Comp Final
Reentry transition may result in culture shock.
- 68% of expats do not know what their position will be upon their return, 54% return to lower level jobs. - 77% have less disposable income upon their return. - Over 50% leave the company within one year upon returning
Performance Management ... Control Mechanism and for Feedback
- Administrative/Evaluative --ensures strategy-consistent behavior --pay, promotions, layoffs -Developmental (very important - to remain competitive) --training, career development, HR research - Legal - minimize exposure to EEO --Job related appraisal --Avoid vague/subjective performance criteria --Implement a review and appeals process --Respect employee privacy and confidentiality
An Exchange:
- Does not sell their own products, but instead sell the products of health insurance companies; - Provides greater volume and competitive pricing; and - Offers insurance packages are categorized as bronze, silver, gold, or platinum based on the percentage of their health costs that the individual must pay (90, 90, 70, and 60 percent, respectively).
Managed Care Plans
- Health maintenance organization (HMO) - Preferred provider organization (PPO) - Point-of-service plan (POS) - Exclusive provider organization (EOS) - Consumer Driven Plans
Strategic Global Philosophical Perspectives: Global Human Resource Strategy Perspectives
-Localizer ~ Think Global, Act Locally. --Pay system varies based on a Country's Culture and Values - key is to be a good corporate citizen locally (nationally). - Exporter ~ One Size Fits All (export HR systems globally) --Corporate pay system is implemented worldwide. Not effective in diverse cultures. Although, it adjust for regulatory issues, it does has minimum recognition of cultural issues. - Globalizer ~ Think and Act Globally and Locally --Collaboration between Corporate and local operations, based on sharing information and ideas while recognizing local differences. (looks at it from a worldwide scope)
What Is an Exchange?
An EXCHANGE is an open marketplace that is a tool that allows you to access insurance options and connects with individuals or employees wishing to purchase insurance.
Types of Coverage
Hospitalization, Surgical, Physician, Pharmacy (Prescription Drug Plans)
Comparing Costs - Labor Costs and Productivity
Minimum wage for Labor is difficult to compare across countries: --the keys are demand, productivity as it relates to job knowledge and requirements (quality of available labor) and performance expectations --Taxes and Regulations
Consolidated Omnibus Budget Reconciliation Act, 1984 (COBRA)
Provides the opportunity for an employee to continue insurance coverage if they leave the company due to no fault of their own [up to 18 months at group rate].
Family Medical Leave Act (FMLA)
allows eligible employees to receive unpaid leave up to 12 weeks per year for specified family or medical reasons
Social Security
benefits are paid to replace part of the lost family earnings when a worker retires, becomes disabled, or dies four categories are: (1) old age or disability benefits, (2) benefits for dependents of retired or disabled workers, (3) benefits for surviving family members of a deceased worker, and (4) lump-sum death payments
Host country-Based Method
pay level and rates for expatriates are based on the host country pay rates, most appropriate for long-term global assignments. you are paying what the host country pays in that region for that job
Components of an Executive Compensation Package
- Base salary - Short-term (annual) incentives or bonuses -- Range from .5 to 10 times base salary -- Cash or Equity (Stock offerings) based components -- Performance Measures (ROI, EPS, Profitability, Stock Value) - Long-term incentives and capital appreciation plans (Threshold, Target & Max) - these are mutually agreed goals -- Market or Performance Based (May or May not require investment by the executive) -- Base on Multi-year Achievements
Integrating a Blended Staff
- Blended Staff are Contingent & Temporary Employees, Independent Contractors. Part-time Employees - Types include a person who works -- Through a temporary employment or Professional Employment Organizations (PEO) -- On an on-call basis (or defined service contract) -- As an independent contractor - Typical salary arrangements -- Workers in first two categories often earn less than workers in traditional arrangements -- Independent contractors often have a higher pay rate
Two common budget process approaches
- Bottom-up - determine cost for each activity and sum them to determine revenue needs - Top-Down - begin with estimate (or available) revenue and allocate to the business activities
Centralized or Decentralized Pay Setting Policy
- Centralized: Employers have less discretion in setting pay rates, government, unions have a strong influence. - Decentralized: greater discretion, less involvement by government or work councils.
Compensation & Global Issues (look @ what are the factors influencing global & why they are important)
- Compensation; In a Global Context - Institutional - Social, cultural, political - Economic - markets, capital, taxes (economic is important but the economic issues are not that unknown/uncertain) - Organizational - strategic, managerial autonomy (*how much autonomy does the management of the org have relative to the political structure), technology - Employee - demographics, KSAs, work expectations/attitudes (where are they located)
Small Employers: The Creation of State-Based Exchanges
- On average, small businesses pay about 20% more than large firms for the same insurance policy. - Since small-group insurance markets in most states are underwritten based on risk, employers less healthy employees or in occupations with predictably high risks can find coverage to be very expensive, and even unaffordable.
