HUMAN RESOURSE MANAGEMENT

Week 1: COURSE ORIENTATION AND REQUIREMENTS

WHAT IS HUMAN RESOURCE MANAGEMENT?

According to Edwin Flippo,

Human Resource Management as “planning, organizing, directing, controlling of procurement, development,
compensation, integration, maintenance and separation of human resources to the end that individual, organizational and
social objectives are achieved.”

According to Decenzo and Robbins,

“Human Resource Management is concerned with the people dimension” in management. Since every
organization is made up of people, acquiring their services, developing their skills, motivating them to higher levels of
performance and ensuring that they continue to maintain their commitment to the organization is essential to achieve
organizational objectives.

Human Resource Management is the management of an organization’s workforce, or human resources .

 Brings people and organizations together so that the goals of each are met.
 HRM means managing men or people. It is the people who becomes the problem in the workplace, if not properly
managed.
 HRM involves all managerial decisions, plans, policies and practices that influence human resources directly .

Why do we call it as Human Resource Management?

Human: refers to the skilled workforce in an organization.
Resource: refers to limited availability or scarce.
Management: refers how to optimize and make best use of such limited or scarce resource so as to meet the organization
goals and objectives.
Therefore, human resource management is meant for proper utilization of available skilled workforce and also to make
efficient use of existing human resource in the organization. The best example in present situation is, the construction
industry has been facing a serious shortage of skilled workforce. It is expected to triple in the next decade from the present
30 per cent, will negatively impact the overall productivity of the sector, warn industry experts.

5 Major Functions of Human Resource Management:

1. Recruitment and Selection - Recruitment is the process of captivating, screening, and selecting potential and qualified
candidates based on objective criteria for a particular job. The goal of this process is to attract the qualified applicants and
to encourage the unqualified applicants to opt themselves out. Before starting the process of recruitment, the companies
must execute proper staffing plans and should grade the number of employees they are going to need. Forecasting of the
employees should depend upon the annual budget of the organization and short-term and long-term goals of the
organization. Recruitment and selection process are very important to every organization because it reduces the costs of
mistakes such as engaging incompetent, unmotivated, and underqualified employees. Firing the unqualified candidate and
hiring the new employee is again an expensive process.

2. Orientation - Many organizations do not provide a thorough orientation to the new employees. This is the fundamental
step to help a new employee to adjust himself with the employer and with his new job. Employee orientation program
should include the objectives and goals of the organization and how the employee can help to achieve the long-term and
short-term goals of the organization. Giving intensive orientation to the employee is one of the major functions of human
resource management. The program should help the employee to know his assigned duties and his exact job description,
job role, and the relationship of position to other positions in the organization. It gives clarification to the employee to take
an active role in the organization.
3. Maintaining Good Working Conditions - It is the responsibility of the human resource management to provide good
working conditions to the employee so that they may like the workplace and the work environment. It is the fundamental
duty of the HR department to motivate the employees. The study has been found that employees don’t contribute to the
goals of the organization as much as they can. This is because of the lack of motivation. Human resource management
should come up with a system to provide financial and non-financial benefits to the employee from the various
departments. Employee welfare is another concept which should be managed by HR team. Employee welfare promotes
job satisfaction.

4. Managing Employee Relations - Employees are the pillars of any organization. Employee relationship is a very broad
concept and it is one of the crucial functions of human resource management. It also helps to foster good employee
relations. They have the ability to influence behaviors and work outputs. Management should Organize activities which will
help to know an employee at the personal and professional level. Well-planned employee relations will promote a healthy
and balanced relation between the employee and the employer. It is the key for the organization to be successful.

5. Training and Development - Training and development are the indispensable functions of human resource
management. It is the attempt to improve the current or future performance of an employee by increasing the ability of an
employee through educating and increasing one’s skills or knowledge in the particular subject.

Importance of Human Resource

Behind the production of every product or service there is a human mind, effort and man hours (working hours).
No product or service can be produced without the help of human beings. Every organization desire is to have skilled and
competent people to make their organization competent and best.

Among the five M’s of management, i.e., men, money, machines, materials, and methods, HRM deals about the
first M, which is men. It is believed that in the five M’s, "men" is not so easy to manage. "every man is different from other"
and they are totally different from the other M’s in the sense that men possess the power to manipulate the other Ms.
Whereas, the other M’s are either lifeless or abstract and as such, do not have the power to think and decide what is good
for them.

Human Relations School of Thought (Theoretical Bases)

:Popular Human Relations Management Theories:
The following human relations management theory basics became evident during human relation studies:
1. Individual attention and recognition align with the human relations theory.
2. Many theorists supported the motivational theory.
3. Studies supported the importance of human relations in business.

George Elton Mayo (father of Human Relations Theory) introduced the Human Relations School of thought,
which focused on managers taking more of an interest in the workers, treating them as people who have worthwhile
opinions and realizing that workers enjoy interacting together.

Mayo concluded that workers are best motivated by:

● Better communication between managers and workers
● Greater manager involvement in employees working lives
● Working in groups or teams

The human relations management theory is a researched belief that people desire to be part of a supportive team
that facilitates development and growth. Therefore, if employees receive special attention and are encouraged to
participate, they perceive their work has significance, and they are motivated to be more productive, resulting in high
quality work.
Objectives of Human Resource Management

1. Societal objective - To be socially responsible to the needs and challenges of society while minimizing the negative
impact of such demands upon the organization. The failure of organizations to use their resources for society's benefit
may result in restrictions. For example, societies may pass laws that limit human resource decisions.
2. Organizational objective - To recognize that Human resource management exists to contribute to organizational
effectiveness. HRM is not an end in itself; it is only a means to assist the organization with its primary objectives.
Simply stated, the department exists to serve the rest of the organization.
3. Functional objective - To maintain the department's contribution at a level appropriate to the organization’s needs.
Resources are wasted when Human Resource Management is more or less sophisticated than the organization
demands. A department's level of service must be appropriate for the organization it serves.
4. Personal objective - To assist employees in achieving their personal goals, at least insofar as these goals enhance the
individual's contribution to the organization. Personal objectives of employees must be met if workers are to be
maintained, retained and motivated. Otherwise, employee performance and satisfaction may decline, and employees
may leave the organization.

Changing Landscape of HRM

Only a few decades ago, the ‘Personnel’ department, as it was once known, was somewhere employees would go to seek
help and support. Familiarly known for its ‘tea & tissues’. Predominantly back then, it would be women in these roles,
dealing with the personal issues that line managers, predominantly men, did not wish to deal with. The department’s
objective; to look after the welfare of the employees.

Move on a decade and ‘Human Resources’ evolved to a department that moved from a ‘welfare’ department to a policy,
processing department. With the economic challenges and reform of legislation, the HR department became the hub that
kept the business safe. It had it hand in most employee relations issues and spent endless amounts of time keeping up
with the ever-increasing legislation. Learning and development or ‘training’ departments, as they were known, were often
separate departments that did not collaborate with HR. Recruitment was seen as reactive and done out of necessity,
conducted by either line managers or agencies.

David Ulrich’s model for Human Resources was revolutionary when first introduced because it looked at people and roles
first and foremost. Human Resources departments are important in organizations in part because of how they focus on the
people in an organization—including employees, managers, board members, and more. Fittingly, David Ulrich’s HR Model
doesn’t build a Human Resources department around function first, but rather around roles.

In particular, David Ulrich’s HR model defined the four roles listed below as the key components of an HR department.
Read this extremely helpful slideshow presentation from the website Creative HRM if you want to learn more about Ulrich
and his ideas.

HR Business Partner: The HR business partner is tasked with communicating with so-called “internal clients” or “internal
customers.” (These are just fancy terms that refer to people directly connected with an organization, and include
employees, shareholders, stakeholders, creditors, and more.)

The HR business partner is the HR point-of-contact for these individuals and is, therefore, the channel that most internal
members of an organization will use to communicate with a Human Resources department. Among other things, the HR
business partner gives feedback to internal customers about the quality of their experience, identifies top talents within
the organization, helps fill job vacancies, shares HR goals with employees to ensure they are implemented across the
organization, and helps promote overall productivity and harmony in the workplace.
Change Agent: When an organization is required to expand, evolve, or otherwise alter its goals or objectives, the change
agent is the Human Resources role that communicates those organizational changes internally. This person or branch

organizes training opportunities so employees can learn the new skills necessary for changing business goals or job roles,
or changes job descriptions to reflect those altered roles. Essentially, the change agent helps adapt the organization for its
next stage of growth or evolution.

Administration Expert: This administration role within HR is responsible for numerous different types of tasks. On one
end of the spectrum, the administration expert follows changes in legislation, regulation, occupational health and safety
rules, and other types of labor or trade law and helps the organization adapt in order to stay compliant with those laws. On
the other end of the spectrum, the administration expert is responsible for organizing personal employee information and
making sure that it is up to date. This person uses an HRIS (Human Resources Information System) to monitor, update, and
secure that information. In other words, the administration expert is the closest thing to a true “document management”
specialist within Ulrich’s HR Model. By using an HRIS, the administration expert is key in helping an organization adopt
modern, paperless policies for storing information, securing personnel files, sharing files within the organization, and
more.
1.
Employee Advocate/Employee Champion: At all times, any Human Resources department is responsible for staying
aware of employee interests and making sure they are protected. The employee advocate (also known as the “employee
champion”) is the role in charge of gauging employee morale and satisfaction and using that information to create a
positive company where people will want to work. This person uses surveys to measure employee satisfaction, spot
shortcomings in company culture, and ensure that managers are fair and equitable to all employees. The employee
advocate also leads initiatives to improve morale and employee experience, helps the change agent with offering training
and professional development opportunities, and ensures that existing employees have opportunities to apply for new
jobs or promotions within the organization.
2.
What does the future hold?
With further economical unrest and technological advancements, HR /People departments will be a major part of any
organization, where growth, investment, innovation and sustainability are key. Investment in people will eventually
overtake the investment in marketing. As employees market the business by becoming true brand advocates, an
employee’s voice has much more authenticity than any marketing campaign.

Human Resource Management Models

Four major models have been identified on human resource management and all these serve as many purposes.

1. They provide an analytical framework for studying Human resource management (for example, situational factors,
stakeholders, strategic choice levels, competence)
2. They legitimize certain HRM practices; a key issue here being the distinctiveness of HRM practices: “It is not the
presence of selection or training but a distinctive approach to selection or training that matters”.
3. They provide a characterization of human resource management that establishes variables and relationship to be
researched.
4. They serve as a heuristic device-something to help us discover and understand the world for explaining the nature and
significance of key HR practices.

1. Matching Model of Fombrun, Tichy & Devanna:

This model held that HR system and the organizational structure should be managed in a way that is congruent
with organizational strategy. Main focus was on the four functions of HRM i.e. selection, appraisal, development and
rewards and their inter relatedness.

This is the first and very simple model that serves as a heuristic framework for explaining the nature and significance of the
key HR activities. But it is incomplete as it focuses only on four functions and ignores all environmental and contingency
factors that impact HR functions.

2. The Harvard Model:

The Harvard model claims to be comprehensive in as much as it seeks to comprise six critical components of HRM. The
dimensions included in the model are: stakeholders’ interests, situational factors, HRM policy choices, HR outcomes and
long-term consequences.
The Stakeholders interests recognize the importance of 'trade offs' between the interests of the owner and those of
employees. Tradeoffs also exists among other interest groups. But this is the challenge of HR manager, who needs to
balance the interests of all stakeholders.
The Situational Factors influence management's choice of HR strategy. the contingent factors included in the model
include work force characteristics, management philosophy, labor market, task, technology and laws and social values.
HRM Policy Choices emphasize the management's decisions and actions in terms of HRM can be fully appreciated only if it
is recognized that they result from an interaction between constraints and choices. This model outlines four HR Policy
areas:
Employee Influence - delegated levels of authority, responsibility, power etc.
HR Flows - recruitment, selection, promotion, appraisal, termination etc.
Reward System - Pay system, motivation etc.
Work System - design of work and alignment of people
These HRM policy choices lead to 4 Cs of HR Policy Outcomes, that have to be achieved:
Commitment
Congruence
Competence

Cost Effectiveness

Beer et al (1984) proposed that long term Consequences both

benefits and costs of HR policies should be evaluated at three
levels: Individual, Organizational and Societal. These in turn
should be analyzed using the 4 Cs.
The Feedback Loop is the sixth component of the Harvard
Model. as was stated above, situational factors influence
HRM policy and choices, and are influenced by long-
term consequences. Similarly, stakeholders’ interests influence
HRM policy choices, and in turn, are impacted by long-term
consequences (see Figure).

3. The Guest Model:

It was developed by David Guest in 1997 and claims to be
much superior to other models. This model claims that the HR
manager has specific strategies to begin with, which demand
certain practices and when executed, will result in outcomes.
These outcomes include behavioral, performance and financial
related.

