Human Resource Management
The term human resources management is often used in two different ways. On one hand it is used to explain the body of management activities and in this way hrm is no more than the long labelled name personnel management in a more modern way (Torrington, Hall and Taylor 2005). On the other hand it also suggests a distinctive philosophy towards carrying out people-oriented organizational activities which is held to serve the business more effectively than the traditional personnel management (Torrington, Hall and Taylor 2005). Armstrong (2001) defines human resources management as a strategic, homogeneous and compact method of control over the most valuable asset of every organization - human capital. It is the employees who take their effort to complete the organizational goals, and at the same time strengthen its position on the market".
According to Mathis and Jackson (1999) human resource (HR) management deals with the design of formal systems in an organization to ensure the effective and efficient use of human talent to accomplish organizational goals. In an organization, the management of human resources means that they must be recruited, compensated, trained, and developed (Pp4).
Whereas Bratton and Gold (2007) define hrm as
"a strategic approach to managing employment relations which emphasizes that leveraging people's capability is critical to achieving competitive advantage, this being achieved through a distinctive set of integrated employment policies, programmes and practices.(Pp7)"
Mathis and Jackson (2005) argue that whether employees are in a big company or in a smaller company with mere 10 employees, employees must be recruited, selected, trained and managed effectively. They also must be adequately and competitively compensated and many should be given a range of benefits.
Rewards
A question we may ask is "what are rewards?" In an organization context everything that employee values in his employment relationship as a result of working for the organization is referred to as rewards (Worldatwork, 2007) i.e. Monetary and nonmonetary return provided to employees in exchange of their time, talent, efforts, and results.
REWARD MANAGEMENT DEFINED
According to Armstrong (2007) reward management deals with the strategies, policies and processes required to ensure that the contribution of people to the organization is recognized by both financial and non-financial means. It is about the design, implementation and maintenance of reward systems (reward processes, practices and procedures), which aim to meet the needs of both the organization and its stakeholders. The overall objective is to reward people fairly, equitably and consistently in accordance with their value to the organization in order to further the achievement of the organization's strategic goals. Reward management is not just about pay and employee benefits. It is equally concerned with non-financial rewards such as recognition, learning and development opportunities and increased job responsibility.
The aims of reward management are to:
ï¬ Reward people according to the value they create;
ï¬ Align reward practices with business goals and with employee values and needs;
ï¬ Reward the right things to convey the right message about what is important in terms of outcomes;
ï¬ Help to attract and retain the high-quality people the organization needs;
ï¬ Motivate people and obtain their engagement and commitment;
ï¬ Develop a high-performance culture.
Armstrong (2007) summarizes Lloyds TSB's definition of what they mean by a high performance organization as under:
ï¬ People know what's expected of them - they are clear about their goals and accountabilities.
ï¬ They have the skills and competencies to achieve their goals.
ï¬ High performance is recognized and rewarded accordingly.
ï¬ People feel that their job is worth doing, and that there's a strong fit between the job and their capabilities.
ï¬ Managers act as supportive leaders and coaches, providing regular feedback, performance reviews and development.
ï¬ A pool of talent ensures a continuous supply of high performers in key roles.
ï¬ There's a climate of trust and teamwork, aimed at delivering a distinctive service to the customer.
Different type of Rewards
Work behavior can be motivated by many different rewards, including pay, praise, promotion, alleviation of boredom, a sense of accomplishment, etc. Recently, such rewards often have been characterized as of two types: intrinsic rewards and extrinsic rewards (Deci, 1975).
According to Mathis and Jackson (1999) intrinsic rewards often include praise for completing a project or meeting some performance objectives. Other psychological and social effects of compensation reflect the intrinsic type of rewards.
Extrinsic rewards are tangible, having the form of both monetary and nonmonetary rewards. Tangible components of a compensation program are of two general types. With the direct type of compensation, monetary rewards are provided by the employer. Base pay and variable pay are the most common forms of direct compensation. Indirect compensation commonly consists of employee benefits.