Advantages with Utilizing an Exchange
- One of the key advantages of the proposed exchange system to smaller companies comes with bargaining power. - Small businesses will join a larger pool of insured within the exchange, thereby spreading the risk and allowing the business access to the lower premiums previously only afforded to larger companies. - By utilizing an exchange, employers will have access to exchange "navigators," or resources that will help to answer any questions around the exchanges' benefit plan offerings such as wellness programs, COBRA coverage, and flexible spending accounts.
Types of Benefits: Mandatory
- Social Security - Unemployment Insurance - Workers' Compensation - Employee Retirement Income Security Act, 1973 (ERISA) - Family Medical Leave Act (FMLA)
Forecasting Revenue (Sales or Budget Allocation)
- Two techniques used when there is high uncertainty (low confidence) in forecasting sales -- Minimum Budget (determine the minimum cost [budget] for each activity to meet performance requirements) -- Must-Do-Budget (Minimum Revenue to Survive ~ *Warning: Do Not be Conservative by either Underestimating Cost or Overstating Revenues.
Issues & Strategies: Supervisory Pay
Issue: Caught between demands of Upper management in terms of production and Employees in terms of rewards, reinforcements, and counseling - Major challenge in paying supervisors is Equity - Pay strategies: -- Key base salaries of supervisors to an amount exceeding highest paid employee -- Pay supervisors for scheduled overtime - Trend in supervisory compensation -- Increased use of incentives/variable pay to entice non-supervisory staff into supervisory jobs -- More than half of all companies have a variable pay component for supervisors
Miscellaneous Benefits
Paid time off during working hours, payment for time not worked, child & elderly care (FMLA), Work-Life balance programs, domestic partner benefits, legal insurance
What is Healthcare Reform?
Patient Protection and Affordable Care Act (PPACA), effective January 1, 2014 - (Operational 2015) *Obama Care*
Home country-Based Method
compensates expatriates as they would be in their home country, most appropriate for short-term global assignments. you get the same pay as what you were making in the home country
Key Issues in Benefit Planning, Design, and Administration
- Allowing for employee input, establishing specific objectives** WHAT DO YOU WANT YOUR BENEFIT PACKAGE TO DO??!!?, providing flexibility, communication benefits information, and modifying employee benefits
Budgeting Process:
- Begin with Revenue Projections (Forecast) ~ effects available resources for all business activities) - Role of Assumptions ~ explains the reasoning used to determine the budget. --MEA to identify issues such as economic activity, competitive activity, market expectations/demands, pricing, technological development. - Develop complete chart of accounts - Research cost for each account (don't just assume the cost) - Develop a written budget for each account - *Avoid straight line estimating - Forecast sales volume - Relate to revenue and projected profit to HR requirements - Project best case/worst case scenarios (develop multiple forecast given varying economic/market conditions) - Project break-even budget point
Components of an Executive Compensation Package
- Equity [Ownership] Related Long-term Bonus Incentives -- Cost may range from Zero to Fair market Value -- Qualified Stock Option - value is not recognized until it is sold (tax deductible) ---(Incentive Stock Options (ISO) or Employee Stock Purchase Plan) --Non-qualified - employer does not receive a tax deduction until employee is required to declare it as income ---restricted stock options, stock appreciation rights (SARs), stock grants, restricted stock units, etc...
Global HR Employee Status Classifications
- Expatriate - a us organization to employ US citizen, US firm located in Italy, with US workers. - Host (Local) Country National - US firm in Italy, with Italian workers. - Third Country National - US firm in several facilities, transfer your Italian worker to Germany
Consumer Driven Plans
- Flexible Spending Accounts (FSA) coverage not provided by employer plan and paid for by the employee. Pretax amount is a benefit deduction from an employee's pay used to reimburse them for medical expenses. --Forfeit unused contributions (*it does reduce taxable income*) -- Health Reimbursement Plan (HRA) - allows employer contributions and the rollover of unused contributions. - Health Savings Accounts (HSA) combines Health Insurance with a tax-deductible savings account to pay for health care. A viable employee health care option for small businesses that have a High Deductible Health Plan (with low out-of-pocket-maximums).
Strategic Reasons for Offering Benefits (Why offer benefits??)