The model emphasizes the logical sequence of six components i.e. HR strategy, HR practices, HR outcomes, Behavioral
outcomes, Performance outcomes and Financial outcomes. Looking inversely, financial results depend on employee
performance, which in turn is the result of action-oriented employee behaviors. Behavioral outcome are the result of
employee commitment, quality and flexibility, which in turn are impacted by HR practices. HR practices need to be in turn
with HR strategies which are invariably aligned with organizational strategies.
4. The Warwick Model:
This model was developed by two researchers, Hendry and Pettigrew of university of Warwick (hence the name Warwick
model). Like other models, the Warwick proposition centers around five elements (See Figure):
Outer Context (macro environmental forces)
Inner Context (firm specific or micro environmental forces)
Business Strategy Content
HRM Context
HRM Content

This model takes cognizance of business strategy and HR practices (as the Guest Model), the external and internal context
(unlike the Guest Model), in which these activities take place, and the process by which such changes take place, including
interactions between changes in both context and content. the strength of the model is that it identifies and classifies
important environmental influences on HRM. It maps the connection between the external and environmental factors and
explores how HRM adapts to changes in the context. Obviously, those organizations achieving an alignment between the
external and internal contexts will achieve performance and growth.

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Week 2: WORKFORCE PLANNING AND RECRUITMENT
MANPOWER PLANNING- process of estimating the optimum number of people required for completing a project, task
or a goal within time.

Contingent Workforce Management (CWM)

is the strategic approach to managing an organization’s contingent workforce in a way that it
reduces the company’s cost in the management of contingent employees and mitigates the company’s risk in
employing them while providing a more consistent supplier and user experience.

The Blended Workforce Management

 Which marries together permanent staff, consultants, independent contractors and contingent
workers—is being increasingly deployed within today’s business world as it addresses an organization’s need for
flexibility, agility and stability.

Managed Service Provider Model

Surveys show that organizations that use MSPs have a 27 percent increased compliance to
contingency labor law, 24 percent increased year-over-year cost savings and 23 percent reduced time-to-fill
rates.
Functional flexibility
Which is the ability for staff to move from task-to-task with limited disruption to the operational
processes.
Multi-generational workforce
If managed effectively, can provide a business with increased flexibility, broader experience and skill
sets, more innovative approaches and new perspectives. In order to negotiate the uncertain modern business
environment.

SCOPE OF WORKFORCE PLANNING

 Why would you include it?

 How would it help the company to grow?
 Who to include in the workforce plan?

Supply Analysis
Profiling your current workforce and projecting the future
composition needed.

 What job now exist?

 How many people are performing?
 How Essential is the job?
 Number of Employees
 Number of Positions
 Existing skills/ competencies
 Performance ratings
 Employee Competency levels

Steps in making Workforce Planning:

Recruitment and Its method

Recruitment is the process by which

a business seeks to hire the right person for a vacancy.
Recruitment Process

Process of HR Recruitment

Fair Human Resources Practices are made to support the

developed workforce planning and there are 5 things that
a workforce plan must possess:

a) Business Needs
- In business need, organizations must see the
changes in business for them to align and meet
the goals or expectations in future programs and
services and how organizations will be affected
by these changes. Another thing is that
organizations must identify what they have and
what will the organization in the future.
b) Capacity
- Capacity means that maximum level. In
organization aspect, they must see if they have
the capability to meet those expectations or goals set on the company. For the current capacity of the organization- the

positions and people-, one must see if the current

capacity is able to meet the needs for future programs.
c) Talent
- Talent also means the skills that needed and to be able to compare and re-align the organization against future requirements.
It will also help the organization to build a tea or department that mixed with talents and skills to the organization.
d) GAP Analysis
- Gap analysis is used to see the discrepancy and differences of talents and workforce so, the organization will identify and
prioritize practical approaches or solutions to fill or close those gaps.
e) Strategies and Renewal
- The workforce needs to develop and improve by innovating new strategies. By this reason, here are 4 key points to consider:
 Build leadership capacity
 Create organizational alignment
 Develop targeted and modernized recruitment and retention approaches and strategies.
 Design new learning and skills development approaches
5 WORKFORCE MANAGEMENT THEORIES:
 Contingent Workforces Management
 Blended Workforce Model
 Managed Service Provider Model
 Multi-generation Workforce Management
 Functional Flexibility

Steps in Workforce Planning

 Forecast Labor Demand
It answers the question “How many people with what skills we need?”, it focuses on the skills that a company need that a
person/employee should possess. In forecast labor demand, a firm’s future staffing depends or should reflect demand for
its products/services, adjusted for changes the firm plans to make it a strategic goal and for changes in its turnover rate
and productivity. To make it short, forecast labor demand should start with estimating will be the demand for your
products or services.

There are two ways to estimate the possible demand for the firm’s product/services:
a) Short term – it says that the management should see the daily, weekly, and seasonal forecasts.
b) Long term – management will follow industry publications and economic forecasts closely.

The basic process for forecasting personnel needs is to forecast the revenue first and then estimate the needed staff
required to support the sales volume. For this reason, there are basic tools for projecting personnel needs such as trend
analysis, ratio analysis, and the scatter plot.

 Trend Analysis
- studying variations in the firm’s employment levels over the past few years. However, trend analysis only provides
an initial estimate of future staffing needs.
(E.g. Computing the number of employees at the end of each 5 years in each subgroup to identify needs.)

 Ratio Analysis
- Making forecasts based on the historical ratio between 1) some casual ratio (like sales volume) and 2) number of
employees required (such as number of salespeople).

(E.g. Given that a saleslady makes 50,000 in sales. If the sales revenue to salespeople ratio remains the same, and the firm
aims for 300,000 in sales, therefore, the firm would require or in need of 6 new salespeople next year to reach the 300,000
sales.)

! Trend analysis and ratio analysis assumes things like productivity remains the same. If sales productivity were to rise or
fall, the ratio of salespeople would change.

 Scatter Plot
- A graphical method used to help identify the relationship between two variables.

Though scatter plots have drawbacks.

1. Historical sales/personnel relationships assume that the firm’s existing activities and skill needs will continue as is.
2. They tend to reward managers for adding employees, irrespective of the company’s needs.
3. They tend to institutionalize existing ways of doing things.

 Forecast Labor Supply

- It answers the question, “How many employees in what position will we need?”, it focuses on the employee itself
and the availability of the job or position.
 a) Inside Candidates
- Inside Candidates are also the “current employee” of the firm that are qualified or trainable for the vacancies or
openings.
As for the inside candidates, the small firms use manual devices to track employee qualification.
There are basic tools for assessing the inside candidates:

 Personnel Replacement Chart

Company records showing present performance and promotability of inside candidates for the most important position.

 Position Replacement Card

A card that is designed for each position in a firm to show possible replacement candidates and their qualifications.

 Markov Analysis
A mathematical process also known as, “Transition analysis” to forecast availability of internal job candidates. It also
creating a matrix that will show the probability that employees in the chain of feeder positions for a key job will move from
position to position and will be able to fill the key position.

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Week 3: Selection and Performance Management

What is Screening/Selection?
Selection is the process of picking or choosing the right candidate, who is most suitable for a vacant job position in an
organization. In other words, selection can also be explained as the process of interviewing the candidates and evaluating
their qualities, which are required for a specific job and then choosing the suitable candidate for the position.

The selection of the right applicant for a vacant position will be an asset to the organization, which will be helping the
organization in reaching its objectives.

The Importance of Selection

Selecting the right employees is important for three main reasons

1. Your own performance always depends in part on your subordinates. Employees with the right skills or who are abrasive
or obstructionist won’t perform effectively, and your own performance and the firm will suffer. The time to screen out such
undesirables is before they are in the door, not after.

2. Effective screening is also important because it’s costly to recruit and hire employees. Hiring and training even a clerk
can cost $5,000 or more in fees and supervisory time. The total cost of hiring a manager could easily be 10 times as high,
after search fees, interviewing time, reference checking, and travel and moving expenses are tallied.

3. Careful selection is also important because of the legal implications of incompetent selection. For one thing, EEO
legislation and court decisions require you to systematically evaluate your selection procedure’s effectiveness to ensure
that you’re not unfairly discriminating against any protected group. Furthermore, courts are increasingly finding employers
liable when employees with criminal records or other problem use their access to customers’ homes or other similar
opportunities to commit crimes. Hiring workers with such backgrounds without proper safeguards is called negligent
hiring.

The Significance of Selection

Whereas recruitment encourage individuals to seek employment with a firm, the purpose of the selection process is to
identify and employ the best qualified individuals. Selection is the process of choosing from a group of applicants the
individual best suited for a particular position and organization. As you would expect, a firm’s recruitment success has a
significant impact on the quality of the selection decision. When recruitment efforts fail to produce qualified applicants,
the organization must hire marginally qualified people. There are many ways to improve productivity, but none is more
powerful than making the right hiring decision .

Difference Between Recruitment and Selection

Selection must be differentiated from recruitment, though these are two phases of employment process. Recruitment is
considered to be a positive process as it motivates more of candidates to apply for the job. It creates a pool of applicants. It
is just sourcing of data. While selection is a negative process as the inappropriate candidates are rejected here.
Recruitment precedes selection in staffing process. Selection involves choosing the best candidate with best abilities, skills.

Environmental Factor Affecting the Selection Process

1. Speed of decision making- The time available to make the selection decision can also have a major effect on the
selection process. Suppose, for instance, that the production manager for a manufacturing firm comes of human resource
manager’s office and says, “My only quality control inspector just had a fight and both resigned. I can’t operate until those
positions are filled.” In this situation, speed is crucial and a few phone calls, two brief interviews, and a prayer may
constitute the entire selection procedure.

2. Organizational Hierarchy- Organizations usually take different approaches to filling positions at varying levels. For
instance, consider the differences in hiring a chief executive officer and a data entry clerk. Extensive background checks
and multiple interviews would most likely apply for the executive positions. On the other hand, an applicant for a clerical
position would probably take a word processing test and perhaps have a short employment interview.

3. Applicant Pool- The number of qualified applicants for a particular job can also affect the selection process. The
process can be truly selective only if there are several qualified applicants. Yet, only a few applicants with the required
skills may be available. The selection process then becomes a matter of choosing from whomever is at hand.

● Selection Ratio- number of people hired for a particular job compared to the individuals in the applicant pool is
often expressed as a selection ratio or

Selection= No. of open positions / No. of available applicants

The selection ratio’s value must range between 0 and 1. where 0 indicates low selection ratio and 1 indicates high selection
ratio. It is assumed that lower the ratio; the better would be the selection decision, as selector can be more selective in
their hiring.

By using certain accurate testing methods for hiring, and combining them with a low selection ratio, business HR
professionals can be practically guaranteed a high success rate for their new employees. If, however, a low ratio is
accompanied by inaccurate testing methods, it can be problematic for HR professionals because it leaves less room for
error. This could result in qualified applicants being rejected in favor of unqualified ones, leading to significant impact on
overall production and business success.

4. Type of Organization- The sector of the economy individuals- private, governmental, or not-for-profit can also affect
the selection process. A private sector business is heavily profit oriented. Prospective employees who can help achieve
profit goals are the preferred candidates. Consideration of the total individual, including job-related personality factors, is
involved in the selection of future employees for this sector.

Government civil service system typically identify qualified applicants through competitive examinations. Often a manager
may select only from among the top three applicants for a position. A manager in this sector may not have the prerogative
of interviewing other applicants.
Individuals considered for position in not-for-profit organization confront still a different situation. The salary level may not
be competitive with those of private and governmental organizations. Therefore, a person who fills one of these positions
must be not only qualified but also dedicated to this type of work

5. Probationary Period- Many firms use a probationary period that permits them to evaluate an employee’s ability
based on established performance. This practice may be either a substitute for a certain phase of the selection process or a
check on the validity of the process. The rationale is that if an individual can successfully perform the job during the
probationary period, the process does not require other selection tools. In any event, newly hired employees need
monitoring to determine whether the hiring decision was a good one.

Even in unionized firms, the labor/management agreement typically does not protect a new employee until after a certain
probationary period. This period is typically from 60 to 90 days. During that time, an employee can be terminated with
little or no justification. On the other hand, firing a marginal employee in a union environment may prove to be quite
difficult after the probationary period. When a firm is unionized, it becomes especially important for the selection process
to identify the most productive workers. Once the probationary period is completed, workers are under the
labor/management agreement and the firm must follow its terms in changing the worker status.

Selection Process/Methods
selection process or selection procedure involves a series of steps to be followed for choosing the suitable person for the
vacant job. This process starts after recruitment and divides the candidates in two parts those who will be offered job and
those will not be. There is a need of well-organized selection process because only then the right type of candidate can be
selected and unsuitable candidates are rejected. The selection process varies from organization to organization and even
from department to department within the same organization. Like in some organizations medical examination is done
after final selection while in others it may be done before final selection. However, every organization designs the selection
process as per its need. The main selection process steps are:

1. Preliminary interview: the selection process generally starts with this step where the totally unsuitable applicant is
eliminated. Thus, the organization is saved from the expenses of processing the applicant through the remaining steps of
selection. The candidates who pass this step are only asked to fill the application form.

2. Receiving applications: after passing the preliminary interview the candidate is asked to fill the standard application
form. The application form generally consists of the information about the age, qualification, experience etc. of the
candidate on the basis of which the interviewer gets the idea about the candidate and this information also helps in
formulating questions.

3. Screening of applications: after receiving the applications the screening committee screens the applications. Only the
candidates who qualify the criteria of the screening committee are called for the interview. Usually the candidates selected
for interview are four to six times more than the number of posts. Interview letter is sent to them or they are called
telephonically.

