Human Resource /Human Capital Management

Definition, Importance and Aim of HR Department

  • Human Resources (HR) Management Definition:

    • Includes all activities and decisions intended to improve the effectiveness of employees and the organization.

  • Importance and Aim of HR:

    • HR policy recognizes employee work performance as a critical factor in business.
    • Aims to bridge the gap between management goals and workforce needs.
    • Manages human resources to maximize their potential, enabling the business to achieve its mission.
    • Focus includes:
      • Interpreting employer/employee needs.
      • Coordinating management and staff requirements.
      • Implementing personnel management activities like manpower planning, recruitment, selection, placement, induction, training, record-keeping, and fair remuneration.

Human Resource Activities

  • Manpower / Human Resource Planning:

    • Planning for labor requirements to keep up with needed labor amounts.
    • Necessary when a business expands or experiences high staff turnover.
    • Purpose:
      • Determine how many employees are needed.
      • Determine what skills are required.
      • Determine when employees will be needed.

  • Techniques Applied During Manpower Planning:

    • Work-load analysis: Determines the number of people required based on the amount of work.
      • Example: A shoe factory producing 1,000 shoes per week, where one person produces 100 shoes per week, requires 10 workers plus a supervisor, totaling 11 people.
    • Job analysis: Systematic method to obtain all relevant information about tasks related to a specific job.
      • Requirements:
        • The job is completely and accurately identified.
        • All tasks are completely and accurately described.
        • The demands the job makes on the worker are analyzed.

  • Conducting Job Analysis:

    • Methods:
      • Interview workers and supervisors.
      • Observe the worker at work (work study).
      • Issue questionnaires to the worker.
      • Techniques can be used separately or together.

  • Two Main Sections of Job Analysis:

    • Job description (about the job):

      • Portrays the duties, responsibilities, and level of authority of the worker.
      • States what is to be done, how it is to be done, and why, when, and where.

    • Job specification (about the worker):

      • Specifies the minimum abilities a worker must possess, including experience, education, and physical requirements.
      • Forms the basis of the recruiting activity.

    • Manning table:

      • Reflects the number of people required and the skills they must have, based on the results of job analysis.
      • Always part of a Workplace Skills Analysis.

    • Example:

      • Position: Secretary
        • Required Number: 2
        • Skills: Competent in Word, Excel, and PowerPoint
      • Position: Domestic
        • Required Number: 1
        • Skills: Cleaning, preparation of refreshments, and basic First Aid
      • Position: Manual Laborers
        • Required Number: 9
        • Skills: A short description relevant to the position
      • Total: 12

    • Determining employee requirements

      • The Manning table specifies the total number of employees needed.
      • The Recruiting Plan will be based on the difference between employees needed and current employees.
        • Example:
          • Position: Secretary
            • Required employees: 2
            • Present employees: 1
            • Number to be recruited: 1
          • Position: Domestic worker
            • Required employees: 1
            • Present employees: 1
            • Number to be recruited: 0
          • Position: Labourers
            • Required employees: 9
            • Present employees: 6
            • Number to be recruited: 3
          • Total
            • Required employees: 12
            • Present employees: 8
            • Number to be recruited: 4

Recruiting – Finding Employees

  • Recruitment:

    • Seeks to attract job applicants with the necessary skills and motivation.

  • Two Sources of New Employees:

    • Internal recruitment (inside the business):
      • Position advertised internally to current employees, involving transfers, upgrades, or promotions.
      • Methods:
        • Job posting: Vacancy on bulletin boards or via email (intranet).
        • Organization searches its files for potentially qualified candidates and contacts them.
        • Recommendations from current employees (hybrid of internal and external).
    • External recruitment methods (outside the business):
      • Recruitment agencies or consultants.
      • Advertising in newspapers, on radio, trade journals.
      • Internet recruitment businesses (e-recruitment).
      • Recommendations or referrals from existing staff.
      • Schools, universities, colleges.
      • Headhunting: Approaching qualified, skilled, and competent people to apply.

