Current Topics in Human Resource Management

The Importance of Work-Life Balance

Managers are increasingly aware of the importance of promoting a healthy work-life balance for employees, which increases job satisfaction.

Learning Objectives

Illustrate the way in which technological advances and competitive economies are eroding the work-life balance and how human resource professionals can offset the 24-7 demands of the workplace

Key Takeaways

Key Points

  • The advancements in the way people access information, communicate with one another, and complete tasks have allowed for flexibility in the workplace, but they have also diminished the distinction between work and family.
  • If people don’t have time to relax and recharge, their ability to do their job decreases and their performance level suffers.
  • In addition to hiring, training, employment contracts, and regulatory considerations, ensuring that employees are both healthy and satisfied at work is well within the purview of human resources departments.
  • Human resources can alter organizational culture, enforce vacation time, offer flextime, and advise overworked employees to avoid the pitfalls of imbalanced work-life dynamics.

Key Terms

  • balance: Mental equilibrium; mental health; calmness; a state of remaining clear-headed and unperturbed.
  • burnout: The experience of long-term exhaustion and diminished interest, especially in one’s career.

The Price of a 24-7 World

Technology has improved people’s lives in many different ways. People can live longer, healthier lives because of technological advancements. A student can access vast resources of information to complete assignments and a mother can see and talk to a daughter who is thousands of miles away. The advancements in the way people access information, communicate with one another, and complete tasks have allowed for flexibility in the workplace. Global markets have opened up and communication has allowed instant access to local expertise, enabling income streams and relationship building anywhere in the world.

With email, texting, instant messaging, and fax, people can communicate instantaneously. With the advancement in smart phones, laptops, and tablets, employees are able to leave the office but still do their work. This has allowed more employees to bring their work home with them. While such access does allow them to spend more time at home, it has blurred the lines between work and life. If the boss sends a text at eleven at night, does the employee have to answer it? When should a person shut down the laptop and spend time with friends and family or pursue their own interests?

Technology also allows some employees to work from home offices full time, and they never have to visit their place of business. While telecommuting eliminates the need to drive to the office, the ability to work from home can make work consume a person’s life. What was once a forty-hour-a-week job can easily become a sixty-hour-a-week job. The person in this scenario will be both stressed and less effective professionally.

The Importance of Work-Life Balance

As with most things in life, moderation is the key. People who are constantly tied to their jobs deal with the symptoms of stress and burnout. Overworked employees are more likely to suffer health problems, more like to be absent and/or sick, less efficient, less sociable, and overall more difficult to work with. It is in the best interest of both the employee and employer to avoid these pitfalls through smart human resource management.

The Role of Management in Promoting Work-Life Balance

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The importance of balance: Balance helps to create harmony and peace of mind.

Human resource (HR) management is a particularly versatile element of the organization, and its responsibilities are often much less clear than a textbook might imply. While hiring, training, employment contracts and regulatory considerations are well within the HR framework, so too is ensuring that employees are both healthy and satisfied at work. This requires taking stands on behalf of the employees, and putting organizational and managerial expectations and policies in place to ensure that employees are treated properly.

One example of what HR and/or upper management can do in this regard is override the culture to encourage employees to take time for themselves. Upper management must communicate to lower managers, through words and by example, that work communication past a certain time of night (or on the weekends) is only acceptable in highly time-sensitive situations (or never at all). HR can suggest to employees that they turn off their work phones in the evenings and leave their work computers in the office unless absolutely necessary.

Another useful tool for management is flextime. This is particularly useful for individuals in global markets, since they are often on the phone early in the morning or late at night with clients or suppliers on the other side of the globe. Employees might also work only four days a week, but work 10 to 12 hours each of those days (from, say, 6:00 a.m. to 5:00 p.m.). Businesses focused on quarterly results could offer long weekends at a company-wide level at the beginning of each new quarter (when workload is the smallest). HR professionals should be observant and creative, identifying when employees are pushing themselves too hard and offering solutions.

Increased Reliance on Contractors and Part-Time Employees

Management must both define and carefully consider the common tradeoffs in employing a part-time or contract-based workforce.

