Five trends in HR, benefits, and compensation.
By Andrea Goodkin and Corey Witzel
As the economy continues to recover in fits and starts, companies of all sizes and in all industries are looking for ways to control benefits and compensation costs while retaining and attracting the best talent. Smart companies are identifying and analyzing trends now to position them for success in the future. They are getting ahead of the curve.
How is your company responding to or preparing for changes in the workplace—whether related to workforce, legal issues, or health and productivity? What’s the conventional wisdom regarding human resources management?
1. Landscape shifts. Whether it’s technology and virtual teams or non-traditional workplaces and flatter organizations, these trends continue to transform the HR landscape. Fueling this transformation are employees’ increased desires for work/life balance and the growing decentralization of the workforce.
Several factors make flexible workplaces feasible. First, the nature of work for many white-collar jobs is conducive to work-at-home scenarios, thanks to the availability of computers, smart phones, and the overall ease of connectivity. Second, employers see flexible workplaces as a way to attract and retain talent. An increase in decentralized workforces where employees are scattered throughout a region or the country, is also prevalent. In fact, according to Forrester Research, as of 2011, about 34 million people work from their residence occasionally, and the number of people who work remotely will almost double—to approximately 63 million people—by the year 2016.
As the workforce becomes younger in aggregate, an ongoing need to recruit and retain top talent is another factor transforming the HR landscape. Changing demographics have brought more “tech savvy” workers who want—and are requesting—more workplace options and different compensation packages.
Given the costs associated with employee compensation, forward-thinking companies may offer employees more flexible workplaces to maximize non-cash compensation—or total rewards. At its most basic level, flexible work schedules are considered a perk—even though flexible work programs can have a real, bottom-line benefit by adding value to the work at hand and strengthening the employer/employee relationship. On top of being an employee perk, a real benefit for the company can be savings in office real estate costs.
If your company is considering a flexible workplace program, both managers and staff need to discuss best practices and roles and responsibilities. Flexible workplace options are more than just “working at home.” They require a thoughtful plan comprised of
goals, metrics, and an understanding of the rationale or reason behind the policy. Not every organization, and certainly not every employee, is suited for flexible workplaces.
Specific training for managers and employees is a critical component in helping to ensure a productive and successful flexible workplace. For example, nurturing employee/employer trust might receive renewed attention in this new environment. How do you know that your work-at-home employees are working? How can you best structure reporting and performance management to minimize micro managing on a long-term basis? And does your company have an HR infrastructure readily adaptable to flexible workplaces?
Employees need to understand that flexible workplace programs do not give employees a carte blanche to work at home. As your organization looks at how to foster a culture of team performance with a flexible workplace environment, consider the following:
- What are performance expectations?
- How can a strong team culture be maintained when some team members aren’t physically in the same space?
- What are the responsibilities/expectations of engagement for the employee working at home?
- How can employees engage in charting their success?
- What resources are available to work-at-home employees?
2. Demographic drivers. What’s the role of demographic shifts in the workplace? How can organizations leverage today’s (and tomorrow’s) multicultural, multigenerational and multilingual workforce?
An aging workforce is prompting many companies to consider the most effective strategies for ensuring a successful process to transfer knowledge. Does your company have a structure in place that highlights the most effective strategies for ensuring a successful knowledge transfer from one generation of leaders to the next? For example, is there a structure that allows for capturing and transferring knowledge related to the institution, culture and processes. With this demographic backdrop, below are five best practices to help foster good working relationships among workers of all ages:
- Understand the current composition of your workforce and develop projections for what it will (need to) look like in the future.
- Train managers and supervisors about inter-generational differences and issues.
- Design comprehensive communication plans that take into consideration the communication styles of different age groups.
- Offer lateral opportunities and training to update skills and revive the subjects and experiences employees have learned and applied.
- Provide flexibility in locations, days/hours worked, and other factors.
3. Compliance trends. As the government emphasizes employer accountability, is your organization prepared to manage U.S. Department of Labor and other audits?
