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A Human Resource A Human Resource Management ApproachManagement Approach

STRATEGIC STRATEGIC COMPENSATIONCOMPENSATION

Prepared by David Oakes

Chapter 14Chapter 14

Compensating the Flexible Compensating the Flexible Workforce: Contingent Employees Workforce: Contingent Employees and Flexible Work Schedulesand Flexible Work Schedules

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Contingent WorkersContingent Workers

Engage in tentative employment

50% male/female

12.5 million employed in 2001

29 million worked a flexible schedule

26.1% of all civilian workers

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Types Of Types Of Contingent Workers Contingent Workers

Part-time employees

Temporary & on-call workers

Leased employees

Independent contractors, freelancers consultants

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Employed Contingent Workers in Employed Contingent Workers in 20012001

TYPE NUMBER

Independents 8,858,000

Part-Time 2,245,000

On-Call 2,089,000

Temporary 1,169,000

Leased 633,000

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Benefits CostsBenefits Costs

Benefit Full-time Part-timePaid leave $1.89 $0.37Supplement pay 0.81 0.17Insurance 2.07 0.50Retirement 1.09 0.19Other 0.05 <0.01 Legally-required 2.27 1.44 Total $8.19 $2.68

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Job SharingJob Sharing

2 or more part-timers perform 1 job Reduces costs Increases flexibility Maintains productivity levels May increase morale & loyalty

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Temporary WorkersTemporary Workers

Fill in for core employees

Help ease high demand periods Help determine future employment needs May be assessed for a core position

Don’t receive company benefits

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Leased Employee ArrangementsLeased Employee Arrangements

Lease company does all HRM functions Fees either % of payroll, or % per employee Employees work for contract duration Food service, security, building maintenance, administration

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Rise In Use Of Contingent WorkerRise In Use Of Contingent Worker

Economic recessions

International competition

From manufacturing to service

More females in workforce

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Service DivisionsService Divisions

Transportation

Communication

Public utilities

Wholesale trade

Retail trade Government

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Federal Compensation GuidelinesFederal Compensation Guidelines

ERISA NLRA ADA ADEA Title VII, of 1964 Civil Rights Act FLSA COBRA

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Wage ComparisonsWage Comparisons in 2004 in 2004

Group F-T P-T

Management & Professional $30.38 $23.79

Production 14.62 8.92

Service 10.26 7.57

Overall Average $19.05 $10.17

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Benefits OfferedBenefits OfferedIn 2004In 2004

% of CompaniesType Offering Benefits Paid time-off 25%

Medical insurance 11%

Retirement 20%

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Leased Workers’ BenefitsLeased Workers’ Benefits

Leasing company is legal employer In 2001, average wage was $19.75

Leasing & hiring companies responsible for discretionary benefits

Covered by safe harbor rules

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Safe Harbor RulesSafe Harbor Rules

Leased employees covered by leasing company’s pension plan Nonintegrated employer contribution rate of 10% Full & immediate participation in vesting

Leased employees less than 20% of non-highly paid workforce

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INDEPENDENT CONTRACTORSINDEPENDENT CONTRACTORS

Freelancers & consultants Companies not responsibility for

Federal Taxes FLSA Overtime or Minimum Wage Workers’ Compensation ERISA, FMLA, NLRA, ADA, Title VII of Civil Rights Act

Economic reality test Right to work test

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Economic Reality TestEconomic Reality Test

Extent a worker controls methods & results

The control a company has on worker’s earnings

Importance of worker’s service to the company

Initiative or skill level required

Permanency, exclusivity, or length of assignment

Worker’s investment in materials or equipment

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Right To Control TestRight To Control Test

IRC test to determine workers’ independence 20 Considerations, including:

Hiring, training, supervising, firing Hours Services Compensation Equipment, materials, location

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Flexible Work SchedulesFlexible Work Schedules

Flextime

Compressed work weeks

Telecommuting

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FlextimeFlextime

Set weekly not daily hours May have to work core hours Possible employer benefits

Lower tardiness & absenteeism Higher productivity Extended business hours

Possible employer drawbacks Increased overhead costs Coordination problems

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Compressed WorkweeksCompressed Workweeks

Example: 40 hours in 3 - 4 days

Possible benefits Can promote recruitment and retention Can reduce commuting time Can allow more family time

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TelecommutingTelecommuting

Employees work on-site & off-site Constant direct contact with other employees Possible benefits

Same as with flextime Possible disadvantages

Less direct employee interactions Makes performance appraisals difficult

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Telecommuting ArrangementsTelecommuting Arrangements

Satellite work centers Neighborhood work centers Nomadic executive office Work off-site and/or on-site Temporary or permanently