Learning Objectives

Analyze the value captured through employing contractors and part-time employees as a human resource strategy

Key Takeaways

Key Points

  • Part-time employees work 35 or fewer hours a week and generally don’t receive benefits from their employers.
  • Contractors are independent organizations /individuals that companies hire on a short-term basis, removing the burden of paying for their training, benefits, or employment taxes.
  • While there are clear benefits to employing a part-time or contract-based workforce (limited benefits and training costs, lower commitment and risk exposure, etc.), there are opportunity costs as well (employee buy-in, long-term employment development, etc.).
  • Both departmental managers and human resource managers must discuss and weigh the benefits and drawbacks of offering a job part-time, full-time, or on a contractual basis. It is a strategic decision with high cost exposure.

Key Terms

  • contractor: A natural person, business, or corporation that provides goods or services to another entity under terms specified in a contract or a verbal agreement.

As companies try to streamline operations and increase profits, human resource professionals are now looking at employees in a different light. In addition to finding the right candidate for the job, they are looking at how to cut costs per employee while still maintaining quality services for clients. The amount of money spent searching for, hiring, compensating and training an employee is examined and used to help determine profits and loss for a company.

As businesses look at new avenues to reduce overall costs, human resources management has evolved to include different types of employment, including more part-time employees and contractors. Particularly in light of the recent banking disaster (2008/2009), trends towards lower cost employment have grown increasingly common. HR professionals and departmental managers must be aware of the tradeoffs and opportunity costs of the models they chose to employ.

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Part-time employment trend: In red, we can see that U.S. part-time employment has been on the rise consistently, with a particularly large jump in 2009 as a result of the banks failing to manage risk and the subsequent recession.

Part-Time Employees

While there is no standard definition of an employee in the U.S., most companies define part-time employees as those who work 35 or fewer hours per week. In addition to working fewer hours, part-time employees don’t usually qualify for benefits such as health insurance, 401K, or paid vacation time.

Pros

The benefit of using part-time employees is mainly that the cost per employee for hiring, orientation, and training is less than for full-time workers. Another benefit of employees that work fewer hours is that employers can be more flexible with scheduling. If a position requires long hours to fill, hiring two part-time people can make scheduling easier than with one full-time employee. It also helps avoid overtime or time and a half, thereby reducing overhead for an employer.

Hiring a greater volume of individuals, but for fewer hours each, also provides more diversity in perspective and skills, which potentially drives higher value (though with more managerial time investment required). This can be particularly useful if a manager is looking to ultimately hire one full-timer and first wants to test a few people to assess skills and organizational fit.

Cons

There are downsides to hiring part-time employees as well. Full-time employees often consider their job a career, and will utilize long-term goals such as promotions and overall organizational success as motivators. Full-timers can also be invested in (e.g., through training and education) with more potential for a return on investment. Part-time employees are more transient, and since they’re more likely to come and go, long-term motivational strategies are less effective with part-timers.

Contractors

Unlike full-time and part-time workers, contractors aren’t official employees of the company. They are hired for a specific position or task and consider the organization a client. Contractors often have more than one client to which they offer similar services, and are therefore specialists. As contractors aren’t employees, companies don’t have to offer benefits or pay taxes such as payroll or social security. Contractors invoice the companies they work for, often on a weekly or monthly basis, and pay their own insurance and taxes.

The pros and cons for part-timers are generally the same as for contractors, where specialists are being hired for short-term contracts (and thus are motivated by the completion of a given task as opposed to by the long-term success of their clients).

Positions that are often filled by contractors include:

  • Accounting
  • Sales
  • Construction
  • IT (programming, web development, etc.)
  • Design (creating ads, logos, etc.)
  • Logistics (e.g., Fedex, UPS)

Human Resource Decisions

As always, trade-offs are inherent when making these hiring decisions. HR professionals must discuss with other management to determine what skills are needed over what period of time, and what resources are available annually to fulfill these needs. If it is a long-term project likely to evolve, with complex political and social interactions and relationship building, a full-timer is probably required. If it is a specialized, short-term task, a contractor or part-timer could be more appropriate. Of course, the limitations of resources impact this decision enormously, as the financial collapse underlines via increasing trends in part-time hiring.

Compensation and Competition

Good compensation helps organizations stay competitive in their industry by retaining high-quality employees.

