Industrial Relations Module...

Industrial Relations

Dr. Jacobo Ramírez Nuñez

D.R. Virtual University of Tecnológico de Monterrey, 2005

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Theme IV: Implementing Compensation

and Security

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Topic 11: Compensation System

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Total Compensation

Direct Indirect

Bonuses

Gainsharing Security Plans• Pensions

Employee Services• Educational assistance• Recreational programs

Commissions

Wages / Salaries

Insurance Plans• Medical• Dental• Life

Time Not Worked• Vacations• Breaks• Holidays




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Compensation Management and Other HRM Functions

Pay rates affect selectivity SelectionSelection standards affect level of pay

required

Pay can motivate training Training and Development

Increased knowledge leads to higher pay

Training and development may lead to higher pay

Compensation Management

A basis for determining employee’s rate of pay

Aid or impair recruitment Recruitment Supply of applicants affects wage rates

Low pay encourages unionization Labor Relations Pay rates determined

through negotiation

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Strategic Compensation Planning

• Strategic Compensation Planning�Links the compensation of employees to

the mission, objectives, philosophies, and culture of the organization.

�Serves to mesh the monetary payments made to employees with specific functions of the HR program in establishing a pay-for-performance standard.

�Seeks to motivate employees through compensation.

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Pay-for-Performance and Expectancy Theory




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Motivating Employees through Compensation• Pay Secrecy

�An organizational policy requiring that compensation levels and decisions about employee compensation be kept secret and, usually, prohibiting employees from revealing their compensation information to anyone.- Can create employee misperceptions

and distrust of compensation fairness and pay-for-performance standards.

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The Bases for Compensation

• Hourly Work�Work paid on an hourly basis.

• Piecework�Work paid according to the number of

units produced.• Salary Workers

�Employees whose compensation is computed on the basis of weekly, biweekly, or monthly pay periods.

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The Bases for Compensation (cont’d)

• Nonexempt Employees�Employees covered by the overtime

provisions of the Fair Labor Standards Act.- They must be paid time and one-half

their regular pay for all work performed after forty regular hours of work.




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The Bases for Compensation (cont’d)

• Exempt employees�Employees who not covered in the

overtime provisions of the Fair Labor Standards Act.- Managers, supervisors, and white-collar

professional employees are exempted on the basis of their exercise of independent judgment and other criteria.

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Components of the Wage Mix

WAGEMIX

Labor MarketConditions

Area WageRates

Cost ofLiving

CollectiveBargaining

LegalRequirements

Compensation Strategyof the Organization

Worth ofthe Job

Employee’sRelativeWorth

Employer’sAbilityto Pay

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Factors Affecting the Wage Mix




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The Wage Mix—Internal Factors• Compensation Strategy

�Setting organization compensation policy to lead, lag, or match competitors’pay.

• Worth of a Job�Establishing the internal wage

relationship among jobs and skill levels.• Relative Worth of an Employee

�Rewarding individual employee performance

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The Wage Mix—Internal Factors

• Ability-to-Pay �Having the resources and profits to pay

employees.

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The Wage Mix—External Factors

• Labor Market Conditions�Availability and quality of potential

employees is affected by economic conditions, government regulations and policies, and the presence of unions.

• Area Wage Rates�A firm’s formal wage structure of rates

is influenced by those being paid by other area employers for comparable jobs.




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The Wage Mix—External Factors

• Cost of Living�Local housing and environmental

conditions can cause wide variations in the cost of living for employees.

� Inflation can require that compensation rates be adjusted upward periodically to help employees maintain their purchasing power.

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The Wage Mix—External Factors• Collective Bargaining

�Escalator clauses in labor agreements that provide for quarterly upward cost-of-living wage adjustments for inflation to protect employees’ purchasing power.

�Unions bargain for real wage increases that raise the standard of living for their members.

�Real wages are increases larger than rises in the consumer price index; that is, the real earning power of wages.

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The Wage Curve

• Wage Curve�A curve in a scattergram representing

the relationship between relative worth of jobs and wage rates.

