Compensation: Creating A Strategic Advantage

Over the last several months the questions about compensation have been increasing. Along with those about the market value for various jobs there have been many about how to get the most out of total reward programs.

Some of the issues raised have included:

• Attracting and retaining talent in an increasingly competitive market place without pricing the product/service delivered out of the market
• Effectively using compensation and rewards to motivate the performance that results in high levels of productivity
• Using compensation to modify behaviour and facilitate cultural change
• Ensuring fixed compensation costs do not increase relative to overall operating costs
• Can compensation really motivate people in the ways we want
• Creating meaningful rewards for different groups of employees while maintaining a perception of fairness overall
• A variety of compliance related issues including overtime pay, vacation pay and in lieu of notice and severance pay.

In many instances the questions asked have arisen due to a basic problem with the existing compensation and rewards structures – they have evolved over time based on the needs of the day and even if they were once fully aligned with the business needs they no longer are.

In an environment like the one we are in today, it is increasingly difficult to find the talent required to do the work, it can be tempting to simply outbid the competition. While that may seem like the best solution and it certainly may be on the short term or in specific instances, it most certainly will not serve the organization and all of its stakeholders well in the long run. The current NHL lockout situation is an excellent example of the downside consequences of doing so.

The ultimate purpose of all compensation and reward programs is to maximize the return on the investment made. Achieving this purpose requires:

1. a clear understanding of the organization (as it is and as it wants to be) and its people (what motivates and satisfies them);
2. knowing the various options for compensation and rewards and understanding how to use them,
3. developing a compensation strategy that is aimed at supporting short and long term goals of the company and,
4. developing, implementing, managing and continually evaluating the various necessary processes.

When an organization spends the time to determine exactly what they want their compensation and reward program to achieve, it is much more likely to be contributing effectively to the overall productivity and success of that organization.

More compensation discussions will follow over the next few quarters.

Looking for more information or need some help with these or other HR issues? Please get in touch.
 

News

Legislation

• Quebec was the first province in Canada to implement a work environment free from psychological harassment as a minimum employment standard (effective June 1, 2004). While other provinces have yet to implement specific standards, there is a growing recognition of psychological harassment and all bullying behaviours as a form of violence.
  
  Recently in Ontario an arbitrator held the employer (Toronto Transit) and the psychologically abusive supervisor liable for damages to an employee. The employee was provided with $25,000 compensation for damages, sick leave credits and compensation for unpaid leave were refunded to the employee, and TTC was order to train all managers on recognizing and prevention of harassment. TTC was also ordered to ensure a harassment free workplace. For more information: Toronto Transit Commission and the Amalgamated Transit Unit, Ontario Labour Code Arbitration.
  
  Employers are legally responsible to provide a workplace that is safe and where employees feel secure. As psychological harassment (including bullying) are increasingly viewed as a form of violence which threatens the safety and security of employees, more employees are likely to push for damages more often.
   
• Health & Safety concerns about drug use and Human Rights concerns around testing for drug use are on a collision course. We can expect increasing media around both pre-employment and random on- the-job drug testing.
   
• The Canadian Criminal Code was amended (effective September 2004) to provide protection for whistleblowers. Employers who attempt to silence whistleblowers may be subject to up to 5 years imprisonment.
   

Worker shortage issues are continuing to get attention

• Some Banff Hospitality Industry facilities are sharing the very limited number of applicants they receive with competitors as a way to try and resolve their labor shortage.
   
• CanWest has dropped www.careerclick.com which was the on-line version of the print ads for their 11 newspapers and replaced it with www.working.canada.com which is a more comprehensive service. They are talking about recruiting on T.V.
   
• Merrill Lynch recently had to pay a record $2 Million for raiding a competitor’s employees
   
•  Demand for IT workers is expected to increase with demand exceeding the supply again in the near future. (www.culpepper.com/e)
   
• The Certified General Accountants Association of Canada recently released “Growing Up: The Social and Economic Implications of an Aging Population” that discusses Canada’s aging workforce, related and provides some ideas on what to do now to prevent future workforce shortages. For a copy of this report www.cga-online.org
   
• Statistics Canada and the OECD’s International Adult Literacy Survey indicates that more than 40% of all Canadians are below the minimum desirable threshold for literacy. Poor literacy levels impact safety, productivity and communication between co-workers, supervisors and customers. (www.hrreporter.com February 28/05)
   

Compensation & Benefits News

• Mandatory Benefit Costs go down slightly as both EI and Worker’s Compensation rates for 2005 have been reduced.
   
• 2004 Base Pay increases averaged about 3.5%. 2005 pay increases are projected to similar on average. (www.conferenceboard.ca)
   
• World at Work reports that the three year downtrend in IT salaries reversed itself in 2004. Certified skills that had the biggest pay jump were networking, which climbed 11.8%; systems administration, engineering, and network-operating skills, which rose 9.5%; and application development and programming languages, which increased 7.7%.

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