4. Employment test: after getting the interview letter and before going to the interview, there is one more step and that
is the employment tests. These tests are done to check the ability of the candidate. These tests vary from organization to
organization and change as per the needs of the particular job. these tests are intelligence tests, aptitude tests, trade tests,
interest tests, personality tests etc. these tests must be designed properly otherwise they will not good indicator of one's
knowledge.

5. Employment interview: the candidates who qualify the above tests are called for the employment interview. This
interview is done to get more information about the candidate, to give him the actual picture of what is required from him,
to check the communication skills of the candidate etc. for senior position post; a panel is prepared who take the
interview. At the end of interview of each candidate the members of panel discuss about the candidate and give him the
grades.
There may be direct interview or indirect interview. The interview should be conducted in a room free from the noise and
disturbance only than the candidates will be able to speak freely and frankly.

6. Checking references: before selecting the employ the prospective employee generally look out for the referees given
by the candidate. To check about the candidate’s past record, reputation, police record etc.

7. Physical examination: The organizations generally prefer medical examination to be incurred of the person to avoid
time and expenditure spend on the medically unfit person. Sometimes the organization may ask the candidate to get them
examined from the medical expert.

8. Final selection: after all these steps the candidate is selected finally. He is appointed by issuing appointment letter.
Initially he is appointed on probation basis after finding his work satisfactory he is appointed as a permanent employee of
the organization or otherwise he may be terminated.

The History of Employment Background Screening

Pre-employment Screening- is a background checks that reveal information about a person's character, reputation, and
experience.

To discover the history of background checks, we must first understand an employer's reasoning for managing risk.

Risk Management
Employers have a responsibility to keep its employees and customers safe. In cases where an employee becomes violent or
displays criminal behavior, the employer can be accused of negligent hiring, taken to court, and be responsible for punitive
damages.

Background checks manage risk for employers by:

• Building a culture and reputation of trust and good will.

• Creating a safe working environment.

• Uncovering a potential for fraud, theft, or criminal activity.

• Reducing turnover due to hiring the wrong candidate.

• Revealing false information found on employment applications or resumes.

• Providing proof to insurance underwriters that employees pose no risk.

• Protecting the employer from liability in the case of violence in the workplace.

HISTORY:
Negligent hiring law first appears in a 1908 case of an apprentice's prank that accidentally killed a fellow employee. The
employer was held liable for the death because they had witnessed the apprentice's reckless action but kept him
employed anyway.

From 1911 - 1933, the law was expanded to cover acts that occurred outside of employment (hiring someone with a
violent disposition) and violence against customers injured by an employee.

A 1951 case tells of a delivery man who "made an indecent attack" on a housewife. The employer, the court advised, was
to be held responsible for the "reasonable care to select employees competent and fit for the work assigned to them and
to refrain from retaining the services of an unfit employee", especially since their employees dealt with the public.

By the late 1970's, more employers were being held liable for negligent hiring.
By looking at the past of a candidate, an employer can select an applicant that is not only qualified for the position, but can
also be a great long-term investment for the organization.

Making the Hiring Decision (THE 7 TIPS)

Who you choose to hire makes a big difference to the success of your organization. A hiring decision can have a long legacy,
so be sure to set the stage for success. Planning, preparation and more efficient processes will save your company in the
long run. A bad hire can be a very expensive mistake!

1. Know What You Want

The first step to making a good hiring decision is to know what you are looking for. You need to take the time to make a
thorough job description so that you know exactly what the role involves. Once you know about the job requirements and
essential qualifications, you can adapt your job search to find the right talent for the role.

2. Look in the Right Places

To recruit the right talent, you need to look in the right places. One of the most effective means of making a good hiring
decision is to implement an employee referral program. Employee referrals have a much better success rate in recruiting —
the applicant-to-hire ratio for employee referrals is 10 to 1, whereas it takes 72 applicants from traditional sources to make
one hire.

Be sure that you also tap into the potential of social media. Platforms like LinkedIn, Twitter and Facebook are great tools to
recruit passive candidates and those who already buy into your brand and culture. Use a modern applicant tracking system
to manage your postings on job boards and social networks. Over time the analytics will show you which of your sourcing
strategies has brought the best results, making it possible for you to target your search and save money while making a
good hiring decision.

3. Create a Good First Impression

The efficiency of your recruitment process says a lot about your company. Be sure to make the best impression by creating
a good candidate experience from start to finish. A talented candidate is also interviewing your organization, judging
whether or not it is a good workplace. A good hiring decision relies on a talented pool of candidates, so do all that you can
to ensure that you don’t turn off potential employees with a poorly run hiring process.

4. Select the Right Hiring Team

Hiring is best done in teams and the right team is essential. Don’t just put anyone on the hiring team — create a team that
represents both the hiring section and your human resources professionals. The team should include the direct supervisor
of the position you are filling, as well as someone who has a thorough understanding of the position and the duties
involved. As mentioned, interviews work two ways and when attending an interview, a candidate is getting a feel for the
people they would work with. So, ensure that you are also selecting your most personable staff for the interview team.

5. Be Objective
Structured interviews are key to making a good hiring decision. You need to set a level playing field in which you ask each
candidate the same questions — this way you are comparing apples to apples when it comes to decision time.

It is important that you not just strike up a conversation with each candidate and go with your gut. You need to ask specific
recruiting questions that are relevant to the job and its duties. Use your detailed job description to create realistic
scenarios so that you can accurately assess each candidate’s knowledge, skills and abilities. This will give you insights into
how the candidate would perform on a day-to-day basis.

6. Be Goal-Driven
Set out a workflow for your hiring process so that you can keep your goals front and center. Set goals for the must-have
qualifications you need to find in a candidate, as well as goals for when you will complete each step of the hiring process.
Delays hurt your hiring process by making it cost more and giving candidates a poor impression of your company. To make
a good hiring decision, you need to ensure your most talented recruits remain interested and available.

7. Act Quickly
A hiring process can easily be set off-course if it isn’t given proper attention by the hiring team. Set up a schedule for your
hiring process and ensure that the hiring team sticks to it. A modern applicant tracking system is a great help, with built in
alerts to let you know when you are approaching a deadline or when candidates are spending too long at one stage in the
hiring funnel.

Follow these seven tips and you are all set to make a good hiring decision. Happy hiring!

METRICS IN RECRUITMENT AND SELECTION

● Metrics quantify the impact and measure the success of human resources management programs and process.
It has two kinds of metrics that are measured in a business. These are:

CPH - cost per hire

Metric that measures the costs related to recruiting and hiring employees

CPH= external costs + internal costs / total no. of hires in a time period

External cost- it is done outside of the company ex: advertising, travelling cost and many more.

Internal costs- this is done inside the company such are the salary of the employee and the technologies use to run the
business. Monitor the costs that is spent for the new hire employees and allows the company to see where they can save
money in the future.

TTF - time to fill

It is the no. of days from when an employee quits their job until an offer is accepted by a new candidate for that job.

TTF= total no. of days of opened jobs / total number of jobs

In this metric it allows the company to budget the fund for the recruitment process and also it will be easy for them to
distribute the work to the employees.

RYR= recruitment yield ratio

The ratio of the applicants that found the job posting from different advertisement.

It can also help the company to figure out the proportion of successful candidates from specific source.

RYR= total no. of candidates that made it to the next round / total no. of candidates for ALL source

DEFINING PERFORMANCE

- A process and an outcome or in other words, it is about doing the work as well as being about the
results achieved.

WHAT IS PERFORMANCE MANAGEMENT?

- is the process of identifying, measuring, managing, and developing the performance of the human resources
in an organization. Armstrong and Baron defined Performance Management as “strategic and integrated
approach to increase the effectiveness of companies by improving the performance of the people who work in
them and by developing the capabilities of teams and individual contributors.”
WHY WE NEED IT?

- To develop the skills that are needed in order to achieve goals that are aligned to the mission of the
company. This type of management can determine whether the employee/s are suitable to the task/job that is
given to him/her.

WHAT IS PERFORMANCE APPRAISAL?

- is the ongoing process of evaluating employee performance. Guide the process of determining how
well employees do their jobs relative to a standard and communicating that information to them.

- Evaluation of employees’ performance.

WHY APPRAISE PERFORMANCE?

● It provides important input on which promotion and salary raise decisions can be made.

● The appraisal lets the boss and subordinate develop a plan for correcting any deficiencies the appraisal might
have unearthed, and to reinforce the things that subordinate does correctly.

● Appraisals can serve a useful career planning purpose by providing the opportunity to review the employee's
career plans in light of his or her exhibited strengths and weaknesses.

Steps in Appraising Performance.

● Defining the job means that making sure that you and your subordinate agree on his or her duties and job
standard.

● Appraising Performance means comparing your subordinate's actual performance to the standards that have
been set.

● Performance Appraisal usually requires one or more feedback session. Here the two of you discuss the
subordinate's performance and progress, and make plans for any development required.

"Action Levers" that contribute to improved performance

● Top Management Levers including:

Consistent messages that senior managers value the workforce, recognition in decision-making of the importance of the
employee commitment to organizational success, clear communication of the organization's mission, guiding principles
and core values, regular communication to inform employees of performance results, periodic communication to recognize
the importance of employee efforts, publishing past success stories to build pride in organization, recognizing significant
group, team and individual accomplishments, providing the technology and resources needed to meet performance
expectations, balancing the importance of organizational performance of employee personal goals.

● Organizational Levers including:

Self-managed teams, employee empowerment, broadening span of management control, minimizing hierarchy and
status distinctions, eliminating structural barriers between individuals, teams, and groups, knowledge management and
employee problem-solving.

● Human Resource Levers including:

Investment in skill-building, salary increase on pay-for-contribution basis, profit-gain-sharing, results-based PMS,
banded salary system to encourage employee flexibility, competency-based HR system to focus on employee capabilities
and generic job classification.
 ● Supervisory Levers including:
Job rotation and cross-training, flexible work schedules, regular constructive feedback on employee strengths and
development needs, encouragement and support for skill development and learning, teamworking, encouragement for
employees to broaden the scope of their role, definition of individual and team performance goals and measures, effective
coaching on-going employee involvement, recognizing and celebrating employee accomplishments, providing
opportunities for fun at work, consistency in decision-making and discipline.

Important Advantages and Disadvantages of Appraisal Tools

++++++++++++++++++++++++++++++++++++++++++

Week 4: EMPLOYEE TRAINING

TRAINING ORIENTATION AND DEVELOPMENT
 What is Training?
- Training is a systematic process of changing the
behavior, knowledge and motivation of present employees to improve match characteristics and employment
requirement.
 What is Employee Training?
- Program that increase the technical skills,
knowledge, efficiency, and value creation to do any specific job in a much better way.
 Training and Human Resource Activities
- Employment Planning
- Staffing
- Performance Appraisal

- Motivating Employees

TRAINING PROCESS FRAMEWORK

A model that defines the processes associated with managing a training organization.

Functional Groups and Process Definition

Administration Process – managing the logistics and day-to-day operations of a training function
Content Process – creating and managing content
Delivery Process – transfer of information.
Technology Process – managing the technologies that are
inherent in creating, managing, and delivering training.

Administration Process:
- Strategic Planning
- Client Relationship Management
- Scheduling and Registration
- Financial and Billing Services
- Assessments and Testing
- Vendor Management
- Tuition Reimbursement
- Marketing and Communications
- Reporting and Metrics
- Materials Fulfillment

Content Process:
- Portfolio Management
- Instructional Design
- Content Development
- Content Curation
- Graphic Design
- Content Refreshment

Delivery Process:
- Instructor Recruitment
- Instructor Development
- Instruction
- Classroom Support
- Course Feedback
- Real Estate and Facilities

Technology Process:
- LMS/LCMS Management
- LMS (Learning Management System
- LCMS (Learning Content Management System)
- Authoring Systems Management
- Delivery Platform Management
- Collaboration Platform Management

Uses:
- Standardize Language
- Sourcing Engagements
- Communicating Suppliers’ Capabilities

BENEFITS OF EMPLOYEE TRAINING

1. Decreased Accidents- If the employee is trained there are less chances of any errors or accidents on the job.
2. Better Productivity- Training of the employees enhances their productivity as well as their efficiency.
3. Improved Employee Morale- Training increases the job security as well as the job satisfaction of the employee, which
eventually results in lesser absenteeism and job turnover.
4. Declined Supervision- A trained employee is well aware of duties and responsibilities and will need less of supervision,
which will result in less wastage of efforts and time.
5. Probability of Promotion- Training equips employees with better skills and knowledge which makes them more eligible
for promotions.