Mathis and Jackson (1999) try to explain intrinsic and extrinsic rewards by using the Porter and Lawler model and an example by Roberta Maynard(1997) they suppose that a salesclerk is motivated to expend effort on her job. From this job she expects to receive two types of rewards: intrinsic (internal) and extrinsic (external). For this salesclerk, intrinsic rewards could include a feeling of accomplishment, a feeling of recognition, or other motivators. Extrinsic rewards might be such items as pay, benefits, good working conditions, and other hygiene factors. The salesclerk compares her performance with what she expected and evaluates it in light of both types of rewards she receives. She then reaches some level of job satisfaction or dissatisfaction. Once this level is reached, it is difficult to determine what she will do. If she is dissatisfied, she might put forth less effort in the future, she might work harder to get the rewards she wants, or she might just accept her dissatisfaction. If she is highly satisfied, it does not always mean she will work harder. She may even slack off a bit, saying, "I got what I wanted."
Therefore Mathis and Jackson (1999) conclude that intrinsic non-financial rewards related to responsibility, achievement and the work itself may have a longer-term and deeper impact on motivation. Reward systems should therefore include a mix of extrinsic and intrinsic rewards.
Gittel (2003) quotes Herb Kelleher, founder of Southwest Airlines, who attributes his airline's consistently strong performance to its unique culture. ''It's the intangibles that are the hardest things for a competitor to imitate,'' he says. ''You can get airplanes, you can get ticket counter space, you can get tugs, and you can get baggage conveyors. But the spirit of Southwest is the most difficult thing to emulate. If we ever do lose that, we will have lost our most valuable competitive asset.''
Nature of Compensation
Compensation is an important factor affecting how and why people choose to work at one organization over others. Employers must be reasonably competitive with several types of compensation in order to hire, keep, and reward performance of individuals in the organization.
Types of Compensation
Extrinsic rewards are tangible, having the form of both monetary and nonmonetary rewards. Tangible components of a compensation program are of two general types . With the direct type of compensation, monetary rewards are provided by the employer. Base pay and variable pay are the most common forms of direct compensation. Indirect compensation commonly consists of employee benefits.
BASE PAY
The basic compensation that an employee receives, usually as a wage or salary, is called base pay. Many organizations use two base pay categories, hourly and salaried, which are identified according to the way pay is distributed and the nature of the jobs. Hourly pay is the most common means of payment based on time; employees who are paid hourly are said to receive wages, which are payments directly calculated on the amount of time worked. In contrast, people who are paid salaries receive payments that are consistent from period to period despite the number of hours worked. Being salaried typically has carried higher status for employees than being paid wages. Some organizations have switched to an all-salaried approach with their manufacturing and clerical employees in order to create a greater sense of loyalty and organizational commitment. But they still must pay overtime to certain employees in jobs covered by federal and state pay laws. According to Armstrong (2007) the base rate is the amount of pay that constitutes the rate for the job. It may be varied according to the grade of the job or, for shop floor workers, the level of skill required. Base pay will be influenced by internal and external relativities. The internal relativities may be measured by some form of job evaluation. External relativities (going rates) are assessed by tracking market rates. Alternatively, levels of pay may be agreed through collective bargaining with trade unions or by reaching individual agreements. Base pay may be expressed as an annual, weekly or hourly rate. This is sometimes referred to as a time rate system of payment. Contingent pay or allowances as described later may be added to base pay. The rate may be adjusted to reflect increases in the cost of living or market rates by the organization unilaterally or by agreement with a trade union.
Base pay as explained by Jensen et al (2007) is the rewards vehicle that recognizes an employee's present value and may also reflect the individual's potential and future worth to the organization. Consider the situation when you hire a new employee and have to settle on a starting salary. There are four key factors: the value the person will be adding to the team (special skills and experiences), how much the person is currently earning (his or her value to someone else), the earnings of other employees doing similar work (internal equity), and what you can afford. Essentially, the new employee is an investment, and you need to determine a fair price for this investment, given the likely returns and the price you're paying for similar investments.
VARIABLE PAY
Another type of direct pay is variable pay, which is compensation linked directly to performance accomplishments. The most common types of variable pay for most employees are bonuses and incentive program payments (Mathis and Jackson, 1999). Which is almost same as defined by Armstrong (2007) while defining contingent pay as additional financial rewards may be provided that are related to performance, competence, contribution, skill or experience. These are referred to as 'contingent pay'. Contingent payments may be added to base pay, i.e. 'consolidated'. If such payments are not consolidated (i.e. paid as cash bonuses) they are described as 'variable pay'.
