L6 HRM Turnover and pay structure

Managing voluntary and involuntary turnover:

Important to monitor since they impact productivity and costs. It helps companies improve employee management and work environment.

Voluntary turnover:

When employees leaves their company by choice due to e.g. retirement, opportunities, personal or family responsibilities and job dissatisfaction.

Involuntary turnover:

When employee leave company due to organization’s choice because of e.g. redundancy (economic necessity), inability to meet performance expectations and undesirable behavior.

Costs associated with turnover

-        Involuntary turnover: Recruiting, selecting, and training replacements, lost productivity (takes time to get the job), lawsuits (wrongful discharge), workplace violence.

-        Voluntary turnover: Recruiting, selecting, and training replacements, lost productivity and loss of talented employees.

To minimize voluntary turn over:

Focus on employee engagement focusing on the degree of involvement and commitment to the job and prevent job withdrawal.

Retirement stages include:

-        Pre-retirement: Activities that take place before an employee announces their intent to retire.

-        Peri-retirement: Activities that take place once an employee has announced their intent to retire (can include reducing work hours and costs through phased retirement programs).

-        Post-retirement: Activities that take place as and after a retiring employee exits the organization e.g. alumni networks.

Reasons for quitting: Job dissatisfaction is the primary driver for job withdrawal and voluntary turnover:

-        Personal disposition: Negative affectivity (feel all negative feelings), core self-evaluations (both positive and negative feelings on self).

-        Tasks and roles: Role (repetitive tasks), role ambiguity (unclear expectations), role conflict (contractionary demands), role overload,

-        Supervisor and coworkers: Uncivil behavior, lack of support from managers, bullying, hazing, groupings.

-        Pay and benefits: Contribute to self-worth, motivated by salary. Pay is an indicator of status in the organization. Pay and benefits contribute to self-worth.

Redundancy (downsizing):

Planned elimination of many personnel to improve competitiveness. When employee is dismissed because their position is no longer needed or company experiencing financial difficulties. One form of involuntary turnover where company focus on cutting costs, restructuring or relocating.

Reasons for employee redundancy: Job disappears

-        Termination of jobs: Company decides roles are no longer needed.

-        Economic recessions: Earn less and must cut costs.

-        Business closure: If business shuts down jobs disappears.

-        Limited funding: Lose investors and cannot afford e.g. job.

-        Business relocation: Company moves operation.

-        Cost reductions

-        Technological replacement: Technology takes over jobs.

-        Structural changes: Mergers and acquisitions or business closure lead to unnecessary costs leading to layoffs because of duplicated roles.

-        Relocation: Moving operation to economical areas abroad leading to termination of jobs.

Redundancy laws and regulations: Rules employers must follow to ensure redundancies are fair, transparent and legal:

-        Redundancy pay: Employees receive compensation based on age, salary, length of service to support employees financially while they find new work.

-        Consultation: Employers must explain why redundancy happened, how many jobs are affected and possible alternatives.

-        Selection criteria: Fair objective criteria decide who is made redundant based on skills, qualifications, performance and attendance.

-        Alternative employment: Employers need to find other suitable roles withing organization.

-        Notice: Give notice or warning to employees before termination.

Undesirable behaviour: E.g. under performance, if go continuously.

-        Unofficial spoken warning

-        Strike 1: Official written warning

-        Strike 2: 2^nd written warning plus threat of temporary suspension

-        Strike 3: Temporary suspension + written notice this is a last chance to improve

-        Termination

Retaining and increasing job satisfaction: To prevent voluntary turnover they must monitor and increase job satisfaction:

-        Selection: Hiring employees predisposed to being satisfied (based on positive past work history) can reduce future turnover – Referring depressed employees for help. Allows to align intrinsic and extrinsic motivation.

-        Job design: Designing meaningful complex jobs by establishing clear and appropriate roles: generate more satisfaction if align task specification to the intrinsic motivation for the employees.