Organization
- Profit
- Reduced Employee Turnover
- Deeper Talent Succession Pipeline
Individual
- Increased Employee Motivation
- Improved Engagement
- Improved Productivity Speed and Competency

• Importance of Employee Training

▪ It keeps the employees updated with the latest
trends and technologies that are needed to survive in this competitive environment.
▪ It improves the quality of work of employees across
different levels in an organization.
▪ It is needed when an employee is moved from one
assignment to another job location of different nature. The employee can be provided the insights about the new
assignment, new environment and its organizational dimensions

THEORIES IN EMPLOYEE TRAINING

Four Major Theories of Training and Development
▪ Theory of Reinforcements (Skinner)
It states that individual’s behavior is a function of its consequences. It is based on “law of effect”, i.e., individual’s behavior
with positive consequences tends to be repeated, but individual’s behavior with negative consequences tends not to be
repeated
▪ Positive Reinforcement
This implies giving a positive response when an individual show positive and required behavior.
▪ Negative Reinforcement
This implies rewarding an employee by removing negative / undesirable consequences.
▪ Punishment
It implies removing positive consequences so as to lower the probability of repeating undesirable behavior in future.
▪ Extinction
It implies absence of reinforcements. In other words, extinction implies lowering the probability of undesired behavior by
removing reward for that kind of behavior

• Theory of Learning Types (Gagne)

1. Gaining attention (reception)
2. Informing learners of the objective (expectancy)
3. Stimulating recall of prior learning (retrieval)
4. Presenting the stimulus (selective perception)
5. Providing learning guidance (semantic encoding)
6. Eliciting performance (responding)
7. Providing feedback (reinforcement)
8. Assessing performance (retrieval)
9. Enhancing retention and transfer (generalization).

Theory of Experiential Learning (C. Rogers)

 Theory of Social Learning (Albert Bandura)
Social learning theory is a theory of learning process and social behavior which proposes that new behaviors can be
acquired by observing and imitating others. It states that learning is a cognitive process that takes place in a social context
and can occur purely through observation or direct instruction, even in the absence of motor reproduction or direct
reinforcement.

EMPLOYEE ORIENTATION AND ONBOARDING ACTIVITIES

Orientation vs. Onboarding THE TRAINING PROCESS

A stage of onboarding An ongoing process of building Step 1: Decide If Training is needed
where new employees engagement from the first The first step in the training process is a basic one: to
learn about the company contact until the employee determine whether a problem can be solved by training.
and their job becomes established within the Training is conducted for one or more of these reasons:
responsibilities. organization. 1) Required legally or by order or regulation 2) to
It is to get you on the It has goal decreasing the time it improve job skills or move into a different position 3) for
payroll, signed up for takes for a new hire to reach the an organization to remain competitive and profitable. If
benefits, and to give you minimum expected productivity employees are not performing their jobs properly, it is
a brief overview of the level on the job. often assumed that training will bring them up to
company’s culture, standard. This may not always be the case. Ideally,
products, and values. training should be provided before problems or
Focus: Role in company Focus: Role in department accidents occur and should be maintained as part of
Duration: One-time event Duration: Sequence of events quality control.
Setup: Classroom Setup: On-the-job
Content: Big picture Content: Individualized Step 2: Determine What Type of Training is needed
Outcome: Ready for Outcome: Ready to contribute The employees themselves can provide valuable
training information on the training they need. They know what
they need/want to make them better at their jobs. Just ask them! Also, regulatory considerations may require certain
training in certain industries and/or job classifications. Once the kind of training that is needed has been determined, it is
equally important to determine what kind of training is not needed. Training should focus on those steps on which
improved performance is needed. This avoids unnecessary time lost and focuses the training to meet the needs of the
employees.

Step 3: Identifying Goals and Objectives

Once the employees' training needs have been identified, employers can then prepare for the training. Clearly stated
training objectives will help employers communicate what they want their employees to do, to do better, or to stop doing!
Learning objectives do not necessarily have to be written, but in order for the training to be as successful as possible, they
should be CLEAR and thought–out before the training begins.

Step 4: Implementing the Training

- Training should be conducted by professionals with
knowledge and expertise in the given subject area; period. Nothing is worse than being in a classroom with an instructor
who has no knowledge of what they are supposed to be teaching! Use in-house, experienced talent or an outside
professional training source as the best option. The training should be presented so that its organization and meaning are
clear to employees. An effective training program allows employees to participate in the training process and to practice
their skills and/or knowledge. Employees should be encouraged to become involved in the training process by participating
in discussions, asking questions, contributing their knowledge and expertise, learning through hands–on experiences, and
even through role–playing exercises.

Step 5: Evaluation Training Program

- One way to make sure that the training program is
accomplishing its goals is by using an evaluation of the training by both the students and the instructors Training should
have, as one of its critical components, a method of measuring the effectiveness of the training. Evaluations will help
employers or supervisors determine the amount of learning achieved and whether or not an employee's performance has
improved on the job as a result.

TRAINING METHODOLOGIES
Instructor-led Training
- Most traditional and widely used training
method - This method mimics other educational
environments like a college course.
- Advantages: Personal Interaction
- Disadvantages: Lack of scalability
(requires an instructor to be present at all times, and can get complicated when class sizes get too big for one-on-one
interactions) and Rigidity (If one trainee is outpacing others, ready to learn more and feeling unchallenged, he or she isn’t
able to create a personalized learning path.)

Interactive Methods
- Classroom style in a new level adding
interactive and group activities to the training experience.
- Small group discussions, case study
reviews, role playing, quizzes and demonstrations.
- Advantages: Empowers conversation and
group interactions - you not only keep the energy high, but allow participants to all learn from each other.
- Disadvantages: Might not be effective to
introvert people. They might not feel as comfortable speaking up and interacting, and may get less out of this type of
training.

Hands-on Training
- Practical - allows trainees to quickly get
their hands on whatever they’re learning.
- Widely preferred by employees.
 - Advantages: Quicker process and
knowledge recollection (hands-on training requires focus, which can improve information retention.)
- Disadvantages: Many people struggle to
understand the complexity of their role without first having the right context.

Computer-based and E-learning Training

- Computer-based Training (any type of
training that takes place on a computer.) while E-learning training (training that’s hosted online via a website or web app.)
- Advantages: Easily scale (This helps
empower a range of learners as people who want to take their time and dive deeper have the freedom to do so, while
quick learners who are more easily bored can move through coursework more rapidly.)
- Disadvantages: Unmonitored (it’s hard to
know whether trainees are truly engaged with the material.)-incorporate quizzes and interactive modules throughout the
digital experience.

Video Training
- Animation (best for explaining complex
topics), Live action (Role play scenarios. Like interaction between employees and customers), To-camera (Interview style,
speaking directly to the viewer), Screen recorded.
- Advantages: Always, accessible,
Affordable to produce, make learning easy, easy to change contents.

Coaching and Mentoring

- A program that supplements educational
curriculum with meaningful human relationships.

++++++++++++++++++++++++++++++++++++++++++++++++++

Week 5: Management Development

Definition- Management Development is a systematic process of management training and growth by which individuals
aspiring to rise on the ladder of management gain and apply knowledge, skills, insights, and attitudes to manage
managers, workers and work organizations effectively. It is also called Management Revolution.

Nature of Management Development

Management or executive development is an organized and planned process and program of training and growth by which
individual manager or executive at each level of management hierarchy gains and applies knowledge, skills, insights and
attitudes to manage workers and the work organizations effectively.

Of course, it is beyond the shadow of doubt that the company can only create the favorable climate for the development
of managers. Ultimately, in any program of management development, self-development will be the key factor to
determine the success of the program of executive development.

Importance of Management Development

Management Development is important to businesses who want to take a proactive approach to growth. No modern
business can continue to be successful without planned attention of growth and development of its managerial staff.

“An institution that cannot produce its own managers will die. From an overall point of view the ability of an institution to
produce managers is more important than its ability to produce goods efficiently and cheaply’’. – Peter Drucker

1. Develop a culture of innovation- your managers have a thorough knowledge of your business and they are some of the
best-placed people to be suggested new products, services or improvements.

2. Retain your best employees – ensure you invest in your employee’s professional development. Employees want to feel
as though they are progressing in their chosen career path and improving their skill-set.
 3. Gain competitive advantage – ensure your managers are equipped with the essential skills in order to distinguish your
business from competition.

4. Management success – management succession planning allows a business to keep moving forward when the inevitable
occurs. Having a successor from within the company can also save time and expenses well as the aiding continuity.

Levels of Management

Different managers perform different types of duties. Some managers decide about the objectives of the business
as a whole. Some managers perform functions to achieve these objectives of different departments like production, sales,
etc. and some of managers are concerned with the supervision of day to day activities of workers. Managers performing
different types of duties may thus be divided into three categories:

- Higher Level Management

- Middle Level Management

-Lower Level Management

Top level management includes board of directors and the Chief Executive. The chief executive may have the
position of the chairman, Managing director, president or general manager. This level determines the objectives of the
business as a whole and lay down policies to achieve these objectives. (making policies meaning providing guidelines for
actions and decisions. It also has an overall control of the organization

Middle level management includes heads of various departments ex. production, sales etc. and other
departmental managers. Sometimes senior departmental heads are included in the top management team. The heads of
the department issues instructions to subordinates as to achieve these objectives.

Lower level management consists of foreman and supervisors. When the work is assigned to workers then these
people ensures that the work is carried out properly and at the right time.

These three levels of management taken together to form the hierarchy of management. It indicates the position
and ranks of managers. Workers including craft persons, manual laborers, engineers, scientists form the bulk of
organizational membership.

Role of Management in Society

The role of managers is to guide the organizations toward goal accomplishment. All organization exist for certain
purposes or goals and managers are responsible for combining and using organizational resources to ensure that their
organizations achieve their purposes. The role of management is to move organization towards its purposes or goals by
assigning activities.

Theories in Management

Development of Management Theory

Ever since the dawn of civilization, one of the biggest concerns of organized cooperation has been management.
While we can trace organization and management as far back as 530 BC, the systematic study and examination of management
is primarily the product of the last four decades of research. Various management theories developed during this time and
contributed to the way we currently approach and understand management. In this article, we will explore
management theories by different authors and the difference between administration and management.

Management Theories – Frederick Taylor

The Father of Scientific Management, Frederick Taylor, attempted to use systematic study in order to find the single
best way of doing a task. He laid down the following four principles of management for all managers:

I. Develop a science for each aspect of work. Also, study and analyze it to find the single best way to do the work.

II. Ensure that the selection of workers is based on a scientific methodology and not on nepotism and favoritism. Also,
train, teach and develop the workforce allowing them to reach the optimum potential.
III. Your employees are not your enemies. Therefore, create an environment of cooperation with them to ensure the
implementation of scientific principles.

IV. Divide all work and responsibility equally between the workers and the management.

Taylor believed that these principles could help determine a fair day’s work for a fair day’s pay in a manner which was
good for both the employees and the management.

Management Theories – Max Weber and Henri Fayol

Max Weber introduced the idea of bureaucratic organizations to the world. Further, this came at a time when politics and
heredity or tradition were the basis of promotions to prominent positions. By definition, bureaucracy is the exercise of control
based on knowledge, expertise, and/or experience

 Qualification-based hiring – Hire employees based on their educational qualification or technical training.

 Merit-based promotion – Managers decide on promotions and base their decisions on experience or
achievement.

 Chain of command – Organizations must have a structure wherein each position reports and is accountable to a
higher position. Also, create a complaints process to protect the rights of workers in lower positions.

 Division of labor – Responsibilities, tasks, and authority is equally divided and clearly defined.

 Impartiality – Regardless of the position or status of an employee, all rules and regulations must apply to all
members of the organization. Recording in writing – Record every single administrative act, decision, rule or
procedure in writing.

 Owners are not managers – The owners of a company should not manage it.

Henry Fayol
The Father of Modern Management Theory, Henri Fayol, proposed a theory of general management which is applicable to all
types of fields and administration. He divided all activities of an industrial enterprise in the following six groups.

1. Technical activities pertaining to production

2. Commercial activities (buying/selling)

3. Financial activities pertaining to the optimum utilization of capital

4. Accounting activities (final accounts, costs, statistics, etc.)

5. Security-related activities (protecting the premises)

6. Managerial activities
Of these, Fayol focused his work on describing and explaining managerial activities. He grouped managerial functions around
the activities of planning, organizing, commanding, coordinating, and controlling. He suggested the following 14 principles of
management.

1. Division of Work: to ensure optimum performance with minimal effort.

2. Authority and Responsibility: Every authority comes with certain responsibilities.

 3. Discipline: Employees must respect and obey their superiors.

4. Unity of Command: Every employee must receive orders from only one senior.

5. Unity of Direction: If there are a group of tasks with a common objective, then there must be a single head and a
single plan.

6. Subordination: Individual interest is secondary to the general interest.

7. Remuneration: Wages must afford maximum satisfaction to the employees and the firm.

8. Centralization: The organization must decide about the amount of authority that the higher levels would retain or
dispersed in the organization.

9. Scalar Chain: The relations between the superiors and subordinates should be short-circuited and not detrimental to
the business.

10. Order: All employees and process must have an appointed place.

11. Equity: Managers must strive for equity and equality of treatment while dealing with the employees. They must
display a combination of kindness and justice.

12. Stability of Tenure of Personnel: Managers must try to reduce employee turnover.

13. Initiative: Managers must take initiatives.

14. Espirit de Corps: There must be an emphasis on teamwork and effective communication for achieving it.

Behavioralists, Sociologists, and Psychologists

Many behavioralists believed that the study of management must concern itself with human behavior in organizations.
Further, they felt that the effectiveness of an organization relies on the quality of the relationship among the people
working in it.

