisor
and manager to discuss and determine the key areas.
• Employee goals with a deadline. Sometimes the employee may
volunteer a goal; other times, the goal will be set by the supervisor. A
significantly underperforming employee may be given a performance
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improvement plan detailing specific goals that must be met to keep
the job.
• Feedback from coworkers and supervisors. The employee may also
have the chance to share feelings, concerns, or suggestions about
the workplace.
• Details about workplace standing, promotions, and pay raises.
Sometimes an employee who has performed very well since the last
review period may get a pay increase or be promoted.
Existing Methods
Many methods exist to gauge employee performance, each with strengths
and weaknesses. Here are a few:
• Graphic rating scales. This method involves assigning ratings to
pertinent traits. These may be numerical (1–5), descriptive (below
average, average, above average), or scales for particular traits (poor
↔ excellent). Although ratings can be simple to set up and easy to
follow, they are often criticized for being too subjective, leaving the
evaluator to define broad traits such “leadership ability” or
“conformance with standards” (Kulik, 2004).
• Behavioral methods. This broad category includes several methods
with similar attributes to help identify to what extent an employee
displays certain behaviors. This could include asking a customer to
identify the usefulness of a sales representative’s recommendation.
While extremely useful for jobs where behavior is critical to success,
identifying behaviors and standards for employees can often be very
time‐consuming for an organization (Kulik, 2004).
• 2 + 2. A relative newcomer in performance appraisal methodology,
the 2 + 2 feedback system demonstrates how appraisals can be used
primarily for improvement. By offering employees two compliments
and two suggestions for improvement focused on high‐priority areas,
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creators Douglas and Dwight Allen (2004) suggest that organizations
can become “more pleasant, more dynamic, and more productive.” If
the goal is employee improvement, this system can provide
significant benefits, but if the goals are compensation changes and
rankings, the system provides little benefit.
Appraisal methodologies depend greatly on the type of work: An
assembly worker will require a very different appraisal system from a
business consultant. Developing the appropriate method for each
business unit requires significant planning if performance appraisal is to
help an organization—and its employees—reach their goals.
Compensation
People talk about loving or hating their jobs, but do they ever mean that
they love or hate their compensation? Companies compete for the best
workers—both managers and other employees―through the
compensation they offer. As the business environment becomes more
complex, so does employee compensation. From an accounting
perspective, employee compensation is the cost of acquiring human
resources for running operations.
Salary
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A salary is a form of compensation paid periodically by an employer to an
employee. The amount may or may not be specified in an employment
contract. In general, employees paid a salary do not clock in and out.
Instead, they work as many hours as are needed to accomplish
organizational goals and objectives. Most managers’ salaries are
calculated on a weekly, monthly, or annual basis, rather than hourly. US
employment law distinguishes between exempt (salaried) and nonexempt
(hourly) workers. Employers can require exempt employees to work long
hours without paying overtime.
Approaches to salary continually evolve as one part of a system including
the combined rewards employers offer. This total rewards system, which
includes bonuses, incentive pay, commissions, benefits, perks, and various
other tools, helps employers link rewards to an employee’s measured
performance.
One reward strategy that has become more common for salaried
employees options is the ability to purchase stock in the company. An
employee stock option (ESO) is an option to purchase company stock at a
specified price during a specific time period. The objective is to give
employees an incentive to behave in ways that will boost the company’s
stock price; after their shares are vested, they could potentially sell them
immediately at a profit. In many cases, the ESO represents an amount
considerably higher than the employee’s base salary. For example, in
2015, Satya Nadella, CEO of Microsoft, was paid a salary of $4.5 million,
but his stock options were worth an additional $79.8 million.
Wages
Wage payment systems offer another way for organizations to
compensate employees. Unlike salary, wages are based either on hours
worked or some other measure of production. Following are some
common wage systems:
• Time rate. The worker is paid by the hour for time worked. Beyond a
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set amount (generally 40 hours per week), the worker is paid for
overtime at a higher (typically 1.5 times) rate.
• Differential time rate. Different hourly rates are fixed for different
shifts or different assignments. The most common differential time
rate occurs in production facilities where workers who are assigned
to a graveyard shift (e.g., 11:00 p.m. to 7:00 a.m.) are paid a shift
differential that can range from a few cents to many dollars per hour.