Selection

  • Selection:

    • Involves screening applicants and choosing the most suitable candidate.
    • Aims to exclude unsuitable applicants whose skills and experience do not match the job specification.
    • Benefits include lower turnover, reduced production costs, less training, and higher productivity.

  • Standard Selection Procedures:

    • Receipt of application forms (external and internal) and/or Curriculum Vitae.
    • Initial screening.
    • CV/job application evaluation (short list).
    • Check references and background of short list.
    • Interviewing of short list.
    • Different tests and examinations.
    • Medical examination (if applicable).
    • Letter of appointment.

  • Receipt of Application Forms/CV:

    • HR manager answers queries from applicants after the vacant post is advertised.
    • A list of all application forms received is drawn up after the closing date.
    • Documentation is checked against the list to ensure everything is received.

  • Initial Screening:

    • Identifies applicants who obviously do not meet the minimum job requirements.
    • Suitable applicants are referred to the next step.
    • Unsuitable applicants are informed accordingly.

  • CV / Job Application Evaluation:

    • A selection panel evaluates the CV/job applications of those who meet minimum requirements.
    • A predetermined set of criteria is used, often a 7-point scoring system (7 = highest, 1 = lowest).
    • Applicants are ranked according to total scores.
    • A short list of candidates is drawn up based on suitability and quality.

  • Reference and Background Checks:

    • HR department verifies information supplied in the CV of short-listed applicants.
    • Employment records and qualifications are checked.
    • HR manager communicates with referees, asking relevant questions about the applicant’s people skills and trustworthiness.
    • A standard set of questions ensures fairness.

  • Interview of Candidates on the Short List:

    • Conducted by one person or a panel (e.g., Personnel Manager, Head of Department, Supervisor).
    • The same person or panel interviews all applicants for consistency and fair labor practice.
    • Purposes:
      • Gather more information from the applicant to assess suitability.
      • Provide more information about the business, job, and conditions of employment to the applicant.

  • Tests and Examinations:

    • Different types of tests can disclose more information about an applicant's suitability.
    • Careful test selection is necessary based on the requirements to be measured.
      • Ability/trade tests: Indicate what tasks the applicant can perform currently and potentially in the future with training.
      • Psychometric tests: Include personality and interest tests, measuring motivation and intelligence.
      • Work sample tests: Measure what the applicant can do and at what skill level using samples of work from the job.

  • Medical Examination:

    • The Employment Equity Act states that no medical examination is required unless it is an inherent job requirement (e.g., eye test for a pilot) or for employee benefits distribution.
    • The employer may give a health-related questionnaire and request a medical examination (including drug and alcohol testing) if there are doubts about the employee's medical status related to job requirements (e.g., bus driver).

  • Letter of Appointment:

    • Selectors rank applicants in order of suitability.
    • A written offer of employment is made to the best person.
      • If accepted (preferably in writing), other candidates are informed of their unsuccessful applications.
      • If the best person declines, an offer is made to the second-best candidate, repeating the process.
      • If no one accepts the offer, the recruiting process restarts.
    • The appointment is not legally binding until the candidate signs the Employment contract.
    • The recruitment process may be observed by staff representatives (e.g., a trade union representative) to ensure fairness.

Employment Contracts

  • Employment Contracts:

    • The Labour Relations Act requires the employer and employee to agree, draw up, and sign an employment contract.
    • The contract is a legally binding document that must comply with the Basic Conditions of Employment Act.
    • The employer may offer better conditions but not less than those in the Act.

  • Contract Should Include:

    • Employer details: full name and address
    • Employee details: full name, identity number, address, contact details, taxation number, etc.
    • Employment details: position held, outline of duties, appointment date, probation period, hours of work, etc.
    • Salary issues: basic starting salary, overtime rate, incentives, deductions (pension, medical aid, tax, bonus, increases, etc.).
    • Leave details: number of days’ normal leave per year, sick leave per cycle, leave for personal affairs, etc.
    • Termination of services: the notice period required by each party, retirement age.
    • Any other necessary issues.