Systems Approach
The systems approach defines a system as a set of interdependent and inter-related parts arranged meticulously to produce a
unified whole. Also, systems are of two types – Open and Closed. An open system recognizes the dynamic interaction with the
environment (suppliers, labor unions, customers, etc.). On the other hand, in a closed system, the environment has no
influence on it
Steps in Establishing a Management Development Program

1. Looking at organizational objectives- the first step in management development program is to identify the
organization’s objectives. The objectives tell “Where we are going” and will develop a framework from which the
executive needs can be determined.

2. Ascertaining Development Needs- Next step is ascertaining development needs which requires forecast its needs
for present and future growth. This is based upon a comprehensive job analysis with particular reference to the
kind of executives needed and the kind of education, experience, training, special knowledge, skills, personal
traits, et6c, required for such work.

3. Appraisal of Present Management Talents - is made a view to determining qualitatively the type of personnel
available within an organization itself. The performance of management individual is compared with the standard
expected of him. His personal traits are also analyzed so that a value judgment may be made of his potential for
advancement.

4. Management Power Inventory - Now a management power inventory is prepared for the purpose of getting
complete information about each management individual’s bio-data and educational qualifications the results of
the tests and performance appraisal. From these it can be known that several capable executives are available for
training for higher positions.

5. Individual Development Program - The planning of individual development programs is undertaken to meet the
needs of different individuals, keeping in view the differences in the attitudes and behavior, and in their physical,
intellectual and emotional qualities. The weak and strong points of individual are known from his performance
appraisal reports and, on this basis, training program are framed and launched.

6. Establishment of Training and Development Program - This job is done by the personnel department. A
comprehensive and well-conceived program is prepared, containing concentrated brief courses in different fields,
human relations, decision making, leadership, etc.

7. Evaluating Development Program - Evaluation of training is any attempt to obtain information (feedback) on the
effects of a training program and assess the value of training. The most important means of evaluating
development programs are observation, ratings, trainee surveys, trainee interview sets.

Management Development Strategies

Management development strategies are several and diverse depending on the context and purpose. In implementing
strategy, it is recognized that management development goes beyond training courses. Thus, a wide range of formal and
informal learning activities will be employed to develop employees even managers which include the ff:

1. Conference Method- is widely used instructional approach that brings together individuals with the same interest
to discuss and attempt to solve problems. If the problem is finished to discuss the leader will let the members
speak and solve their own problems
2. Behavior Modelling- has long been successful training method that utilizes live demonstration or video tapes to
illustrate effective interpersonal skills and how managers function in various situations. It is observing what others
do.

3. In Basket training- is a simulation in which the participant is given a number of business papers, such as
memorandum and reports that typically goes in the managers desks. The papers are in no particular order and
this call for actions ranging from urgent to routine. It is assigning a priority to each situation.

4. Internships- is a recruitment method where students divide their time between attending classes and working for
an organization. This can serve as an effective training method. An internship provides an excellent means of
viewing a potential permanent employee.

5. Job Rotation- involves moving employees from one job to the other to broaden their experience. Rotational
training helps new employees understands the variety of jobs within their fields

6. Programmed Instructions- A teaching method that provides an instruction without the intervention of the
instructor. This is commonly done in computers.

7. Coaching- is an on the job approach to management development when the manager ids given an opportunity to
teach on a one to one basis.

8. Mentoring- the trainee is given an opportunity to learn from one to one from more experienced organizational
members

9. Business Games- simulations that represent actual business situations. The participants are assigned different
roles then competes with each other

10. Case Study- is a training method that utilizes simulated business problems for trainees to solve. Decision making
skills will be tested here.

Making a Management Development Plan

We must define first what a development plan means, a DEVELOPMENT PLAN is a formal set of developmental
goals having an action steps with targeted completion dates, established at the beginning of the performance year. In this
development, it includes

1.) "learning" in which learning directed toward specific objectives such as following certain regulations or procedures or
the application of an acquired skill

2.) "education" in which learning directed at broader objectives such as becoming a more effective supervisor or better
leader.

Having a well-thought-out development plan will further provide the employees with a lot of more opportunities, a clear
perception and direction as well on increasing their different skills that leads to advancements and succession of their
careers. With this, a more expanded skill set will forge ahead in the business.

There are 5 steps in creating a Development Plan:

STEP 1: CONSIDER BUSINESS GOALS.

- Before setting objectives for the employee development plan, start first by aligning the development needs with the
company's business needs.

STEP 2: TALK TO YOUR EMPLOYEES.

- Talk with each of the team members to better comprehend and assimilate what their career goals are. Do not assume
that you already know the employees' skill level and career aspirations.

STEP 3: RECOGNIZE POTENTIAL VS. READINESS

- As you assess your staff, you need to recognize the big difference of the two.

STEP 4: CONSIDER ALL TYPES OF TRAINING AND DEVELOPMENT

- After knowing what the objectives are, it's time to find out how your employee will acquire new skills. Conducting
development programs that is not way too much expensive will work. Formal classroom trainings or online discussions are
some of the ways to help the team to expand their talents.

STEP 5: CREATE A PLAN FOR BEFORE, DURING AND AFTER

- Once you have already identified some of the specific learning opportunities, start creating a plan with a specific and
timely goals.

++++++++++++++++++++++++++++++++++++++++++++++++++

Week 6: Compensation Management

Compensation management is the practice of the organization that involves giving monetary as well as non-monetary
rewards to the employees, in order to compensate for the time, they allocate to their job. The use of compensation
management is increasing as organizations have started to realize the need for leveraging its human capital in order to gain
a competitive edge in the industry. Compensation management involves “maximizing the return on human capital.”

THEORETICAL BASES
MOTIVATION THEORY: EXPECTATION AND EQUITY
Vroom's expectancy theory assumes that behavior results from conscious choices among alternatives whose purpose it is
to maximize pleasure and to minimize pain. Vroom realized that an employee's performance is based on individual factors
such as personality, skills, knowledge, experience and abilities. He stated that effort, performance and motivation are
linked in a person's motivation. He uses the variables Expectancy, Instrumentality and Valence to account for this.

Expectancy is the belief that increased effort will lead to increased performance i.e. if I work harder, then this will be
better. This is affected by such things as:
o Having the right resources available (e.g. raw materials, time)
o Having the right skills to do the job
o Having the necessary support to get the job done (e.g. supervisor support, or correct information on the job)

Instrumentality is the belief that if you perform well that a valued outcome will be received. The degree to which a first
level outcome will lead to the second level outcome. i.e. if I do a good job, there is something in it for me. This is affected
by such things as:
o Clear understanding of the relationship between performance and outcomes – e.g. the rules of the reward 'game'
o Trust in the people who will take the decisions on who gets what outcome
o Transparency of the process that decides who gets what outcome

Valence is the importance that the individual places upon the expected outcome. For the valence to be positive, the
person must prefer attaining the outcome to not attaining it. For example, if someone is mainly motivated by money, he or
she might not value offers of additional time off.
 The three elements are important behind choosing one element over another because they are clearly defined:
effort-performance expectancy (E>P expectancy) and performance-outcome expectancy (P>O expectancy).
E>P expectancy: our assessment of the probability that our efforts will lead to the required performance level.
P>O expectancy: our assessment of the probability that our successful performance will lead to certain outcomes.
At first glance expectancy theory would seem most applicable to a traditional-attitude work situation where how
motivated the employee is depending on whether they want the reward on offer for doing a good job and whether they
believe more effort will lead to that reward. However, it could equally apply to any situation where someone does
something because they expect a certain outcome. For example, I recycle paper because I think it's important to conserve
resources and take a stand on environmental issues (valence); I think that the more effort I put into recycling the more
paper I will recycle (expectancy); and I think that the more paper I recycle then less resources will be used (instrumentality)
Thus, Vroom's expectancy theory of motivation is not about self-interest in rewards but about the associations
people make towards expected outcomes and the contribution they feel they can make towards those outcomes.

The Adams Equity Theory was developed by the American psychologist John Stacey Adams in 1963. It’s about the balance
between the effort an employee puts into their work (input), and the result they get in return (output)

To understand Adam’s Equity Theory in full, we need to first define inputs and outputs. Inputs are defined as those
things that an individual does in order to receive an output. They are the contribution the individual makes to the
organization.

Common inputs include:

o The number of hours worked (effort).
o The commitment shown.
o The enthusiasm shown.
o The experience brought to the role.
o Any personal sacrifices made.
o The responsibilities and duties of the individual in the role.
o The loyalty the individual has demonstrated to superiors or the organization.
o The flexibility shown by the individual, for example, by accepting assignments at very short notice or with very
tight deadlines.

Outputs (sometimes referred to as outcomes) are the result an individual receives as a result of their inputs to the
organization. Some of these benefits will be tangible, such as salary, but others will be intangible, such as recognition.

Common outputs include:

o Salary
o Bonus
o Pension
o Annual holiday allowance
o Company car
o Stock options
o Recognition
o Promotion
o Performance appraisals
o Flexibility of work arrangements
o Sense of achievement
o Learning

PAY MODEL
This model helps understand the compensation system in a structured way.

1. Compensation Objectives: Desired results of pay system. The basic pay objectives include efficiency, fairness, and
compliance with laws and regulations. Objectives shape the design of the pay system and serve as the standard against
which the success of the pay system is evaluated. Efficiency, fairness, ethics, and compliance with law & regulations.
Efficiency: improving performance, increasing quality, delighting customers and stockholders-controlling labor costs.
Fairness: fair treatment for all employees by recognizing both employee contributions (higher pay for greater performance,
experience, or training) and employee needs (a fair wage as well as fair procedures).
Compliance: a pay objective means conforming to federal and state compensation laws and regulations.
Ethics: ethics means the organization cares about how its results are achieved.

2. Pay Policy: Internal alignment, competitiveness, contributions, management.

Internal Alignment: Pay relationship in jobs or skill levels within an organization. Focuses attention on employee and
management acceptance of those relationships. Involves equal pay for jobs of equal worth and acceptable pay differentials
for jobs of unequal worth. How differently should diff levels of skills and work be paid in org?
Competitiveness: How should compensation be against competitors?
Contribution: Should pay increases be based on individual and/or team performance, experience, learning, improved skills,
changes in living, personal costs?
Management: How open and transparent should the pay decisions bets all employees? Who should be involved in
designing and managing the system?

3. Pay Techniques: Mechanisms or technologies of compensation management, such as job analysis, job descriptions,
market surveys, job evaluation, and the like, that tie the four basic pay policies to the pay objectives.
Techniques: Internal Structure: Job based/ person-based approaches for an organization.
Pay Structure: Refers to the array of pay rates for different work or skills within a single organization. Focus attention on
differential compensation paid for work of unequal worth.
Pay for Performance: Pay that varies with some measure of individual or organizational performance, such as merit
pay, lump-sum bonus plans, skill-based pay, incentive plans, variable pay plans, risk sharing, and success sharing.
Evaluation: see which technique works best.

FACTORS AFFECTING WAGES OR COMPENSATION OR DETERMINANTS OF WAGES OR COMPENSATION:

1) Productivity of workers: to get the best results from the employees and to increase the productivity compensation has
to be productivity based.
2) Ability to pay: it depends upon the employer’s ability to pay wages to the workers. This depends upon the profitability
of the firm. If the firm is marginal and can’t afford to pay higher than the competitors then the employees will go to other
firms while if the company is successful then they can easily pay their employees as they wish.
3) Government: government has also fixed the rules for protecting the interest of the employees. The organizations are
liable to pay as per the government instructions. Wages cannot be fixed below the level prescribed by the government.
4) Labor union: labor union also helps in paying better wages to the workers. Higher wages have to be paid by the firm to
its workers under the pressure of the trade unions.
5) Cost of living: wages depend upon the cost of living if it is high wages will also hike.
6) Demand and supply of labor: it is one of the important factors affecting wages. If the demand of labor is more, they will
be paid high wages otherwise vice versa. If the supply of the employees is more than they will be paid less and vice versa.
7) Prevailing wage rate: wages also depend upon the prevailing wage rate as the organizations have to pay accordingly to
keep the employees with them.

Forms of Pay
By definition, compensation can be understood as total amount of the monetary and non-monetary reimbursement
provided to an individual in return for labor. It has 2 forms: direct and indirect.
 Direct financial compensation is most widely known and recognized form of compensation. Most sought
after by workers, direct compensation is the money which is paid directly to employees in exchange for their labor. This
includes everything from hourly wages, to set salaries, bonuses, tips and commissions.
 Indirect financial compensation includes all monies paid out to an employee that are not included in
direct compensation. This form of compensation is often understood as the portion of an employee’s contract that covers
items such as temporary leaves of absence, benefits and retirement plans.

Internal Alignment and External Competitiveness

Internal alignment or internal equity refers to comparisons among jobs or skill levels inside a single organization
(Milkovich and Newman, 2008). Jobs and people’s skills are compared in terms of their relative contributions to the
organizations’ business objectives. In Internal alignment also focus on why pay relationships that motivating employees to
choose increased training and greater responsibility in dealing with customers, internal pay relationships indirectly affect
the capabilities of the workforce and hence the efficiency of the entire organization. This also agree by report Business for
Social Responsibility (BSR) Report, 2008) that defines internal alignment is the set of commitments, strategies, policies,
procedures, systems and behaviors that support integrated customer decision making based on suppliers’ commercial and
ethical commitment and performance. This is translated into practice by the basic techniques of reward management, job
analysis, job evaluation, and performance appraisal. The focus is on comparing jobs and individuals in terms of their
relative contributions to the organization’s objectives (Bratton and Gold, 2001).