• Piecework. Workers are paid a set amount per unit that they
produce. This type of pay has fallen out of favor with many
businesses since it emphasizes quantity over quality. That said, pay in
today’s gig economy can resemble this production‐based model. An
Uber driver receives a payment for each trip, for example.
The Piecework System in 1912
Commission
Under a straight commission system, employees receives no
compensation from the employer unless they close a sale or transaction.
Real‐estate transactions and car sales are two examples where
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commission is the standard form of compensation. This approach to
compensation has fallen out of favor in many businesses because it can
lead to high‐pressure sales tactics that annoy customers.
Hybrid Systems
Compensation for some positions is a blend of other types of pay with
commissions, tips, and bonuses.
Similar to straight commission, salary plus commission requires an
employee to make a sale or close a deal to earn a portion of the
compensation. However, the employee also earns base pay each pay
period. If the base salary is adequate, it can reduce the use of high‐
pressure sales tactics.
Restaurant servers receive an hourly wage plus tips, but in the US, the
hourly wage can be far below the federal minimum applied to other
workers. This is because diners are expected to make up the difference
through tipping. When they don’t, employers are by law expected to
make up the difference. As with commissions, working for tips can be
beneficial to workers when tips are high, helping them achieve a better‐
than‐minimum wage. Moves to raise the minimum wage for these
workers to a level comparable with other industries can be controversial,
with both employers and employees arguing for and against a higher
minimum wage—and less reliance on tips—for servers (Carman, 2018).
When an employee is paid a salary plus bonus, the bonus is not paid
unless sales‐volume or production goals are met or exceeded. For
example, the manager of a real‐estate firm may be paid a substantial
salary but earn a bonus only if the office exceeds a preestablished sales
goal for the month, quarter, or year. The advantage of a salary plus bonus
is that it’s tied to the performance of a department or division, motivating
the entire team to work together to reach organizational goals or sales
targets.
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Benefits
Compensation includes more than just salary. Benefits are a key
consideration for legal, motivational, and employee relations. Benefits
address a range of employee needs, and they are important for retaining
employees. HR professionals must be familiar with various options for
providing benefits. Following are some of the benefits commonly offered:
• Relocation assistance. Often, hiring people means moving them to a
different location. New talent may come from another city or even
another country, so relocation assistance may entail assistance with
visas, housing, flights, and other moving costs.
• Medical, prescription, vision, and dental plans. In countries with
comparatively few socialized benefits, including the United States,
health insurance is a key, and often legally required, benefit for full‐
time workers.
• Dependent care. As part of the health insurance offered, many
companies allow employees to elect care not only for themselves,
but for their spouse and dependent children as well.
• Retirement plans. Larger employers usually offer employees
retirement‐related benefits. These include 401(k) and 403(b) plans
that allow workers to save some of their earnings for retirement.
They usually provide for various investment options, such as stocks,
bonds and mutual funds. These plans offer tax benefits, and often
employers will make a percentage contribution based on a portion, or
all, of what the employee saves. Sometimes these plans are referred
to as defined contribution plans, since the ultimate retirement
benefit depends on what the employee has contributed. Defined
benefit plans, while still available, have become an increasingly rare
private‐sector benefit in the United States.
• Group term life and long‐term care insurance. Life insurance and
long‐term care benefits help insure workers and their families against
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various types of risks and disasters. These insurance plans protect a
worker’s dependents (and the worker, in the case of long‐term care)
if a serious illness, death, or other tragedy occurs.
• Legal assistance. Less common than the other benefits listed, legal
assistance plans can be established for jobs in which the risk of
personal liability is high. The plans themselves can be expensive, and
they may draw on organizational resources to cover liability.
• Child care. Supporting working parents is increasingly critical to
retaining great talent. Employer‐covered child care helps keep it
affordable for families and enables employees to focus on their work,
which benefits the employer.
• Transportation benefits. Another common benefit is paid
transportation. Particularly in countries and regions where public
transportation is the norm, it’s quite common for the employer to
pay for some or all of an employee’s commute.
• Paid time off. All organizations in the US must provide paid time off,
vacation, and sick pay under certain circumstances. Many countries
have stringent legislation governing minimum requirements for paid
time off and vacation leave to ensure that employees have a healthy
work‐life balance.