• Pay Grades�Groups of jobs within a particular class

that are paid the same rate.• Rate Ranges

�A range of rates for each pay grade that may be the same for each grade or proportionately greater for each successive grade.




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Freehand Wage Curve

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Single RateStructure

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Wage Structure with Increasing Rate Ranges




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The Wage Curve (cont’d)

• Competence-based Pay, (also skill-based pay or knowledge-based pay)�Compensation for the different skills or

increased knowledge employees possess rather than for the job they hold in a designated job category.

• Red Circle Rates�Payment rates above the maximum of

the pay range.• Broadbanding

�Collapses many traditional salary grades into a few wide salary bands.

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Topic 12: Employee Benefits

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Compensation SystemPayment to Employees

Sociological Economical

Services(Legal, Recreation,health)

No cash(Food checks,uniforms)

Benefits(Stock opt,Car)

Employees Benefits required by law (Christmas,Holydays Profit sharingTax-back)

Discretionary employees benefits

Direct

Fixed Salary

Variable (pay-for-performance

Indirect

Services and Benefits Cash




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- Operational excellence - Product/Service Leadership

- Customer Intimacy

STRATEGY/VALUE PROPOSITION

- Mindset- Competencies- Behavior

WORKFORCE SUCCESS

CUSTOM ERSUCCESS

BUSINESS PROCESSSUCCESS

FINANCIALSUCCESS

Business Scorecard

Rewards

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- Operational excellence - Product Leadership- Customer Intimacy

STRATEGIC FOCUS- Communication- Work design- Selection- Development- Measurement- Rewards

HR Practices

-Workforce Mindset- Technical Knowledge- Workforce Behavior

HR Deliverables

- Alignment- Integration- Differentiation

HR Systems

- Admin. Expertise- Employee Advocacy- Strategy Execution- Change Agency

HR CompetenciesHR Scorecard

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Figure 3: Aligning HR Practices Around Value Propositions

Work Design Perfo rmance MeasuresSelection of Competenc ies

Competenc y Deve lopment Rewards Communic ation

-Righ t Work -Culture -Hire -Orienta tion -Behavior -Strategy-Key Process es -Expectations -Move -Current Job -Consequences -Minset-Job Design -Feedback -Exit -Career level -Reward Levels -Sta tus-Organ izational Design -Leve ls-Centrali zed/controlled -Total cos t producti vity -Strong basic -Strong orientation on -Team productivity -Strategic choic e-Strict Polic ies/ -Erro rs educ ation expecta tions, ru les awards -Teamworkprocedures -Waste Quantitative -Predicab le career -Profit sharing tied to -Encourage process

-Abandoned call s Verbal ladder performanc e c ri teria improvement feedback-Lost Written -Learning S tructured -Skil l-based paycustomers/acc ounts Oral-Net Sales --- hand -Processcoun t Competenc ies-Times /deadlines met -Passive learners

-More Autonomy -% Sales from new -Technical/resea rc h -Employee -Team innovation -Strategic choic e-Teams (cross produc ts (a.g., last Competenc ies respons ible for awards -Antibureauc rati cfunctional ) 3 years) -Outside the box leran ing -Competency-bas ed -Candor

-Margin think ers -Mandatory pay -Humble-New sales growth -Active learners competenc y growth -EncourageCustomer growth -Feed back on ideas/problem solving-Industry prefessiona l -Let employees k nowacco lades /recognition competenc y growth what a winner "looks li ke"-Copyrights -Feed back on new-Patents product sales

-Coordinated -Customer guaranties -Active learners -Oriented towar long- -Individual awards -Strategic choic e-Know the customers' -Customer retention -Networking term relationship with -System awards -Customer advocatesneeds rate competencies customer -Nonfinancial awards -Know your customers'

-No. re ferrals from p -Not a lot o f ladders -"Fee for service " needscurrent customers -Acts as a consul tant awards

to customer/partner

Stra tegic Choices and Traditional AllignmentWORKFORCE ALIGNMENT

Implications: What must we do (first? Second?) to align HR w ith our busines s strategy ?