While various government audits are safeguards to maintain employer accountability, don’t wait for an auditor’s phone call. In fact, don’t wait for an audit. Conduct a self-audit to ensure that your company is operating within specified requirements. Without such internal monitoring and controls, your organization is creating more external exposure for itself and therefore is at a heightened risk for an audit. Depending upon the outcome of the audit, significant financial penalties—or worse yet, the loss of a contract—can jeopardize your business.
Considering the increasing trend of using independent contractors to outsource some roles, many employers consider independent contractors to be another “hot topic” in legal issues. Yet even knowing that independent contractors are a potential hot topic, employers have an “it won’t happen to us” attitude. But it might.
A host of issues accompany independent contractors. For example, if a person classifies himself as an independent contractor, he does not pay payroll taxes. Today, some independent contractors are actually filing for unemployment, without understanding their work status. If an independent contractor has been considered an employee by the state, then the employer could be subject to back benefits and employment taxes. Key lesson: Don’t misclassify people as independent contractors.
Ensure that your independent contractors truly meet the legal definition of an independent contractor and execute a contract that defines the contractor’s role as a non-employee and states that the contractor is responsible for paying any and all withholding taxes. Employers that believe their workers are excluded from the protections of the Fair Labor Standards Act (FLSA) will need to prepare a written classification analysis and provide that analysis to the workers. The analysis will describe why someone is classified as an independent contractor instead of an employee.
4. Health and productivity focus. With healthcare reform, employers focused on immediate compliance concerns in 2010. This year, many employers are taking a broader view and potentially transforming their commitment to healthcare and its ever-increasing costs into a commitment to health and productivity. This change in focus puts a greater emphasis on overall employee well-being. It addresses not only the costs of hospitalizations, chronic diseases, and the absenteeism involved with those, but also some key root causes: depression and stress.
Companies still have a vested interest in encouraging employees to participate in programs and modify their own lifestyle behaviors to maintain and/or improve their health, whether it be to reduce healthcare costs or to enhance productivity. With the popularity of consumer-directed health plans and wellness programs, is your organization positioned to help employees help themselves?
Absence management is a trend in small and large companies alike. At a very basic level, absence management promotes a culture where employees are motivated to be healthy and come to work. You want employees to contribute to and get the most out of their work. When employees are healthy, everyone wins.
5. Success measurement. With fewer dollars to go around, organizations will increase pay differentiation based on results and expected outcomes. Pay for results is a trend anticipated to spread beyond the managerial level during the next several years. Rather than flat, across-the-board increases, companies are looking at paying the top performers.
During the last several years, many employers have not been awarding increases and in several instances, salary freezes have been the norm. How can your company begin to calibrate salary programs today—integrating base and incentive compensation—that reward both employee and employer?
Several strategies can enable employers to be creative, flexible, and meet their organization’s financial goals and the needs of employees. For example, in individual pay-for-results models, employers can structure pay so that a portion of it is at risk. For example, a person might have a compensation structure where the base is 80 percent, the remaining 20 percent is “at risk” and the employee is eligible for a bonus based on several, pre-determined factors.
Another compensation model rewards the efforts of a team (i.e., Specific goals, project deadlines, whatever the agreed upon deliverables are). This team-based model—which requires a certain type of culture—can help motivate members of a team to work together, achieve their common goal and reap the rewards. Companies will have to rethink their traditional performance review models, to identify ways to recognize overall team results without the burden of exhaustive individual performance reviews (which managers also dislike).
Many companies are taking a step back to identify and evaluate total compensation plans to structure them to meet—and potentially exceed—the organization’s financial and other goals. Getting ahead of the curve in issues related to human resources, benefits, and compensation requires thoughtful, well-researched approaches. The result can help promote employee productivity and satisfaction and drive your company’s bottom line.
Andrea Goodkin is a partner at Laurus Strategies, and Corey Witzel is vice president and general counsel at EmPowerHR, both of which are affiliated businesses within the CSIG Holding Company.