BENEFITS
Many organizations provide numerous extrinsic rewards in an indirect manner. With indirect compensation, employees receive the tangible value of the rewards without receiving the actual cash. A benefit is an indirect reward, such as health insurance, vacation pay, or retirement pensions, given to an employee or group of employees as a part of organizational membership (Mathis and Jackson, 1999). Armstrong (2007) summarizes employee benefits as pensions, sick pay, insurance cover, company cars and a number of other 'perks'. They consist of elements of remuneration additional to the various forms of cash pay and also include provisions for employees that are not strictly remuneration, such as annual holidays.
Bonuses
Individual employees may receive additional compensation payments in the form of a bonus, which is a one-time payment that does not become part of the employee's base pay. Generally, bonuses are less costly to the employer than other pay increases because they do not become part of employees' base wages, upon which future percentage increases are figured. Growing in popularity, individual incentive compensation in the form of bonuses often is used at the executive levels of an organization, but bonus usage also is spreading to lower-level jobs. Bonuses also can be used to reward employees for contributing new ideas, developing skills, or obtaining professional certifications. When the skills or certification requirements are acquired by an employee, a pay increase or a one-time bonus may follow. For example, a financial services firm provides the equivalent of two week's pay to employees who master job-relevant computer skills. Another firm gives one week's pay to members of the HR staff who obtain their professional certifications such as PHR, SPHR, CCP, and others. Firms in the information technology industry pay bonuses for obtaining special technical skills in order to keep employees from looking for new jobs elsewhere using their newly acquired skills and certification. A bonus recognizes performance by both the employee and the company. When both types of performance are good, bonuses go up. When both are bad, bonuses go down. When an employee has done poorly in a year that was good for the company, most employers base the employee's bonus on individual performance. It is not always as clear what to do when an employee does well but the company does not. However, a growing number of companies are asking employees to put a portion of their pay "on the line." While offering big incentive bonuses for high performance, they are withholding them when performance is poor and insisting that employees share both the risks and rewards of business.
Nature of Benefits
Benefits attempt to protect employees and their dependents from financial risks associated with illness, disability, and unemployment. Also, from management's perspective benefits are thought to contribute to attracting, retaining, and maintaining human resources. Two factors that have influenced the growth of benefits are federal tax laws and other legislation affecting benefits.
TAX ADVANTAGES OF BENEFITS
Benefits generally are not taxed as income to employees. For this reason, they represent a somewhat more valuable reward to employees than an equivalent cash payment. For example, assume that employee Henry Schmidt is in a 25% tax bracket. If Henry earns an extra $400, he must pay $100 in taxes on this amount (disregarding exemptions). But if his employer provides prescription drug coverage in a benefit plan, and he receives the $400 as payments for prescription drugs, he is not taxed on the amount; he receives the value of the entire $400. This feature makes benefits a desirable form of compensation to employees, and more benefits are more desirable.
Types of Benefits
Many different types of benefits are offered by employers. Some of the benefits are legally mandated by federal, state, and local laws. Employers have little choice but to pay for these benefits.
MANDATED BENEFITS
Mandated benefits are those benefits which employers in the United States must provide to employees by law. Social Security and unemployment insurance are funded through a tax paid by the employer based on the employee's compensation. Workers' compensation laws exist in all states. In addition, under the Family and Medical Leave Act (FMLA), employers must offer unpaid leaves to employees with certain medical or family difficulties.
VOLUNTARY BENEFITS
Most of the other types of benefits are provided by employers voluntarily in order to compete for and retain employees. By offering additional benefits, organizations are recognizing the need to provide greater security and benefit support to workers with widely varied personal circumstances. By offering more benefits, employers hope to strengthen the ties between the organizations and employees as valuable human resources. Also, as the workforce ages and more individuals retire, financial security in retirement is an issue that employees and employers are addressing. In addition, with the changes in work and jobs emphasizing flexibility and choice, both workers and employers are seeing benefits choices as necessary. As a result, flexible benefits and cafeteria benefit plans have expanded.