- Help attract employees - Help retain employees - *Elevate the image of the organization with employees and other organizations (*how employees perceive their benefit package is the greatest impact on surveys) - Increase job satisfaction
Goals of the PPACA
- Increase Accountability - effected individuals, insurance, and organizations (cost, control and options) - Increase Access of Coverage - so that it covers more people - Extend Protection to those already having coverage
Who is effected by Healthcare Reform
- Individuals and Families - Employers (50 or more employees) - Healthcare Providers & Insurance Companies
Financing Benefits Plans: Alternatives
- Non-contributory - Employer pays total costs - Contributory - Costs shared between employer and employee - Employee financed - Employee pays total costs for some benefits (by law the org must bear the cost for certain ones)
Global Pay Comparisons
- Objectives: Long - Short term, Commitment, Egalitarian-Performance, Cost control (bonus, performance, tariffs) - Internal Alignment: Person-Work, Small-Large Pay differences, pay level (many-few) (*what's our philosophy here) - External Competitiveness: (Age, Market, Tariff - set economic conditions relative to pay) - Employee Contribution: Bonus, Performance, Tariff - Strategic Objectives: Commitment, security, employee flexibility, innovativeness, Performance investment, Strategic value
Conflicts Faced by Sales Staff
- Often go for extended periods in field with little supervision - Challenges (burden them with sales requirements) -- Staying motivated -- Continuing to make sales calls despite little supervision
Promotional Increases as a Pay-for-Performance Tool
- Promotion should be accompanied by a salary increase (at least) of 8 to 12% (if not closer to 15%) - Characteristics of promotional pay increases --Size of increment is approximately double a normal merit increase --Represent a reward to employees for commitment and exemplary performance
Three KEY Topics Affecting Employers!
- Reporting Requirements ~ Comparative Effectiveness Fees, Medical Loss Ratios, Benefit Coverage Summary, W-2s, Medicare Tax Increase, Employer Notifications (The Exchange), IRS Notices, etc... - Play or Pay Mandates ~ Provide minimum essential coverage for all fulltime employers OR Pay Excise Tax for not offering minimum coverage, or having employees enroll in a State Health Exchange, or Unaffordability. - Fulltime Equivalents ~ Standard Period is 3 to 12 months, fulltime employee 30+ hours. On-going or new. Variable Employee - limited duration 30+ hrs/week. ▸Seasonal Employee - 120 days or fewer, with 50 FTEs
Characteristics of Special Groups
- Tend to be strategically important to a company - Positions tend to have built-in conflict that arises because different factions place incompatible demands on members of group
Disadvantages with Utilizing an Exchange
- The primary complaint from small businesses regarding reform is the insurance mandate. --$40,000 fine with an additional $2,000 for each employee exceeding an employee head count of 50. - Exchanges may reduce administrative costs, but they impose costs of their own. - Potential fines could be given to small businesses over 50 employees since they are required to provide health insurance. This could cause some small businesses to artificially cap their head count below 50. This will create a job shortage and aversively affect economic growth.
Cost of Living and Purchasing Power (talking about expatriates predominantly)
- This is difficult to assess across countries ~ however it is essential when transferring employees - The key is to keep employees Whole ~ when transferred, they maintain the same quality of life and Purchasing Power.
Components of Total Pay Packages - Key is keeping and employee Whole
1. Base Salary - annual salary, unadjusted. 2. Short & Long-term Incentives 3. Tax Equalization Allowances - payments for higher tax rates of other countries. (the company pays the difference) 4. Benefits - continuation of, or substitute for, home benefits. 5. Allowances & FSPs - cost-of-living, housing, education, medical, security, and relocation payments.