Placement of Staff

  • Placement Decision:
    • Made after the selection decision.
    • Involves comparing individual abilities with the requirements of vacant positions.
    • Individuals are placed in positions that best match their abilities and the job requirements.
    • A candidate may be placed in a different position than the one applied for if the business believes their skills are better utilized elsewhere.

Remuneration

  • Remuneration:

    • Salaries and wages are a major business expenditure and influence a worker's job choice.
    • The HR function may handle the payroll.
    • Remuneration is a key condition of employment for trade unions in negotiations for better pay and annual increases.

  • Job Evaluation:

    • Investigates the relative importance of a job to create a job hierarchy.
    • Remuneration is determined by the job's status in the hierarchy.
    • Leads to equity because the remuneration scale is linked to the job's contribution to the organization's performance.

  • Types of Remuneration:

    • Salaries: Fixed amounts paid monthly, typically for white-collar workers (professional, skilled, or managerial roles).
      • Examples: doctors, lawyers, teachers, engineers in office situations.
      • Commission: Part of the salary in sales, where employees earn a basic salary plus a percentage of their sales.
      • Performance bonus: Managerial employees may receive a bonus in addition to their salary as an incentive.
    • Wage earner: Payments to employees providing less-skilled labor, usually paid weekly, daily, or monthly.
      • Examples: blue-collar workers (tradesmen) such as factory workers, builders, electricians, plumbers.

  • Methods of Wage Payment:

    • Piece rate system: Workers are paid according to the quantity of products made.
    • Time rate system: Paid according to the number of hours worked.
    • Overtime payment: Extra pay for working beyond normal hours (e.g., weekends, public holidays).
      • Workers in factories, security companies, and hotels operating 24/7 may be paid a shift rate.
      • The BCEA mandates compensation (allowance, time off, etc.) for night shift workers (6 pm to 6 am).
    • Profit-sharing scheme: A business might implement it as a bonus or part of the salary package (e.g., for managers).
    • Fringe benefits (Employee benefits):
      • Additional benefits beyond salary.
      • Influence job seekers' choice of employer.
      • May be compulsory (e.g., pension or provident fund, medical aid, and UIF).
      • Workers contribute to these funds via salary deductions, with the employer contributing further amounts.

  • Further Benefits May Include:

    • Housing allowance
    • Company car or transport allowance
    • Education or study allowances
    • Meals
    • Discount on goods purchased
    • Loans at reduced interest rates
    • Clothing allowance
    • 13th bonus cheques
    • Entertainment or travel allowances
    • Fringe benefits are taxable, and businesses must make income tax deductions from employees’ salaries.
      • According to the BCEA, employers cannot deduct money from remuneration unless it is a voluntary deduction (e.g., union membership) or a legal requirement (UIF or PAYE).
      • Income tax in South Africa is progressive, meaning higher salaries pay a higher percentage of tax.

  • Salary Scales:

    • Employers may structure remuneration as ‘basic plus benefits’ or on a ‘cost to company’ basis.
    • Advantage of cost to company: salary amount is earned even if a benefit is not taken, whereas in the basic plus benefits an employee loses the benefit if it is not taken.
      • Basic plus benefits
        • Basic of R180 000 p/a
        • Housing of R24 000 p/a
        • Pension of 10% of basic
        • Medical aid of R18 000 p/a
        • Car allowance R24 000 p/a
        • Total possible package is R264 000
      • Cost to company
        • Total package R250 000 p/a (Benefits are paid out of this amount)
        • Total possible package is R250 000
    • An employee who chooses not to purchase a house and therefore is not eligible for a housing allowance will earn R240 000 (R264 000 minus the housing allowance) in the ‘Basic plus benefits’ structure and R250 000 in the ‘Cost to Company’ structures
    • An employee taking advantage of all benefits would earn the total package or R264 000
    • Many wage earners are not recipients of these benefits.
    • Many businesses have adopted the idea of ‘a happy worker is a productive worker’ and have realised that working conditions play an important role in the productivity and efficiency of workers.
    • Some businesses have introduced gyms, crèches, coffee shops and entertainment areas to the workplace e.g. Google

Induction (or Orientation)

  • Purpose:

    • To let new employees learn the business's practices and rules.
      • This doesn't involve specific job training and applies to all employees.
    • To enable new employees to fit into the existing workgroup, including subordinates and superiors.
      • This includes socialization to help the new employee feel at home.