Health-Care Benefits
Employers provide a variety of health-care and medical benefits, usually through insurance coverage. The most common plans cover medical, dental, prescription drug, and vision-care expenses for employees and their dependents. Basic healthcare insurance to cover both normal and major medical expenses is highly desired by employees. Dental insurance is also important to many employees. Many dental plans include orthodontic coverage, which is usually very costly. Some employer medical insurance plans also cover psychiatric counseling.
Financial and Other Benefits
Employers may offer workers a wide range of special benefits-financial benefits, insurance benefits (in addition to health-related insurance), educational benefits, social benefits, and recreational benefits. From the point of view of the employer, such benefits can be useful in attracting and retaining employees. Workers like receiving special benefits, which often are not taxed as income.
Financial Benefits
Financial benefits include a wide variety of items. A credit union provides saving and lending services for employees. Purchase discounts allow employees to buy goods or services from their employers at reduced rates. For example, a furniture manufacturer may allow employees to buy furniture at wholesale cost plus 10%, or a bank may allow use of a safe deposit box and free checking to its employees. Employee thrift, saving, or stock-investment plans may be made available. Some employers match a portion of the employee's contribution. These plans are especially attractive to executive and managerial personnel. To illustrate, in a stock purchase plan, the corporation provides matching funds equal to the amount invested by the employee to purchase stock in the company. In this way, employees can benefit from the future growth of the corporation. Also, it is hoped that employees will develop a greater loyalty and interest in the organization and its success. Financial planning and counseling are especially valuable to executives, who may need information on investments, tax shelters, and comprehensive financial counseling because of their higher levels of compensation. These financial planning benefits likely will grow as a greater percentage of workers approach retirement age. Numerous other financial-related benefits may be offered as well. These include the use of a company car and company expense accounts and assistance in buying or selling a house when an employee is transferred.
Time-Off Benefits
Employers give employees paid time off in a variety of circumstances. Paid lunch breaks and rest periods, holidays, and vacations are the most well known time-off benefits. But leaves are given for a number of other purposes as well. Time-off benefits are estimated to represent from about 5% to 13% of total compensation. Some of the more common time-off benefits include holiday pay, vacation pay, and leaves of absence.
Holiday Pay
Most, if not all, employers provide pay for a variety of holidays. Other holidays are offered to some employees through laws or union contracts. As an abuse-control measure, employers commonly require employees to work the last scheduled day before a holiday and the first scheduled workday after a holiday to be eligible for holiday pay. Some employers pay time-and-a-half to hourly employees who must work holidays.
Vacation Pay
Paid vacations are a common benefit. Employers often use graduated vacation time scales based on employees' length of service. Some organizations allow employees to accumulate unused vacation. A growing number of companies are allowing employees to "buy" additional vacation or let them sell unused vacation back to employers. Jones (1998) about 25% of all surveyed firms permit such options. As with holidays, employees often are required to work the day before and the day after a vacation.
Leaves of Absence
Leaves of absence, taken as time off with or without pay, are given for a variety of reasons. All of the leaves discussed here add to employer costs even when they are unpaid, because usually the missing employee's work must be covered, either by other employees working overtime or by temporary employees working under contract.
Recognition: Jensen et al (2007) Recognition and nonmonetary rewards can be very effective motivators and can help drive business performance. Encouraging employees to put their discretionary effort into their work and to deliver superior performance with the chance to make a difference and be recognized is a very powerful management tool that is often not utilized enough. Recognition programs can also reinforce desired behaviors and work cultures that can enhance the employer's brand and promote the organization as an employer of choice.
Current challenges and our focus
The situation faced by HR management is a challenging one and changes are stirring rapidly across a wide range of issues (Pp4).Mathis and Jackson (1999) draw from a study by the Hudson Institute and some other studies the most prevalent challenges facing HR management which are as under:
Economic and technological change
Workforce availability and quality concerns
Demographics and diversity issues
Organizational restructuring
However we will have a look at the workforce availability and quality concerns.