Key Factors: Designing a Sales Compensation Plan
1. Nature of people who enter sales profession (confident, outgoing, knowledge of products, etc.) 2. Organizational strategy (maintain or build - expand - territory?) 3. Market maturity (younger the market - cold call; more mature market - maintain relationships) 4. Competitor practices (incentives, commission, bonus structures) 5. Size of company (impacts how you design your territory) 6. Economic environment (affects how the competitive market is) 7. Product sold (the profit market on the products leads to size of incentives)
Why Managers Do Not Like Performance Assessments
1. Time consuming 2. Subjectivity (in Performance Assessment criteria measures) - if we don't have the info we need, we can't make an objective assessment 3. Performance Expectations may not be known by or may be vague 4. Supervisors are not rewarded for their PA efforts 5. Perception is that there is a minimum relationship between performance and rewards
Health and Medical Benefits
General Health Care & Healthcare Reform (PPACA), Health Care: Cost Control Strategies, Short- & Long-Term Disability, Dental Insurance, Vision Care
Employee Benefits
are that part of the total compensation package, other than pay for time worked, provided to employees in whole or in part by employer payments (life insurance, pension (retirement plans), workers' comp, vacation, holidays)
Workers' Compensation
covers injuries and diseases that arise out of, and while in the course of, employment (covered by state , not federal law)
Compensating Employees in a Global Context: Headquarters-Based Pay Method
the pay levels and rates are established by Corporate and are the same for all locations, domestic and global. Simplest to administer but has potential of equity issues. doesn't matter where you are - you get paid the same
Benefits of Budgeting:
- Control of Expense-Revenue Ratio (Expenses > Revenues = Losses) - Coordinate Activities - Budget for ALL Departments & activities (*what are the critical activities that you want to track costs for, to find out if there are other alternatives that could be more cost effective) - Set Performance Standards [Goal for Sales & Operational (e.g., HR, Compensation) Budgets] (*what do you expect the cost to be?) - *Evaluation Tool [Deviation Analysis, ± Comparison to Actual Results to Planned (Budgeted)] some budgets you want to monitor routinely - Corrective & [Remedial] Control (Take necessary action to prevent future over expenditures or under sales forecast)
Requirements to Link Pay to Performance
- Define performance: Behaviors, Competencies, Traits - Balance Scorecard ~ that emphasizes multiple measures to assess and improve employee performance - Specify a continuum describing different levels from low to high on performance measure (e.g. Graphic Rating Scales) - Decide how much of a merit increase is given for different levels of performance - Performance-based Guidelines - Performance Rating Pay Increase (Adjustment) Matrix
Forecasting Compensation Budgets: A Process View
- Determine pay of present employees - Calculate total compensation for present employees (salary + benefit rider costs) - Estimate (forecast) present employee total compensation for the next year -- Include forecasted pay adjustments and possible bonuses to occur during the year - Calculate total compensation costs for additional new positions - Total all compensation costs for existing and any planned or increase/decrease in budget costs positions.
Reward Components: Professional Employees
- Dual-career ladders (starting as one position and going in one track within the company) - Maturity Curve Pay Plans (be aware - these plans generally minimize performance) - Performance-based incentives -- Profit sharing (some type of $ in hand) -- Stock ownership (you get company stock - issue is how the stock is priced) - Bonuses; Completion of projects on or before deadlines; Patents; Publications; Elections to professional societies; Attainment of professional licenses - Perks based on unique needs of professional employees
Defined Benefit Plans
- Employer provides a specific pension level defined in terms of: Fixed dollar amount or Percentage-of-earnings amount that may vary with years of seniority - Employer finances this obligation by: Following an actuarially determined benefits formula and Making current payments that will yield the future pension benefit for a retiring employee - Determination of benefit levels: Average earnings at end of tenure (last generally the 3 - 5 years) or Average career earnings or Fixed dollar amount not dependent on earnings
Types of Health Care Coverage
- Insurance Policy - contractual relationship stating the type and amount of coverage to be paid. - Insurance Premium - negotiated amount paid by employers to the insurance company to maintain the policy. - Types of Coverage and Cost: Single, Family Coverage & Group Coverage --Experience Rating - serve as the basis for establishing premiums based on the claims (use) of the coverage by employees (how often do your employees use the services)
Health Insurance Portability and Accountability Act, 1996 (HIPAA)
- Lessens an employer's ability to deny coverage for a preexisting condition - Prohibits discrimination on the basis of health-related status - Provides stringent privacy provisions
Types of Benefits: Voluntary
- Major Medical - Supplemental Insurance (Long-term Care) - Life Insurance - Dental - Educational Reimbursement - Retirement (Deferred) Income Program (401K, ESOP) - Vacation - Holiday - Health/Fitness Club Expense - Child Care - Financial/Legal Services -Relocation Expense
Employee Retirement Income Security Act, 1974 (ERISA)
- Nonqualified Plans ~ does not meet ERISA's minimum standard provisions and do not receive favorable tax treatment. - Qualified Plans ~ meets all 13 standard provisions and provides favorable tax benefits for Employers and Employees.