Fringe Benefits
The term fringe benefits was coined by the National War Labor Board
during World War II to describe the various indirect benefits that industry
had devised to attract and retain workers when wage increases were
prohibited. The term perks (from perquisites) is often used colloquially to
refer to discretionary benefits like these.
Perks are often given to employees who are performing well or who have
seniority. Common perks are hotel stays, free refreshments, leisure
activities during the workday, allowances for lunch, and usage of
company cars. When options are available, certain employees may also
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receive first choice on things like job assignments and vacation
scheduling. They may also be tapped first for promotions.
Fringe benefits may also include wellness programs, retail and event
ticket discounts, hotels and resort programs, etc. These are ways to raise
employee satisfaction, corporate loyalty, and worker retention. They are
considered one cost of keeping good employees.
(https://www.washingtonpost.com/news/food/wp/2018/06/19
/restaurant‐industry‐vows‐to‐fight‐dc‐voters‐move‐to‐raise‐tipped‐
workers‐pay/?utm_term=.53dd7b884701)
Terminations
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Terminations can occur for a range of reasons, both voluntary and
involuntary. The type of termination determines the employee’s future
relationship, if any, with the employer.
Firing
A firing is usually thought to be the employee’s fault and is considered
dishonorable. It can hinder the job seeker’s chances of finding new
employment, particularly if the person has been fired from previous jobs.
Prospective employees don’t always include jobs they were fired from on
their résumés. As a result, employers may view unexplained gaps in
employment or an applicant’s refusal to provide references from previous
employers as red flags.
Layoff
Another type of involuntary termination is a layoff. Usually a layoff isn’t
related to performance, but is the result of economic cycles, company
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restructuring, or closing of the business. Layoffs are not uncommon in
today’s global economy, with rapidly evolving technology and skill
requirements. In fact, a large proportion of workers may be laid off during
their careers for reasons other than their performance.
Layoffs may occur as a result of downsizing (a reduction in the workforce)
or redundancy (the view that certain positions aren’t needed). Positions
may be eliminated because the company wishes to reduce its size or
operations, or it may lack the resources to retain the position. These
reductions may be temporary or permanent.
Attrition
Attrition is a way to reduce the payroll by not replacing workers who
retire or leave the company for other reasons. Sometimes companies will
offer a lump sum—typically a few years of salary—to encourage an
employee, or a group of employees, to resign. Informally, this is
sometimes called a buyout.
Mutual‐Agreement Termination
Some terminations are mutual agreements between the employer and
employee. In many cases, the employer wants the employee to quit but
offers a mutual‐agreement termination agreement instead of firing them.
Sometimes a termination date has been previously agreed to through an
employment contract.
Forced Resignation
Sometimes an employer may degrade an employee’s working conditions
to encourage the worker to leave the company. The employee may be
moved to a different geographical location, be assigned an undesirable
shift, receive fewer work hours, be demoted, or receive work assignments
with uncomfortable conditions. Companies may try to force an
employee’s resignation in other ways, often so they won’t have to fill out
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termination papers in jurisdictions that don’t recognize employment at‐
will, which permits employers to dismiss a worker without warning and
for any reason, without having to establish just cause for termination.
With few exceptions, employees cannot collect unemployment benefits if
they leave voluntarily, but tactics designed to force a resignation may
amount to constructive dismissal, which is illegal in some jurisdictions.
Rehire Following Termination
A worker who has been terminated may or may not be eligible for rehire.
If the decision to terminate was the employee’s, the employer’s
willingness to rehire often depends on their relationship and other terms
of the separation, such as how much notice was provided to the
employer.
When employees depart on good terms, they may be given priority for an
open position later. This is usually true in the case of a layoff. Conversely,
a person can be terminated with prejudice, meaning that an employer will
not rehire the former employee. This judgment can be made for a number
of reasons, including incompetence, misconduct, insubordination, or
attitude.
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Licenses and Attributions
Chapter 15: Human Resource Management
(https://courses.lumenlearning.com/wm‐introductiontobusiness
/chapter/diversity‐in‐human‐resources/) by Linda Williams and Lumen
Learning from Introduction to Business is available under a Creative
Commons Attribution 4.0 International (http://creativecommons.org
/licenses/by/4.0/) license. UMGC has modified this work and it is
available under the original license.
© 2023 University of Maryland Global Campus
All links to external sites were verified at the time of publication. UMGC is not responsible for the
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