Pro

duct

lead

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hO

pera

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Cus

tom

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timac

y




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The HR BureaucracyCommon Language

CompanyMission/Strategy

Promotions

PositionDescriptions Job

Classifications

Independent Activities

Company Values

DevelopmentalCompetencies

Department/UnitObjectives

Performance Ratings

Performance300 Degree appraisals

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Differentiation: Your Organization’s Workforce(s)

HighLow

Hig

hLo

wUn

iqu

ene

ss o

f H

um

an C

apit

al

Competitive Advantage Value Of Human Capital

Professional Partners Strategic Capabilities

Contract Services Operational Partners

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Linking HR Scorecard to Business ScorecardHR Scorecard Business Scorecard

- Communication- Work design- Selection- Development- Measurement- Rewards

HR Practices

- Alignment- Integration- Differentiation

HR SYSTEMS

- Administrative Expertise

- Employee Advocacy- Strategy Execution- Change Agency

HR Competencies

-Operational excellence -Product Leadership-Customer Intimacy

STRATEGY/VALUE PROPOSITION

- Mindset- Competencies- Behavior

WORKFORCE SUCCESS -Quality

-Cost-Service-Warranty-Time

CUSTOMERSUCCESS

-Speed-Productivity-Transactions

BUSINESS PROCESSSUCCESS

-Revenue-Cost-Return

FINANCIALSUCCESS

RewardsFeedback




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Topic 14: Safety and Health

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Employers’ Responsibilities and Rights• Employers are required to keep certain records, and to

compile and post an annual summary of work-related injuries and illnesses.

• It is the employer's responsibility to make sure employees use protective equipment when necessary. Employers must therefore engage in safety training and be prepared to discipline employees for failing to comply with safety rules.

• Employers must not discriminate against employees who exercise their rights under the act by filling complaints.

• Evaluate workplace conditions.

• Make sure employees have and use safe, properly maintained tools and equipment.

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Work-Related Fatalities- Records

• The purpose of this rule (LFT Title 9) is to require employers to record and report work-related fatalities, injuries and illnesses.

Recording or reporting a work-related injury, illness, or fatality does not mean that the employer or employee was at fault, that the labor law has been violated, or that the employee is eligible for workers' compensation or other benefits.




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Non-Mandatory records• Employers are not required to keep the labor law records

injury and illness records for any establishment classified in the following Standard Industrial Classification (SIC) codes. All employers, including those partially exempted by reason of company size or industry classification, must report to labor secretary any workplace incident that results in a fatality or the hospitalization of three or more employees.

� SIC � 525Hardware Stores� 725Shoe Repair and Shoeshine Parlors� 542Meat and Fish Markets� 545Dairy Products Stores� 731Advertising Services, etc

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Recording and Reporting Occupational Injuries and Illness • Basic requirement.

�You must consider an injury or illness to be work-related if an event or exposure in the work environment either caused or contributed to the resulting condition or significantly aggravated a pre-existing injury or illness. Work-relatedness is presumed for injuries and illnesses resulting from events or exposures occurring in the work environment.

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Are there situations where an injury or illness occurs in the work environment and is not considered work-related?

• An injury or illness occurring in the work environment that falls under one of the following exceptions is not work-related, and therefore is not recordable.




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Situations where an injury or illness is not considered work-related.

• if . . .(i) At the time of the injury or illness, the employee was present in the work environment as a member of the general public rather than as an employee. (ii) The injury or illness involves signs or symptoms that surface at work but result solely from a non-work-related event or exposure that occurs outside the work environment. (iii) The injury or illness results solely from voluntary participation in a wellness program or in a medical, fitness, or recreational activity such as blood donation, physical examination, flu shot, exercise class, racquetball, or baseball.

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Situations where an injury or illness is not considered work-related.

• The injury or illness is solely the result of an employee eating, drinking, or preparing food or drink for personal consumption (whether bought on the employer's premises or brought in). For example, if the employee is injured by choking on a sandwich while in the employer's establishment, the case would not be considered work-related.