External competitiveness refers to comparisons of the organization’s pay relative to the pay of competitive organizations
(Bratton and Gold, 2001).
Objective of determining external competitiveness decisions in terms of both how much and what forms are (Milkovich
and Newman, 2008);
To ensure that the pay is sufficient to attract and retain employees if employees do not perceive their pay as competitive in
comparison to what other organizations are offering for similar work, they may be more likely to leave. To control labor
costs so that the organization’s prices of products or services can remain competitive in a global economy.
Overall the internal alignment and external competitiveness are essential to compensation includes any direct or indirect
payments to employees, such as wages, bonuses, stock, and benefits. So external competitiveness directly affects both
efficiency and fairness and it must do so in an ethical way that complies with relevant legislation and internal alignment
seek that where organizations internal drivers, include vision and mission as well as general goals, are aligned with their
words and actions.

Similarities in Internal Alignment and External Competitiveness

In determining internal alignment or external competitiveness or both used for designing the compensation package for an
employee in an organization, there are similarities between them, which are efficiency, fairness and compliance.

First, efficiency that can help imply the future return can encourage employees to remain within the organization,
increasing experience and training, cooperate with workers and seek greater responsibility for the sake of organization
they work for. This will diminish shirking among workers and permit hiring best qualified employees (Milkovich and
Newman, 2008).

Second, fairness also shows that organization must be fair to ensure that good employee don’t retire and sustain
organization productivity and trust among employees. Even though not everyone is paid equal but at least must be fair
according to job, skills and knowledge a certain employee had so what happen when that is perceived as too large?
Fortune (1989), for example asserts that this differential is seen by employees as unfair, resulting in a “trust gap” which
suggests that such differentials are necessary to provide incentives for expending effort and taking on added
responsibilities and risks to the organization which resulted in higher turnover and dissatisfaction among an employee who
work for the organization.

Finally, in compliance which compensation either in internal alignment or external alignment must be complied either in
terms of policy, rules, acts and regulations that have been set up by government? Other than that, this to ensure t all
necessary governance requirements can be met without the unnecessary organization manipulation when operates
certain countries.

COMPENSATION STRUCTURE
Compensation structures continue to evolve, and they usually do so to help organizations keep current with both market
and workforce trends. Some may wonder what compensation structures are. Loosely, “compensation structure” refers to
the various ways that companies can organize their pay practices. They provide guidelines for pay that help organizations
identify whether their pay is in bounds. The right compensation structure means having guidelines for pay relative to the
market or markets where you compete for talent, guidelines that support appropriate internal alignment, and guidelines
that ensure compliance.
DIFFERENT YPES OF COMPENSATION STRUCTURE
1. Traditional
Traditional salary structures usually have many narrow salary ranges and multiple grades, with separate structures for each
type of employee. These structures are often based on specific job functions or occupations. For example, nonexempt
employees will be in one structure, salaried employees in another structure and executives in a third. For each job function
or occupation, the traditional structure might have as many as 10 salary ranges and 10 grades, with a different salary
amounts for each. The traditional salary structure offers flexibility but also has controls, and works well in relatively stable
organizations. However, managers have less discretion to give pay raises with this system.
2. Broadband
In the broadband salary structure, employees are grouped by type of job, such as administrative, professional,
management and executive, rather than being broken down into multiple categories within a job type. This system offers
flexibility and guidelines, but features fewer strict controls. Broad banding has few ranges but they are wide, and salaries
within the range may vary as much as 80 to 200 percent, according to human resources firm WorldatWork. The federal
government typically uses the broadbanding system, according to the Strategic Compensation Policy Center. Career
banding is a variation of broadbanding, with limited structures and few ranges but wide variation. The Strategic
Compensation Policy Center notes that salaries may vary as much as 150 percent within the range.
3. Step
The step structure is more likely to be used when internal equity is important and differences in performance levels are
difficult to assess. Step structures are more rigid than the other two systems, and managers have little discretion in giving
raises. Unlike a traditional or broadband system, step structures tend to be specific to a job. For example, a system may be
set up for payroll clerks I, II and III, each with a salary range. Larger organizations that use step structures are likely to have
wider salary ranges. WorldatWork notes that ranges in step structures are typically 20 to 40 percent. The health care and
social assistance industries tend to use step structures, according to WorldatWork.
4. Market-based
Market-based salary structures are, as the name implies, based on data obtained from the job market about pay ranges for
similar jobs. This type of salary structure has a range for each distinct type of job. The pay ranges are typically narrow to
keep them in line with the external job market. The organization conducts or pays for a salary survey and bases its salary
ranges on the results of the survey. In October 2012, WorldatWork reported 64 percent of organizations used market-
based salary structures. Consulting, professional, and scientific and technical services are the organizations most likely to
use market-based salary structures.

JOB EVALUATION
The Job Evaluation is the process of assessing the relative worth of the jobs in an organization. The jobs are evaluated on
the basis of its content and the complexity involved in its operations and thus, positioned according to its importance.

Job Evaluation Methods

There are non-analytical and analytical job evaluation methods that are employed by the organizations to realize the worth
of a set of jobs.

Non-analytical Job Evaluation Methods

1. Ranking Method: This is the simplest and an
inexpensive job evaluation method, wherein the jobs are
ranked from the highest to the lowest on the basis of their importance in the organization. In this method, the overall job is
compared with the other set of jobs and then is given a rank on the basis of its content and complexity in performing it.
Here the job is not broken into the factors, an overall analysis of the job is done. The main advantage of the ranking
method is, it is very easy to understand and is least expensive. But however, it is not free from the limitations, it is
subjective in nature due to which employees may feel offended, and also, it may not be fruitful in the case of big
organizations.
2. Job Grading Method: Also known as Job-
Classification Method. Under this method the job grades or classes are predetermined and then each job is assigned to
these and is evaluated accordingly.
For Example, Class, I, comprise of the managerial level people under which sub-classification is done on the basis
of the job roles such as office manager, department managers, departmental supervisor, etc.
The advantage of this method is that it is less subjective as compared to the raking method and is acceptable to the
employees. And also, the entire job is compared against the other jobs and is not broken into factors. The major limitation
 of this method is that the jobs may differ with respect to their content and the complexity and by placing all under one
category the results may be overestimated or underestimated.

Analytical Job Evaluation Methods

1. Factor-Comparison Method: Under this method, the
job is evaluated, and the ranks are given on the basis of a series of factors Viz. Mental effort, physical effort, skills required
supervisory responsibilities, working conditions, and other relevant factors. These factors are assumed to be constant for
each set of jobs. Thus, each job is compared against each other on this basis and is ranked accordingly. The advantage of
this method is that it is consistent and less subjective, thus appreciable by all. But however, it is the most complex and an
expensive method.
2. Point-Ranking Method: Under this method, each
job’s key factor is identified and then the subfactors are determined. These sub-factors are then assigned the points by
its importance.
For example, the key factor to perform a job is skills, and then it can be further classified into sub-factors such as
training required, communication skills, social skills, persuasion skills, etc.
The point ranking method is less subjective and is an error free as the rater sees the job from all the perspectives. But
however, it is a complex method and is time-consuming since the points and wage scale has to be decided for each factor
and the sub factors.

JOB-BASED VS PERSON-BASED PAY STRUCTURES

JOB BASED PAY STRUCTURES

A job-based pay structure is a structure of salary payments that is built on compensable factors determined by the job. In
other words, the salary for a job is determined by its responsibilities, and sometimes its work conditions.

PERSON BASED PAY STRUCTURES

Like a job-based structure, developing a person-based pay structure also requires an understanding of the tasks and
responsibilities of jobs in a business. Similarly, the development of the structure requires job analysis and job descriptions.
The difference is that it compensates the job incumbent (person) in terms of his knowledge, competencies and skills. These
are called competency-based pay structure, skills-based pay structure or knowledge-based pay structure.

CURRENT TRENDS IN COMPENSATION MANAGEMENT

1. Skill-based pay
- is a compensation system that rewards employees with additional pay in exchange for formal certification of the
employee's mastery of skills, knowledge, and/or competencies.
2. Broad banding
-a strategy for salary structures that consolidate a large number of pay grades into a few "broad bands."
3. Comparable worth or pricing method
-describes the notion that sex-segregated jobs should be reanalyzed to determine their worth to an employer.
4. Cafeteria approach
-is one in which the employer gives each employee a benefits fund budget, and lets the person spend it on the benefits he
or she prefers, subject to two constraints.
5. Variable pay plans
- is the portion of sales compensation determined by employee performance.

++++++++++++++++++++++++++++++++++++++++++++++++++

Week 7: Employee Benefits

I. THEORETICAL BASES

Employee benefits are essentially welfare programs implemented by many organizations to take care of the basic needs of
their employees. Employee benefit programs include group insurance for health, dental and life, income protection,
retirement benefits, day care, tuition reimbursement, sick leave, paid vacation, social security, and other specialized
benefits. Employee benefit providers are the companies that provide such benefits to different organizations. A lot of
insurance companies are employee benefit providers as insurance is a major part of employee benefit.

STRATEGIC PAY DIMENSIONS

Pay practices vary significantly across employing units and to some degree, across jobs. One must discuss the Different
form, level, structure, mix, and administration of payment systems.

First, pay can be in the form of cash or benefits (e.g., health care, retirement, paid vacation). Health care has been the
fastest growing benefit, and most employers describe the challenge of controlling this cost while providing quality
coverage as one of their top human resource management challenges.

Second, both benefits and cash compensation can be described in terms of their level (how much). Most organizations use
one or more market pay surveys to help determine what other organizations pay specific jobs in making their own pay
level decisions.

Labor costs and productivity are also key factors in decisions about where to locate production. Germany's high labor costs
have led to what Business Week described as the "Exodus of German Industry." German companies are moving production
to lower labor cost countries, such as those in Eastern Europe and the United States.

Third, the structure refers to the nature of pay differentials within an employing unit. How many steps or grades are in the
structure? How big are the pay differentials between different levels in the structure? Are employees at the same
hierarchical level in different parts of the organization (e.g., different product sectors or different occupational groups) paid
the same?

Fourth, payment systems differ in their mix (how and when cash compensation is disbursed). Some organizations pay
virtually all employees a base salary that is adjusted approximately once per year through a traditional merit increase
program. Merit increases become part of base salary and are supposed to depend on merit (performance), although there
is a widespread belief that most employees get about the same percentage increase, regardless of their performance.

Fifth, pay is administered differently in different organizations. The design of pay policies differs, for example, in terms of
who is involved in the process. The roles of human resource departments, line managers, and rank and file employees
differ across situations. In some organizations, line managers may design plans, often with assistance from the human
resources department. Alternatively, human resources takes the lead in other cases.

CONSEQUENCES OF PAY DECISIONS: THEORIES

To understand what types of pay systems are most likely to be effective and how their effectiveness differs according to
contingency factors such as business strategy, national culture, competitive environment, and employee characteristics, we
need to have a good conceptual framework, or theory. In truth, there is as of yet no grand theory of compensation that
takes these contingency factors into account.

Reinforcement and Expectancy Theories

Reinforcement theory states that a response followed by a reward is more likely to recur in the future (Thorndike's Law of
Effect). The implication for compensation management is that high employee performance followed by a monetary reward
will make future high performance more likely. By the same token, high performance not followed by a reward will make it
less likely in the future. The theory emphasizes the importance of a person actually experiencing the reward.

Equity Theory
Equity theory suggests that employee perceptions of what they contribute to the organization, what they get in
return, and how their return-contribution ratio compares to others inside and outside the organization,'
determine how fair they perceive their employment relationship to be Perceptions of inequity are expected to
 cause employees to take actions to restore equity. Unfortunately, some such actions (e.g., quitting or lack of
cooperation) may not be helpful to the organization.

Agency Theory
Agency theory, until recently best known in the economics, finance, and law literatures, focuses on the divergent interests
and goals of the organization's stakeholders, and the ways that employee compensation can be used to align these
interests and goals (Eisenhardt, 1989; Fama & Jensen, 1983). ownership and management (or control) are typically
separate in the modern corporation, unlike the days when the owner and manager were often the same person. With
most stockholders far removed from day-to-day operations, so-called agency costs (i.e., costs that arise from the interests
of the principals/owners and their agents/managers not converging are created.)
Different situations that may affect a contract

 Risk aversion - Risk aversion among agents makes outcome-oriented contracts more costly.
 Outcome uncertainty - Profit is an example of an outcome. Linking pay to profits (outcome-based contract) is more
costly to the extent that profits vary and so there is a risk of low profits.
 Job programmability - As jobs become less programmable (i.e., less routine and less structured), and more difficult to
monitor, outcome-oriented contracts become more likely. The increasing complexity of organizations and technology
makes monitoring more difficult, and may help explain the growing use of variable pay programs (discussed below),
which are examples of outcome-based contracts.
 Measurable lob outcomes - When outcomes are more measurable, outcome-oriented contracts are more likely.
 Ability to pay - outcome-oriented contracts contribute to higher compensation costs because of the risk premium.
 Tradition - A tradition or custom of using (or not using) outcome-oriented contracts will make such contracts more (or
less) likely.