GROWTH IN CONTINGENT WORKFORCE
In the past, temporary workers were used for vacation relief, maternity leave, or workload peaks or to cover for the temporary staff shortage (Mathis and Jackson, 1999). Today "contingent workers" (temporary workers, independent contractors, leased employees, and part timers) represent over 20% of the workforce(Pp6).According to Mathis and Jackson(1999) many employers operate with a core group of regular employees with critical skills and then expand and contract the workforce through the use of contingent workers(Pp6). This practice requires determining the actual staffing needs and deciding in advance which employees or positions should form the "core" and which should be more fluid and can be contingent(Pp6). At one large firm, about 10% of the workforce is contingent now and companies utilize the contingent employees as a way to stabilize the "core" workforce (Pp7). Instead of hiring regular fulltime workers when work piles up and then firing them when the work is finished, the company relies more on temporary workers and independent contractors (Pp7). So if employees are paid only when they are working (as contingents are), overall productivity increases (Pp7). Another reason for the growth in contingent workers is the reduced legal liability faced by employers (Pp7) which means they can exploit the full potential of the temporary workers and use it to maximize the profits. As more and more employment-related lawsuits have been filed, some employers have become more wary about adding employees (Pp7). Instead, by using contract workers supplied by others recruitment agencies; they face fewer employment legal issues regarding selection, discrimination, benefits, discipline, and termination (Pp7).
Bergström and Storrie(2003) in their book Contingent employment in Europe and the United States refer to a bottom up definition of the contingent worker: " those individuals who do not perceive themselves as having an implicit or explicit contract for continuing employment" (Pp6). Alternatively they define contingent employment as "an employment relationship that could be terminated with minimal costs within a predetermined time from the point of view of the employer" (Pp6). This definition well includes all types of contractual relationships that both parties the employee and the employer may regard as limited in time (Pp6).
Bergström (2003) argues that contingent employment relationships are different from traditional employment relationships in at least two different ways. First contingent employment relationship means both parties regard their relationship as temporary. There may be some implicit expectations among the parties for long-term relationship but in general there are no formal grounds for continuing the employment relationship. Second way in which the author differentiates the two relationships is contingent employment relationships imply that the risk and responsibilities are distributed among the participating parties in different ways from what is generally the case in standard open-ended employment relationships. It varies according to the type of the contingent labor i.e. whether it is limited duration contract or temporary agency work. In limited duration contracts the employer has the much of managerial responsibility and in case of temporary agency work the responsibility is shared among three parties. In short , in temporary agency work, managerial work is organized through a horizontal division of labor and the managerial responsibilities are distributed among the employment relationship.
Wages and benefits for the contingent workers
Bergström (2003) refers to Gannon (1996) that a widespread belief that contingent workers earn less than the permanent workers which is supported by Summers(1997) that most serious problem of contingent employment from employee point of view is discrimination in wages and benefits provided by the employer. Bergström (2003) argues that contingent employment is regarded as unstable and insecure form of employment tending to reduce workers' bargaining position in relation to the employer. Thus the temporary nature of contingent employment relationship affects the bargaining power of workers and as a result they get lower wages (Pp16). He further more argues that contingent contracts in most countries are over represented in some segments of the labour market (women, young people, foreign workers and ethnic groups) and that they are often at disadvantage because of lower wages, abuse by employers in relation to dismissal, reduction in working hours and so on, and little or no social security protection with respect to unemployment, retirement and invalidity (Pp16). Bergström (2003) refers to ThÑbaud-Mony (2001) that the increase of unskilled contingent work in France, in particular industrial cleaning where ethnic community men and women are working, is an example of modern form of slave labour (Pp17). Belous (1997) implies that working as a contingent worker not only means earning less but they also endure a high level of income insecurity (in Bergström and Storrie, 2003 p.16).
In a survey conducted in June 2001, Hay Group Europe research found
that approximately one-third of all employees plan to quit their job
within the next two years, with sales and information technology staff
being the most mobile. The top five reasons cited for employees wanting
to leave are (in order of importance):
1. Dissatisfaction with manager
2. Lack of career opportunities
3. Job not ''stretching'' enough
4. Personal reasons (spouse, partner moving on, maternity, etc.)
5. Compensation