-        Social support: Help employees pursue personal career goals and fostering a culture of mutual respect increases satisfaction. Reinforce shared values, encourage social support.

-        Setting satisfactory pay levels and communicate pay structure and policies

HR role in conflict resolution:

To retain employees must balance through conflict resolution where hr works as an intermediary between employee and manager.

-        Should be impartial to conflict.

-        Neutral mediator in workplace conflicts

-        Facilitate fair and effective communication

-        Identify root causes of disputes

-        Enforces policies for resolution: Code of conduct, enforce and communicate these.

-        Implements strategies around conflict management: set policies and standards, implement it and when conflict happens use these.

-        Maintain a positive work environment

-        Prevents future workplace conflicts.

Pay structure:

Focus on how organizations develop a logical and fair system for compensating employees. Pay is a critical tool for human resource management because it influences the types of employees attracted to the organization, their motivation, and their decision to stay.

-        The goal of a pay structure is to simplify pay decisions by grouping similar jobs rather than negotiating uniquely for every employee. (Job structure and pay level).

 

Pay structure introduction

-        Pay is a powerful tool for meeting the organization’s goals

-        Pays has a large impact on employee attitudes and behaviors

-        It influences the kinds of people who are attracted or remain with the organization

-        Employees attach great importance to pay decisions when they evaluate their relationship

-        Employees attach great importance to pay decisions when they evaluate their relationship with their employer.

Legal requirements: Compensation policies are regulated by federal and state laws:

Equal employment opportunity; Employers must provide equal pay for equal work regardless of race, sex, or age. Differences in pay are only legal if they are based on business related consideration like seniority, merit, or quantity/quality of production.

Minimum wage

-        Sweden don’t have but have negotiations with unions that set the wages.

-        Minimum wage: the lowest amount that employers may pay under federal or state law, stated as an amount of pay per hour.

-        The Fair Labor Standards Act (FLSA) establishes the lowest amount that employers may pay under federal law, stated as an amount of pay per hour. While the federal minimum is currently $7.25, some states have higher requirements, and some cities have passed "living wage" laws based on the specific cost of living in that region.

Factors influencing pay: There are individual affecting – intrinsic and extrinsic that affect inside and outside business vs structural factors. - External

o   Demand and supply of labor

o   Cost of living

o   Society

o   Labour unions: Influence pay by setting requirements through collective bargaining, often resulting in higher pay for union members than nonunion workers.

o   The economy: State of economy

o   Labour laws

Internal factors influencing pay

-        Internal: Policies for entrance, tasks and activities

o   The compensation policy

o   The org. ability to pay

o   Job analysis and description: Provide the necessary data to perform a job evaluation, which measures the relative worth of jobs based on compensable factors like experience, education, and complexity.

o   Employee: motivation.

Employee judgements about pay fairness

Employee motivation depends heavily on their perception of pay fairness, which is explained by equity theory. Employees evaluate their pay by comparing their outcomes (pay) and inputs (effort/skills) against three yardsticks.

Employees evaluate their pay by comparing their outcomes (pay) and inputs (effort/skills) against three yardsticks:

-        External equity: What they think employees in other organizations earn for doing the same job

-        Internal equity (different jobs): What they think other employees holding different jobs within the organization earn for doing work at the same or different levels

-        Internal equity (same job): What they think other employees in the organization earn for doing the same job as theirs.

If employees sees them as underrewarded based on these they will:

• Put less effort

• Seek way to increase their outcomes

• Withdraw

• Important to communicate fairness and be transparent.

 

Economic Influences on Pay: Organizations must balance two competing market forces:

• Product Markets: Organizations must keep labor costs low enough to sell products at a competitive price.

• Labor Markets: Organizations must pay enough to attract and keep qualified workers. Companies may choose to pay at, above, or below the market rate.

• Benchmarking: Many firms use pay surveys to compare their own compensation practices against successful competitors.