Learning Objectives

Assess the intrinsic value of strong compensation packages relative to deriving competitive advantage

Key Takeaways

Key Points

  • It has become standard in today’s market to pay employees wages and benefits through a compensation package.
  • Candidates will often pass on a high-wage position for one that combines wages and benefits.
  • Companies need to balance compensation packages, which help acquire and keep quality employees without incurring unsustainable costs.

Key Terms

  • benefits: Non-wage compensation that is offered to at least 80 percent of the staff.
  • Compensation: The total wages and benefits paid to an employee or contractor for a given job or contract.

Employees are invaluable resources for an organization. Ensuring the welfare and happiness of employees can make them more productive and less likely to leave the company. This is not only an internal consideration but also a competitive one. Securing and retaining top talent is not unlike securing and retaining customers, where effectively identifying the appropriate target and sustaining that relationship lowers long-term costs and increases brand value.

One of the key instruments in attracting and keeping employees is creating an effective compensation package. Compensation must therefore be both competitive and well-designed to meet the needs of the customer (in this case, the employee). Human resources (HR), in conjunction with the hiring manager, is tasked with this process.

Components of Compensation

Compensation is what employees receive for the work they perform at a company. Compensation can come in the form of cash as well as benefits (e.g., health insurance).

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Compensation and health insurance: Employers think about the total compensation cost of employees and that calculation considers what they pay in health insurance premiums, in addition to salaries and wages. Since insurance premiums continue to grow rapidly, this cost is increasingly replacing other forms of compensation. The Council of Economic Advisors predicts that eventually wages will actually be reduced in real (inflation-adjusted) terms as the increase in insurance premiums will require reductions in non-insurance compensation. Health insurance premiums are thus a cause of salary and wage growth stagnation for much of the population in the U.S.

The current trend for organizations is to compensate employees with a combination of wages and benefits. Candidates often require a compensation package that includes benefits as a perk for employment, and may pass on a position with a higher salary if a competitor is offering a lower salary and a benefits package. These benefits generally revolve around healthcare and dental coverage, employee discounts, retirement planning, educational benefits, stock options, and other forms of additional compensation.

Compensation and Competitiveness

Compensation can be a two-edged sword if it is not managed properly. On one hand, a high base salary and a lucrative benefits package can help an organization keep and retain high-quality employees. On the other hand, high levels of compensation create high overhead for the company. In addition, attracting employees purely through offering high levels of compensation has disadvantages; these employees may have little attachment to the intrinsics of the job and may leave as soon as they find a better offer elsewhere.

Companies need to find a balance when creating a compensation package to attract quality employees and keep overhead low. To identify this balance, companies must look at the structure of the wages within the organization, the compensation common in their industry, as well as their strengths and those of their competitors. By looking at these factors an organization can attract the employees it needs to maintain a competitive advantage and keep employee turnover low.

The Importance of Fringe Benefits

Hiring and retaining employee talent is a critical factor in success, and providing fringe benefits can be an effective tool in this process.

Learning Objectives

Identify the critical importance of providing strong benefits packages, particularly in light of current external factors (e.g., health care costs)

Key Takeaways

Key Points

  • Most employees expect some form of nonmonetary benefits in addition to wages.
  • In order to be competitive in their industry, companies can offer various fringe benefits to attract and retain employees. Benefits, if well managed, can be a source of competitive hiring practices.
  • With the increase in healthcare costs, employees are trending more towards jobs with benefits that will assist them with covering these costs. Companies also capture scale economies when negotiating with insurance companies, lowering cost per employee.

Key Terms

  • fringe benefits: Various forms of nonwage compensation provided to employees in addition to their normal wages or salaries.

A combination of wages and benefits such as health insurance, vacation time, and retirement plans have become an expected form of compensation for today’s employees. As the search for high-quality workers becomes more difficult and health care costs increase, it has become important to offer fringe benefits to gain a competitive advantage. Common benefits include the following:

  • Relocation assistance
  • Sick leave
  • Company cars
  • Medical and dental insurance plans
  • Vacation/paid leave
  • Profit sharing
  • Retirement plans
  • Leisure activities on work time, such as in-office exercise facilities
  • Long-term and life insurance
  • Education funding
  • Legal-assistance plans
  • Child-care plans
  • Miscellaneous employee discounts
  • Free lunches at work

Rising Healthcare Costs

Healthcare costs have risen at a rate that makes it difficult for governments, businesses, and individuals to keep up. Without health insurance, individuals can easily be forced into poverty by trying to obtain medical care on their own.