  • Induction Program Should Include:

    • Immediate kinds of information and company policies.
    • Knowledge of supervisor expectations and where to seek help and advice.
    • Introduction of fellow workers and people with whom they will work.
    • Understanding how the department fits into the business and knowledge of products and services.
    • Often expedited by a mentor who oversees the new employee’s first few months.

Training of Staff

  • Training Purpose:

    • Systematic process to improve employee performance and increase business efficiency.
    • Can change or improve:
      • Knowledge, skills, and productivity levels of employees.
      • Behavior and attitudes of employees.
    • Skills Development Act and Skills Development Levies Acts:
      • Passed to address the shortage of skilled labor in South Africa.
      • Aim:
        • Ensure the workplace is also a place of learning.
        • Invest more in education and training.
        • Ensure good-quality training programs.
        • Improve employment opportunities for disadvantaged people.

  • Training Process Steps:

    1. Analyze business operations to identify problems and future skill needs.
    2. Use job analysis to gather details of the skills required for particular jobs.
    3. Analyze individual job performance to determine areas needing training or retraining.
    4. Determine training needs based on the above analyses.
    5. Develop training objectives by clearly stating what the employee will be able to do after training.
    6. Develop a training program that incorporates basic skills, knowledge, attitudes, and behavioral requirements.
      • This program may consist of lessons in a manual, short lectures, demonstrations, or outsourced trainers.
    7. Train the staff using one or more of the following methods:
      • On-the-job training: Occurs in the real work situation with a hands-on approach.
      • Off-the-job training: Courses offered by outsiders (e.g., at a university).
      • Apprenticeship training: Combination of on-the-job and off-the-job training (e.g., work for six months and attend lectures for six months).
      • Workshops: To promote interaction or update skills.
      • Job rotation or multi-skilling: Expands an employee’s experience within the business.
      • Self-study: Workers use manuals at their own pace.
      • Buddy system/mentorship: Workers or superiors share skills with junior employees.
      • Learnerships: Students work within a business while studying (internship); they may be offered a position upon completing studies.
        • Some businesses sponsor learners in fields like accounting and engineering, claiming back expenses from the Skills Development Levy.
        • The Government sponsors learnerships through the Skills Development Fund to reduce unemployment.
      • Online Training Companies: E.g. Media Works supply online training courses for a variety of industries.
    8. Evaluate results by comparing the trainee's performance with the training objectives.

Evaluation and Retention

  • Evaluation (Performance Appraisals):

    • Management continually evaluates efficiency or performance to ensure staff operate to the best advantage.
    • Checks whether training goals have been met and assesses skill levels and shortcomings.
    • Done by management, peers, subordinates, and the workers themselves.
    • Provides an opportunity to voice concerns or grievances and to develop action plans for improvement

  • Performance Appraisals’ Main Functions:

    • Give feedback on past performances and communicate future expectations.
    • Identify strengths and weaknesses and devise strategies to leverage strengths and improve weaknesses (e.g., training).
    • Discuss employment issues like salary progression, bonuses, perks, promotional opportunities, and career growth.

  • Retention:

    • High employee turnover is detrimental to productivity, public image, and employee morale.
    • Businesses must retain employees, particularly skilled and managerial staff, due to the costs of recruitment and training.
    • Changes in staff can slow down production and strategic plans.
    • Some workers leave for legitimate reasons (e.g., spouse relocation, health, or new opportunities).