II. LEGALLY REQUIRED BENEFITS IN THE PHILIPPINES

In any company, whether big or small, the greatest asset is the people. The company wins when they perform well, and the
company suffers if they don’t.

As an employer, you are obliged to take care of your company’s people by giving them the proper employee
benefits as mandated by the government. By following these labor laws and ensuring your employees understand their
benefits you will help increase job satisfaction which, in turn, will improve their work performance and positively impact
your company.

Labor Code of the Philippines - The Labor Code of the Philippines stands as the law governing employment practices and
labor relations in the Philippines. It was enacted on Labor Day of 1974 by President Ferdinand Marcos, in the exercise of his
then extant legislative powers. It prescribes the rules for hiring and termination of private employees; the conditions of
work including maximum work hours and overtime; employee benefits such as holiday pay, thirteenth month pay and
retirement pay; and the guidelines in the organization and membership in labor unions as well as in collective bargaining.
Explanation - The Labor Code of the Philippines is a law that governed employment practices and labor relations in the
Philippines. It simply imposes the rules in hiring and terminating an employee; the maximum work hours and overtime of
an employee; employee benefits such as holiday pay, 13 th month pay and retirement pay. Also, any legally employed
worker who work (8) hours a day on 48 hours a week schedule is covered under the Philippine Labor Code.

Here are the–important things you need to know about employee benefits in the Philippines, as mandated by the
government:

Types of Employee Benefits

Explanation – When you are employed, you are entitled to various benefits that can be summed up into three categories:
employee minimum wage and additional pays due to varying factors like holidays or overtime, leave benefits which are
paid absence from work, and mandatory government contributions.

Compensations Benefits
Explanation- Compensation and benefits is an important aspect of HRM as it helps to keep the workforce motivated. It
helps give benefits to employees based on their performance and actions and brings the best out the employees at
workplace.

1. Overtime pay
The employee who renders service beyond the schedule indicated in the contract will be given additional compensation
equivalent to his regular wage including at least 25% premium.

Explanation - This is in accordance with our Labor Code, which states that the maximum number of hours that we can work
in one day is eight hours. Going beyond that would

2. Premium Pay
A premium pay is an overtime pay for rest days and official holidays. Employee shall be paid an additional
compensation from the rate of the first eight hours on a holiday or rest day plus at least 30%. There are three types:
a) Regular Holidays – these refer to fixed dates like Christmas Day, Independence Day, or New Year’s Day. However,
National Heroes Day and Holy Week are considered regular holidays despite changing dates.
b) Special Holidays – also known as Special Non-Working Holidays, they fall on flexible dates, depending on the
circumstance. Examples are ASEAN Summit or regional events like festivals or class suspensions. A day becomes a
special holiday if: proclaimed by the President, enacted by the Congress, or 3) declared by LGUs in the specific
regions.
c) Double Holidays – this is a rare occurrence wherein a regular holiday and a special holiday fall on the same day.
Example: President Rodrigo Duterte declared August 21, 2018 as special non-working (Eid’l Adha) and regular
holiday (Ninoy Aquino Day) at the same time.
For Example:
Working on Rest day Premium / Working on Special Holiday Premium
Both types of premium follow the same formula: (Hourly rate × 130% × 8 hours)
 3. Night Shift Differential
Also known as night shift pay, it applies to employees who work between 10:00 PM and 6:00 AM. An additional 10%
premium is applied for every hour at work.

4. 13th Month Pay

Under Presidential Decree No. 851, employers from the private sector in the Philippines are required to pay their rank-and-
file employees a Thirteenth 13th Month Pay not later than December 24 every year. The 13th month pay is equivalent to
one twelfth (1/12) of an employee’s basic annual salary. The 13-month pay is often mistaken as the Christmas Bonus, but
technically, it’s a monetary bonus mandated by law. The Christmas bonus is only a voluntary gesture from the employers.
According to the law, the 13-month pay is given either in 2 installments (May and December) or in full before December
24.
Explanation - You can receive this pay if you are any private employee with fixed or guaranteed salary who have worked for
at least one month. Resigned or terminated employees who left their employers before the release of the 13-month
bonuses can also receive this. Take note that employees who quit the job without going through the separation process
and workers who are paid purely on commission are not entitled for 13 months pay.

5. Separation pay
Separation pay is also part of the Labor Code and is given
to employees terminated from the company. The only
exception are those terminated because of misconduct
or crime involvement.
There are two types:

a) 1/2 Month Pay per Year of Service

Explanation – an employee is eligible for separation pay
with the value of one-half (1/2) month pay for every year
of service if the separation from the service is because of retrenchment to save the company from pitfalls, closure or
termination of the operations due to bankruptcy and other bad instances, and grave illness incurable within 6 months or
harmful for co-workers.
b) One-Month Pay per Year of Service
Explanation – an employee is eligible for a separation pay worth of one month per year of service if the termination of the
contract is because of: installation of devices or machines that reduce the number of labors, redundancy, or when there is
excessive manpower, impossible reinstatement to the former position because of significant reasons.
6. Retirement pay
Upon the age of 60 years or more, an employee who has served at the establishment for at least five years may be
granted a retirement pay equivalent to at least one-half month of salary for every year of service. A fraction of at least six
months is considered as one whole year.
As stipulated by the DOLE National Wages and Productivity Commission, “The minimum retirement pay shall be
equivalent to one-half (1/2) month salary for every year of service, a fraction of at least six (6) months being considered as
one (1) whole year.”
Included in the one-half pay are 15 days salary based on the latest salary rate, cash equivalent of 5 days of service
incentive leave, one-twelfth (1/12) of the 13th month pay.

How to compute the pension:

(1/12 x 365/12 = .083 x 30.41 = 2.5)

Minimum Retirement Pay = Daily Rate x 22.5 days x number of years in service

Leave Benefits
1. Service Incentive Leave
Article 95 of the Labor Code says that an employee who has worked for a year is entitled to five (5) SILs with full pay. These
can be used for vacation leave or sick leave.
Explanation – Service Incentive leave prescribe that a certain employee who has worked for a year is entitled to
have 5 Service Incentive Leave with full pay and they can used it for vacation leave or sick leave.
2. Parental leaves
There are 2 types of parental leaves:
a) Maternal – any pregnant woman employee who has
worked with the company for at least six months will
be granted a maternity leave of at least two weeks prior to her due date (expected date of delivery) and four weeks
after normal delivery or miscarriage with full pay based on her regular salary.

As of February 21, 2019, the Expanded Maternity Leave (EML) Bill has been signed into law. This law grants 105 days of
paid maternity leave credits. The law also allows new mothers to extend this leave for an additional 30 days, but this will
be unpaid.

The EML is applicable to all a woman’s pregnancies.

Explanation – Maternity leave is a period of absence (2 weeks) from work granted to a mother before and after the
birth of her child and as of February 21, 2019, (Expanded Maternity Leave Bill that has been signed into law) the employee
grants 105 days of paid maternity leave credits and allow them to extend up to 30 days that’s unpaid.

b) Paternal – the R.A No. 8187, or Paternity Leave Act

of 1996, grants seven (7) days of fully paid leave to married fathers. This is effective up to the first four deliveries of the
legitimate spouse.

Under the EML, seven days of a woman’s paid maternity leave credits can be transferred to fathers, extending the
allowed seven-day paternity to be extended to 14.
Explanation - Paternity leave is a period of absence (2 weeks) from work granted to a father before and after the birth of
his child.
 3. Bereavement Leave
This is a 3 days additional time off from work to mourn for the death of immediate family members such as mother, father,
siblings, and children. It must be noted that this is not a paid leave.

Mandatory government contributions

1. Social Security Systems (SSS) Contributions

The Social Security System serves as an insurance program set by the government for all wage earners from the private
institutions (the counterpart for government employees is GSIS) in the country. Republic Act No. 8282, otherwise known as
the Social Security Act of 1997, refers to the social security system in the Philippines that is initiated, developed and
promoted by its Government.
● Sickness Benefits
● Death Benefits
● Maternity Benefits
● Funeral Benefits
● Retirement Benefits
● Disability Benefits
Explanation - The social security system is aimed at providing protection for the SSS member against socially recognized
hazard conditions, such as sickness, disability, maternity, old age and death, or other such contingencies not stated but
resulted in loss of income or results to a financial burden.

2. PhilHealth
This serves as a health insurance program for private employees providing financial aid and service privileges for health
care.

PhilHealth has removed the previous salary brackets, creating a new condensed contribution table with P10,000 as the
salary floor and P40,000 as the ceiling. The computation starts at 2.75% of the basic salary per month, and the payment is
shared by employer and employee.

The PhilHealth benefits include:

a) Inpatient benefits (hospitalization, facility fees, and physician/surgeon fees)

b) Outpatient benefits (day surgeries,
radiotherapy, hemodialysis, outpatient blood transfusion, primary care benefits)
c) Z benefits (financial/medical aid for the patients with cancer and in need of surgeries)
d) SDG related (Malaria package, HIV-AIDS package, anti-Tuberculosis treatment, voluntary surgical
contraception procedures, and animal bit

3. Pag-IBIG
Also known as the Home Development Mutual Fund (HDMF), Pag-IBIG is another form of national savings program and the
financing office for affordable shelter.

Again, the total contribution is shared between you and the employer. The highest compensation per month subjected to
Pag-IBIG contribution is P5,000 and it means that the employer and employee will pay P100 each as the maximum
contribution.

Pag-IBIG lets you have the following benefits: housing loan, multi-purpose loan, calamity loan, secured savings.

III. EMPLOYEE BENEFITS AS A TALENT MANAGEMENT STRATEGY

 - Benefits of Talent Management makes the organization more competitive and progressive. It helps
automate the core processes and helps capture data for making better decisions. Automates repetitive tasks like creating
salaries thereby releasing time and resources for making strategies and more critical decisions.

TALENT MANAGEMENT

- Talent management is the process of recruiting, training, developing and retaining staff by organizations so that
they can reach their business goals. In general, talent management can be considered a discipline as big as the
role of HR or a small bunch of initiatives aimed at people and overall organization development. It implies that
these organizations are strategic in sourcing, attracting, selecting, training, developing, retaining, promoting and
moving employees throughout the organization.
- Talent management is not just a simple human resource key term one will come across. It is also committed to
hire, manage, develop, and retain the most talented and excellent employees in the industry. In fact, talent
management plays an important role in the business strategy since it manages one of the important assets of the
company—its people. That is why companies should make the effort to effectively manage the employees to help
them develop their skills and capabilities in order to retain them.

TALENT MANAGEMENT SYSTEMS

- Talent management systems, on the other hand, are integrated software solutions built to track and manage the
recruitment, professional development and performance of employees and potential candidates. These systems
enable the automation of all the processes within the talent management realm and simplify workflows for HR
and the company, as a whole.

 With the present industry becoming extremely competitive for quality employees, otherwise recognized as the "battle for
excellence," or “war for talent”, businesses see HR assets as a top priority, and since businesses are only as effective as
the individuals within them, it is essential to locate, employ and maintain quality applicants and top performers. A
powerful and effective talent management system can assist attract and retain top talent and have an effect on
productivity at the bottom of the line.

BENEFITS OF HAVING A TALENT MANAGEMENT SYSTEM

1. Attract top talent. Having a strategic talent management gives organizations the opportunity to attract the most
talented and skilled employees available. It creates an employer brand that could attract potential talents, and in turn,
contributes to the improvement of the organizations’ business performance and results.
2. Employee motivation. Having a strategic talent management helps organizations keep their employees motivated
which creates more reasons for them to stay in the company and do their tasks. In fact, 91 percent of employees
shared that they wanted more than just money to feel engaged and motivated, as revealed by Chandler and Macleod’s
survey.
3. Continuous coverage of critical roles. Talent management equips companies with the tasks that require critical skills
to plan and address the important and highly specialized roles in the workforce to its employees. This means that the
company will have a continuous flow of employees to fill critical roles to help companies run their operations
smoothly and avoid extra workload for others, which could lead to exhaustion.
4. Increase employee performance. The use of talent management will make it easier for the companies to identify
which employees will be best suited for the job that can lead to less performance management issues and grievances.
It will also guarantee that the top talent within the company stays longer.
5. Engaged employees. Talent management allows companies to make systematic and consistent decisions about the
development of staff, which guarantees the employees’ skills and development. Furthermore, employees will feel
more engaged when there is a fair procedure for the development, which helps in increasing the retention rates that
helps companies in meeting their operational requirements.
6. Retain top talent. Well-structured on-boarding practices create higher levels of retention which saves the company on
its recruitment and performance management cost in the long run.
 7. Improve business performance. Talent management helps employees feel engaged, skilled, and motivated, allowing
them to work in the direction of the company’s business goals, which in turn, increases client satisfaction and business
performance.
8. Higher client satisfaction. A systematic approach to talent management means that there is an organizational
integration and a consistent approach to management. When systems are more integrated, client satisfaction rates are
usually higher, since they are dealing with fewer people and their needs are met more rapidly.