Qualified Plans
- Participation (Eligibility): Employees at least 21 YOA and 1 year of service based on the 1,000 hour rule. (*if you work for an org under 1000 hours, you do not need to provide benefits...) - Vesting Options: Clift (fully vested after 3 years of eligible service) or Graduated (vested after 5 full years of service at 20%/year). - Nondiscrimination Rules: prevents favoring benefits provided highly paid employees (excluding the top 10%) relative to lower paid employees. - PBGC: Pension Benefit Guaranty Corporation (guarantee vested benefits)
The Performance Management Process
- Performance Management - Continuous process where employees and managers work together --Establish Expectations; Coaching and Development; Feedback - should all be done with proper communication --Review - the manifestation of the process, documenting what has been done year round; (1) manager should be providing the description for the actual rating that the employee did; (2) start looking towards the next period ---Try to separate this into 2 meetings, one for the actual review of performance, the other for pay discussion --Rewards and Recognition
Trends Related to Cost Containment
- Probationary periods - before you qualify for coverage - Benefit limitations (skinny plan - only covers minimal services) - Copay - requiring that employees pay a fixed or % amount for coverage - Administrative cost containment - controlling costs through policies such as seeking competitive bids for programs - Retaining strategic function internally *first thing to think about is what do we want our benefit plan package to accomplish in our compensation package - Significant movement to outsourcing *ok only if you did the step above first... - Promote preventive health programs
Potential Pay Recognition Issues with Appraisal Formats
- Ranking - Rater compares employees against each other (Issue departmental comparisons) - Rating - Rater evaluates employees on some absolute standard (Issue - relevance of the scale and objectivity of the performance measures) - MBO/MBR - Rater evaluates performance on measures relative to mutually agreed upon results (Issue: Must be a living agreement and time involved) *takes the most amount effort* *these types of systems are a living system, if something changes (revenue/pay scale/etc.) you have to cont. make changes with performance requirements*
Defined Contribution Plans
- Require specific contributions by employer - Final benefit received by employees is unknown o Dependent on investment success of plan manager - Popular forms of these plans: 401 (k) plan, EZ IRA, Simplified Employee Pension Plan (SEP - IRA), Employee Stock Ownership Plan (ESOP), Individual Retirement Accounts (IRAs), Keogh Plan (self-employed) (set up for individual businesses to save) *reduces your taxable income (Profit-sharing, Money, or Paired Plan)
Primary Global Issues Affecting the Organization's HR Environment
- Social Contracts: Regulatory - Centralized v. Decentralized Global Compensation Issues (degree of Government Involvement and Pay Rates) - Wage Flexibility (centralized you have less wage flexibility - decentralized you have more wage flexibility) - Managerial Autonomy (Inversely related to Centralization) - Regulation of Hours Worked - Labor Standards (prevent Social Dumping - moving less capable workers out of the country, to get more capable in) - Tax Structure (influences foreign assignments) - National Culture and Compensation System Design - Relevance of Hofstede's Research Today - Labor Costs, Productivity and Purchasing Power
Explanations for CEO Compensation
- Social comparisons - Executive salaries bear a consistent relative relationship to pay of lower-level employees (what do they make in relation to what lower employees make) - Economic approach - Value of CEO should correspond to some measure of organizational success (how does it rate to performance - not just financial) (Balance Scorecard Approach) - Agency theory - Incorporates political motivations (influence something to better yourself)
Conflicts Faced by Top Management
- Stockholders want healthy returns on investment - Government wants compliance with laws - Must decide between strategies (look at balanced scorecard) -- Maximizing short-term gains versus (incentives basically set up for 12 months) -- Focusing on long-term results (sustainability) (looks between 12 and 36 months)
Who Are Special Groups?
- Supervisors - caught between upper management and employees - Professional employees - may be torn between goals, objectives, and ethical standards of their profession - Sales staff - often go for extended periods in the field with little supervision - Blended Work Staff (i.e., Contingent Employees) - play an important "safety valve" role for company - Corporate directors - face possibility that disgruntled stockholders may sue over corporate strategies that don't pan out - Top management executives - stockholders want healthy ROI, government wants compliance with laws
Understand Why Raters Make Mistakes
- Types of Errors - when we make that decision we are not going to have a relevant information on the pay associated --Errors in rating process - the way the process is designed (type of info you maintain needs to be relevant) --Errors in observation (Attention) - the ability to observe --Errors in storage and recall - how much information can you as a supervisor retain --Errors in actual evaluation - usually a result of an error in one of the first 3 - something in the written aspect that is wrong
Hofstede's Cultural Dimensions & National Culture: Relevance? As a Starting Point: Cultures are Changing or Evolving(?)
1. Individualism/collectivism - degree to which people act as individuals rather than as members of a group. 2. Power distance - how a culture deals with hierarchical power relationships. 3. Uncertainty avoidance - how cultures deal with the fact that the future is not perfectly predictable. (risk) 4. Masculinity-femininity - describes the division of roles between the sexes within a society. 5. Long-term/short-term orientation - tendency of a culture to focus on long-term benefit or short-term outcomes.