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Situations where an injury or illness is not considered work-related.• (v) The injury or illness is solely the result of an

employee doing personal tasks (unrelated to their employment) at the establishment outside of the employee's assigned working hours. (vi) The injury or illness is solely the result of personal grooming, self medication for a non-work-related condition, or is intentionally self-inflicted. (vii) The injury or illness is caused by a motor vehicle accident and occurs on a company parking lot or company access road while the employee is commuting to or from work. (viii) The illness is the common cold or flu (Note: contagious diseases such as tuberculosis, brucellosis, hepatitis A, or plague are considered work-related if the employee is infected at work).




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• (ix) The illness is a mental illness. Mental illness will not be considered work-related unless the employee voluntarily provides the employer with an opinion from a physician or other licensed health care professional with appropriate training and experience (psychiatrist, psychologist, psychiatric nurse practitioner, etc.) stating that the employee has a mental illness that is work-related.� Note: If the employee is made ill by ingesting

food contaminated by workplace contaminants (such as lead), or gets food poisoning from food supplied by the employer, the case would be considered work-related.

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How do I decide if a case is work-related when the employee is working at home?• Injuries and illnesses that occur while an

employee is working at home, including work in a home office, will be considered work-related if the injury or illness occurs while the employee is performing work for pay or compensation in the home, and the injury or illness is directly related to the performance of work rather than to the general home environment or setting.

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How do I decide if a case is work-related when the employee is working at home?• For example, if an employee drops a box of work

documents and injures his or her foot, the case is considered work-related. If an employee's fingernail is punctured by a needle from a sewing machine used to perform garment work at home, becomes infected and requires medical treatment, the injury is considered work-related. If an employee is injured because he or she trips on the family dog while rushing to answer a work phone call, the case is not considered work-related. If an employee working at home is electrocuted because of faulty home wiring, the injury is not considered work-related.




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Investigating and Recording Accidents

• Every accident, even those considered minor, should be investigated by the supervisor and a member of the safety committee or the supervisor.

• The investigation may determine the factors contributing to the accident an may reveal what corrections are needed to prevent it from happening again.

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Mexican Labor Law• Art. 477

There are 4 types of risks: temporal disability, permanent partial disability, totally permanent disability, and death.

• Art. 483The disabilities caused by work-related risks have to be indemnificated and paid directly to the affected employee. In case of mental disability, the employer will pay to the person in charge of the affected employee.

• Art. 487The employees who suffer from a work-related risk have access to:� Medical assistance� Rehabilitation� Hospitalization when needed.� Medicine and first-aid material.� Orthopedic accessories.� Indemnification

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The employer has no responsibility of a work-related risk when:� The employee is under the effects of alcohol.� The employee is under the effects of a narcotic or any

other drug, and the employer has not been noticed.� The employee hurts himself un-purpose.� The work-related risk is caused by a fight or a suicide

attempt.

• Yet, the employer has the obligation to give first-aid attention, and to transport the employee to his/her house or medical center.

• Art. 491If the work-related risk causes temporal disability, the indemnification will be the full payment of the salary while the employee is unable to perform his/her duties. This payment starts the day the disability occurs.




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If the disability is permanent, the indemnification will be the equivalent to 1095 days of daily salary.

• Art. 499If the employee, victim of a work-related risk, can not perform his duties, but may perform another duty, they employee has the obligation to give this position to the affected employee.

• Art. 500-502When the result of the work-related risk is the death of the employee, the indemnification will be:� Two months of salary for the funerary

expenses.� 730 days of daily salary.

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Employers Obligations

• Provide medical examinations when required.

• Keep records of any work-related injuries and illnesses.

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Employees´ Responsibilities and Rights

• Follow all employer safety and health rules and regulations, and wear or use prescribed protective equipment while engaged in work.

• Report hazardous conditions to the supervisor.

• Report any job-related injury or illness to the employer, and seek treatment promptly.

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