IV. EMPLOYEE BENEFITS AS REWARDS

- In a competitive business climate, more business owners are looking at improvements in quality while reducing
costs. Meanwhile, a strong economy has resulted in a tight job market. So, while small businesses need to get
more from their employees, their employees are looking for more out of them. Employee reward and recognition
programs are one method of motivating employees to change work habits and key behaviors to benefit a small
business.

DIFFERENTIATING REWARDS FROM MERIT PAY AND THE PERFORMANCE APPRAISAL

- A small business owner must distinguish the wage or merit pay scheme from the reward system when developing
a reward program. Financial rewards, particularly those given on a regular basis such as bonuses, profit sharing,
etc., should be linked to the achievements of an employee or group and should be considered "pay at risk" in
order to distance them from wages. A manager can thus prevent the employee's feeling of entitlement and
guarantee that the award emphasizes excellence or accomplishment rather than fundamental skills or basic
competency.
- Merit pay increases, then, are not part of an employee reward system. Normally, they are an increase for inflation
with additional percentages separating employees by competency. They are not particularly motivating since the
distinction that is usually made between a good employee and an average one is relatively small. In addition, they
increase the fixed costs of a company as opposed to variable pay increases, such as bonuses, which have to be
"re-earned" each year. Finally, in many small business’s teamwork is a crucial element of a successful employee's
job. Merit increases generally review an individual's job performance, without adequately taking into account the
performance within the context of the group or business.

DESIGNING A REWARD PROGRAM

 Identification of company or group goals that the reward program will support

 Identification of the desired employee performance or behaviors that will reinforce the company's goals

 Determination of key measurements of the performance or behavior, based on the individual or group's previous
achievements

 Determination of appropriate rewards

 Communication of program to employees

In order to reap benefits such as increased productivity, the entrepreneur designing a reward program must identify
company or group goals to be reached and the behaviors or performance that will contribute to this. While this may seem
obvious, companies frequently make the mistake of rewarding behaviors or achievements that either fail to further
business goals or actually sabotage them. If teamwork is a business goal, a bonus system rewarding individuals who
improve their productivity by themselves or at the expense of another does not make sense. Likewise, if quality is an
important issue for an entrepreneur, the reward system that he or she designs should not emphasize rewarding
the quantity of work accomplished by a business unit.
Properly measuring performance ensures the program pays off in terms of business goals. Since rewards have a real cost in
terms of time or money, small business owners need to confirm that performance has actually improved before rewarding
it. Often this requires measuring something other than financial returns: reduced defects, happier customers, more rapid
deliveries, etc.
When developing a rewards program, an entrepreneur should consider matching rewards to the end result for the
company. Perfect attendance might merit a different reward than saving the company $10,000 through improved contract
negotiation. It is also important to consider rewarding both individual and group accomplishments in order to promote
both individual initiative and group cooperation and performance.
Lastly, in order for a rewards program to be successful, the specifics need to be clearly spelled out for every employee.
Motivation depends on the individual's ability to understand what is being asked of her. Once this has been done, reinforce
the original communication with regular meetings or memos promoting the program. Keep your communications simple
but frequent to ensure staff members are kept abreast of changes to the system.

TYPES OF REWARD PROGRAMS

1. MOTIVATIONAL BENEFITS

 Benefits are crucial to being competitive in the market place. Money is the top reward that motivates
employees. However, a benefits package is a very important part of the package deal of a particular job.
Employees can be overwhelmed with the variety of benefits they are offered. Benefits constitute a large
percentage of most company’s expenses. Endless mixes of employee benefits such as health care and life
insurance, profit sharing, employee stock ownership plans (ESOPs), exercise facilities, subsidized meal plans,
and more have been used by companies in their efforts to maintain happy employees.

 Insurance.

- Most organizations offer insurance coverage, including prescription drugs, vision care, mental health care, and
dental care. Health insurance costs have been rising the past few years, yet employees expect insurance coverage.
Almost all companies pay a major portion of the premiums for health care coverage. Many health plans give
employees an incentive to take costs into consideration when seeking health care services by allowing them to
save what they do not spend in a given year for their future needs. Life insurance and disability insurance may be
available as well. Many companies are working towards improving the health of their employees, so as to improve
productivity and reduce absenteeism.

 Pensions.

- Employers have long sought to enhance their organizational performance by improving employee satisfaction. The
idea that a satisfied employee is a better employee seems to be intuitive. Designing a retirement plan that
strongly appeals to employees can create significant value for an organization. The two most popular pension
plans are the individual retirement accounts (IRAs) and 401K plans, which allow employees to save money on a
tax-deferred basis by entering into salary-deferral agreements with the employer. The design and features of a
retirement program can have very meaningful effects on workers’ behavior, which can deliver favorable economic
returns to the organization. Retirement plans can enhance productivity, influence workers’ behavior, giving
younger workers a compelling reason to continue working for their employer and encouraging older workers to
retire on a timely basis.

 Time off.
 - The purpose of time off is to provide employees with paid time off work that can be used for such needs as
vacation, illness, and appointments. The importance of this time is taken to heart by employers as an effective
benefit for their employees. Allowing employees time off to take vacations or run errands helps save them stress.
For example, knowing errands need to be done during work hours can be frustrating. Saving employees time like
this can increase productivity and retention. An innovative way to meet corporate social responsibility is to allow
employees paid time off in order to do charitable work throughout the community. There is evidence that time off
such as this helps in recruiting and retaining top talent.

- Paid sick days are time off from work that an organization voluntarily provides employees as a benefit. Jury duty is
also an acceptable reason for time off. Employers often allow time off for special religious holidays or funeral
leave for friends or family members for personal reasons. Employers are not obligated by either federal or state
law to provide personal leaves of absence to their employees, but employees value any time off, as time is a
precious gift.

2. LIFE CYCLE BENEFITS

 Life cycle benefits are based on a person’s stage of life and include things such as child care and elderly health
care services. Saving employees, the cost of day care services is a huge benefit for parents. For those caring
for elderly parents, referral services or long-term health care insurance may be offered. Employee assistance
programs (EAPs) were originally designed to help alcoholics. Today, they help with a variety of problems,
including drug abuse, marital problems, and financial planning. Helping employees deal with their personal
problems can bring about a more positive atmosphere and improve their job performance. In order to
encourage participation, services such as these should be kept confidential.

 Flexible spending

- Flexible benefits allow employees the opportunity to put together their own benefit package by choosing those
benefits that best meet their personal needs. Companies allocate a specific budgeted amount for each employee,
and then the employee is allowed to allocate this money. These cafeteria-style plans have led to increased benefit
satisfaction, reduced turnover, and increased overall job satisfaction. For organizations, these types of plans can
be costly, because they are hard to maintain.

3. OTHER BENEFITS

 Some companies offer other fringe benefits that may compensate for lower taxable income such as the use of
a company car, reimbursements for education, moving costs, child care or elder care subsidies, or help in
finding a spouse’s job. Branded merchandise, such as gift cards and gift certificates, can produce a lasting
effect that can result in increased engagement in the organization’s goals. Giving the gift of travel creates
memories that last well beyond any incentive program. Companies are getting more and more innovative
with other rewards. Other gifts such as gifts or presents, tickets to concerts, auto repair assistance, or prepaid
legal plans. Legal services can assist with legal advice, wills and estate planning, and investment counseling.

 Other programs, called wellness programs, help employees deal with stress and prevent them from getting
physically or psychologically ill. By assisting employees in this way, absenteeism due to these types of illnesses
can be reduced. Less sick days will be taken, a reduction in health insurance premiums, and an increase in
productivity when employees are healthier. Organizations realize this and are installing gymnasiums or
providing the opportunity of a membership to a gymnasium or health club. Some encourage healthy workers
by paying for unused sick days.
 The Results of Reward Systems

- Rewards bring motivation. Employee motivation occurs when management takes steps to foster a work
environment where employees are self-driven to perform their job tasks at a level that meets or exceeds
management’s standards. Employers can see a spike in the level of interest among employees with a well-planned
reward system. If the system continues successfully, even greater performance level and job satisfaction can be
achieved. Rewards, whether in the form of gift cards, cash, or time off, increase performance. Employees often
come to work with a new attitude once a reward system is put in place, and executives see a healthier and
happier work environment. In fact, employee incentive programs can increase overall reduce turnover, boost
morale and loyalty, improve employee wellness, and increase retention. Aside from motivation, many believe that
spending more on benefits is worth it, because it attracts, maintains, and retains outstanding employees.

V. PORTFOLIO OF EMPLOYEE BENEFITS PACKAGE

VI. DESIGNING BENEFITS PLANS

5 STEPS TO UPDATE YOUR COMPANY BENEFITS PLAN

1. Align the benefit strategy with business objective

- An important first step in designing an employee benefits program is to identify its objectives. Doing a benefits plan,
you should always revisit the strategy regularly to ensure it evolves as regulations and employee requirements change,
while still supporting business priorities. Generally, this process does not result in a list of specific benefits offered but
rather provides an overview of the organizations objectives of offering benefits that reflect both the employer and
employee needs.
2. Aim for global consistency with local relevance
- In the company, cultural differences among locations can be accommodated as long as they are in keeping with
the strategic commonalities that support the company’s underlying principles.
3. Provide core security and increase employee choice
- Health cover, life insurance, and a pension are among the core benefits that provide employees with financial
security and should be available to all. Once these essentials are taken care of, employers can offer a selection of
add-ons for individuals to choose from. Paid sick leave is another benefit that is quickly becoming a mandatory
offering for many employers. State and local laws are regularly being passed that require employers to offer paid
sick leave to employees, and employers should be aware of state and local requirements.
4. Educate employees about the benefits program
- It should explain how it fits in with the company’s goals and rewards policy to boost employee appreciation and
understanding and, ultimately, the value of the program to the company.
5. Deliver high-performing programs
- Design best practices based on research into employee behavior. Improve administrative efficiency. Use
technology to enhance cost-effective delivery of the program. Use data and claim analytics to support decision-
making. Establish quality standards for insurance products.
 What to Include in Your Benefits Plan

BASICS

1. Health Insurance
- Health insurance is the most basic benefit to offer to the employees need it and expect it to be available at work.
Depending on the size of your company, you may even be required to offer health insurance under the Patient
Protection and Affordable Care Act (PPACA).
2. Dental Insurance
- While PPACA does not require employers to offer dental insurance, according to Duchesne, this is a “baseline”
that workers expect their employers to offer. The Institute for HealthCare Consumerism reports that “employees
with dental insurance ... value these benefits highly and perceive themselves to be in better oral and overall
health” than workers who do not receive such benefits at work.
3. Life Insurance
- Life insurance is also an important basic benefit to offer, and it’s one that can benefit employees greatly. It is much
easier (and generally less expensive) to get life insurance through a group workplace plan rather than to purchase
an individual policy, so this is a benefit that employees are likely to appreciate greatly.
4. Retirement Plan
- According to Aon Hewitt’s in 2013 Trends & Experience in Defined Contribution Plans survey indicates that” a
defined contribution plan is the primary source of retirement income” for workers at “three quarters of
employers”.
5. Paid Time Off
- Providing employees with compensated time off is “a very basic benefit that isn’t too costly to businesses.”
Employers are well-served to provide benefits that allow employees to take a reasonable amount of time off from
work with pay. This includes both paid holidays and a system that allows workers to schedule time off for their
own needs, such as taking vacation or getting well when they are sick.

AS A WHOLE PERSON
1. Financial Protection
- These include insurance that pays benefits in the event that a covered employee experiences a critical illness,
disability or the need for long term care. Such benefits can help convey a message that the employer is concerned
about workers and their loved ones, wanting them to “thrive both on and off the job.”
2. Stock Options
- Publicly traded businesses and closely-held companies often offer stock option plans that grant employees the
ability to purchase stock at a fixed price. Offering this type of benefit “can be a flexible way for companies to share
ownership with employees, reward them for performance, and attract and retain a motivated staff.”
3. Wellness Benefits/Programs
- If you want to be seen as an organization that cares about your employees, then you’re going to have some level
of wellness program. Depending on your workforce, that could be anything from gym reimbursements or on-site
fitness centers to bringing in a chef for an organic cooking class or giving out pedometers so employees can track
their steps during a month-long healthy living competition.

4. Employee Assistance Programs

- Employee Assistance Programs (EAPs), which provide mental health, legal and counseling services and referrals,
are still popular - and typically at a fairly low cost per-employee” According to a
Department of Labor (DOL) publication, “EAPs enhance employee and workplace effectiveness and are a vital tool
for maintaining and improving worker health and productivity, retaining valued employees, and returning
employees to work after illnesses or injuries.”

5. Family-Friendly Benefits
- Family-friendly benefits are a growing trend. We see this not only through our business, but across industries and
the country for that matter. As national awareness around work-life issues increases with events like the White
 House Summit on Working Families, we’ re going to continue to see more of a push for family-friendly benefits. As
this evolves, you see organizations who offer family- friendly benefits, like paid parental leave or childcare
assistance, using these benefits to keep their talent and as part of their recruiting efforts, as well. Family-friendly
benefits may also include things like flex time, comp time and telecommuting opportunities. These things are very
important to workers with caregiving responsibilities.

VII. TRENDS IN EMPLOYEE BENEFITS PROGRAMS

VIII. PREPARING FOR RETIREMENT
IX. PRE-RETIREMENT PLANNING