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International health care cost comparison: The above chart underlines the struggle in the United States to pay for health care: U.S. healthcare costs exceed those of other countries relative to the size of the economy (GDP). Health care, due to poor management of the industry, is a leading cause of poverty in the U.S. and is a crucial benefit companies can offer employees.

While the cost negatively impacts businesses, it also offers an opportunity through competitive advantage. This is to say, organizations can capture lower health insurance costs per employee due to scale economies, allowing organizations an important bargaining chip in the hiring process.

Stock Options

Another key benefit for top talent is the offering of stock options. While stock as compensation has unique taxation rules, which can make it more or less attractive for specific people, it also has the added benefit of motivating the employee (particularly top management) to work to achieve broader organizational success. Stock options essentially mean ownership of the company, and this company ownership (i.e., equity) drives positive employee behavior.

The Evolution of Labor Relations

Human resource management must carefully monitor the labor relations and regulations in all of the geographic regions where they hire.

Learning Objectives

Explain the way in which labor relations and labor unions evolve and change over time, alongside the implications of the negotiation process between employers and employees.

Key Takeaways

Key Points

  • A trade union or labor union is an organization dedicated to promoting employee rights and improving employee welfare in a given organization or industry; this is the fulcrum of labor relations.
  • The prevalence of unions, both from a geographic and industry standpoint, often significantly impacts the welfare and wage propositions of a substantial number of employees.
  • Human resource professionals need to closely monitor changes in labor relations, both to understand the most recent hiring practices and to ensure compliance (if applicable) with union rules and regulations.
  • In 2010, union membership in the U.S. hovered around 11%. This is down substantially from historic numbers, and is the lowest in 70 years in the U.S.

Key Terms

  • labor relations: The study and practice of managing unionized employment situations.

The prevalence of unions, both from a geographic and industry standpoint, often significantly impacts the welfare and wage propositions of a substantial number of employees. Unionization is hotly debated, as unions employ collective bargaining on behalf of employees independently from company human resource (HR) policies. The legislative backing and legal framework is complex and ever evolving, both domestically and abroad. HR professionals need to closely monitor this evolution, both to understand the most recent hiring practices and to ensure compliance (if applicable) with union rules and regulations.

The Definition of Labor Relations

While the term is used broadly and in many contexts, labor relations, for our purposes, is the study and practice of managing unionized employment situations. This definition can be expanded to include history, law, sociology, management, and political science, as the existence, evolution, and implications of union development have substantial political, economic, and legal implications.

The Declining Unions

an academic field and in business application. Laissez-faire attitudes and the promotion of free market dynamics are, in many ways, contrary to the legal creation of employee rights. Whether this loss of interest in collective bargaining is a good thing or a bad thing is up for debate, and the power of trade unions is integral to this discussion. Labor relations is a subarea of industrial relations, which is the field of employee/employer relationships. Industrial relations was a more prevalent field of study historically, however, and has seen substantial decline both as an academic field and as a business application. Laissez-faire attitudes and the promotion of free-market dynamics are, in many ways, contrary to the legal creation of employee rights. Whether this loss of interest in collective bargaining is a good thing or a bad thing is up for debate, and the power of trade unions is integral to this discussion.

A trade union or labor union is an organization dedicated to promoting employee rights and improving employee welfare in a given organization or industry. This is the fulcrum of labor relations, and thus central to the discussion of how it is evolving today (compared to how it evolved in the past).

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U.S. union membership over time: The above chart is extremely useful in understanding labor-relations trends over the past century or so in the United States. As you can see, the 1930s, during the Great Depression, is when unions began to grow in prominence and power. This held strong for many years, and the decline of unions is a very recent trend in labor relations. Many correlate this decline in unions with the economic struggles of 2008–2009, noting that the rise and fall is between the two worst economic collapses in history.

In 2010, union membership in the U.S. hovered around 11%. This is down substantially from historic numbers, and is the lowest in 70 years in the U.S. Finland, on the other hand, has union participation of 70% (2010) and Canada has 27.5% (2010). Union workers in the United States make anywhere between 10% and 30% more than nonunion workers in the same job, underlining why businesses often oppose unionization and workers often support it.