Evaluation Patterns & Employer
As global competition has increased, many organizations have tried a number of labor costs modelling practices. Cut overhead costs by downsizing. The reduction in full-time positions generally decreases the benefits portion of the compensation budget, by reducing the number of workers included in the organization’s benefits program. The Adolph Coors Company opened a wellness center for employees with projected savings based on the avoidance of future health care costs (Bunch, 1992).
Alternatively, the retail grocery industry has come under recent attack by union groups for their practice of utilizing part-time unbenefitted workers to hold down labor costs. Contingent workers. Approximately 25 percent of the U. S. civilian work force is composed of what are termed “contingent workers” (Mathis & Jackson, 1994, p. 38), who regularly work only part-time or on a temporary basis . Since contingent workers are not part of the organization’s full-time work force, they frequently do not receive benefits, thereby lowering overall labor costs.
In an organization that does not need a long-term committed work force, such as when a low-cost strategy is employed, the replacement of full-time workers with contingent workers and outside consultants can be an effective way to reduce the benefits portion of labor costs. Prudent use of part-time workers can increase staffing flexibility, while reducing labor costs. However, “it should be remembered that frequently full-time positions cut during lay-offs are later replaced by more expensive consultants.
” (Lucero & White) The replacement of full-time, benefitted workers by consultants can often result in an overall increase, rather than decrease in actual costs (Cascio, 1993). As with any human resource practice a careful cost/benefit analysis is required to determine congruity with organizational objectives. Flexible benefits package. Allowing employees to participate in decision-making can assure that compensation dollars are spent in ways that maximize benefits for workers.
This approach is supported by research which has identified an increase in satisfaction occurring after a change from a standard benefits package to a flexible benefits package (Lawler, 1990, 1991; Barber, Dunham, & Formisano, 1992). Although the current trend is toward more flexibility in compensation and benefits programs (McCaffery, 1988), the costs of flexibility can increase communication and administrative costs. These increased costs are likely to continue to act as a deterrent to increasing employee participation in organizations choosing a low-cost strategy.
As new types of benefits have been added to employer-sponsored packages, a resulting side effect has been the increased employer involvement in the nonwork lives of employees. As employees become more reliant on employers in nonwork areas such a childcare assistance “the bond between employee and employer can be profoundly affected (Guzzo, Nelson, & Noonan, 1992, p. 245). ” The historical evolution of benefits has not only increased employer involvement in employees’ nonwork lives, but has encouraged the expectation that the employer will take care of employee needs.
As argued by Lucero and Allen (1994), this gradual change in the employee-employer relationship, has resulted in an adversarial relationship between employees and employers with respect to benefits. While employers are increasingly concerned with benefit costs, employees are increasingly concerned about their ability to meet their own financial and security needs. Employers who wish to maintain a stable, long-term work force should consider ways to continue to cover employee needs, thereby preventing the disruption of the important employee-employer relationship.
Manor HealthCare Corporation found the emphasis on employee needs to be an important value for their high service industry. The benefits package was designed to reward length of service while improving health insurance and pension contributions for lower paid employees (Gunsch, 1993). “Where cost and efficiency are the primary values, communication with employees should emphasize the cost of benefits as a portion of employee total compensation. ” state Lucero & White. “This emphasis on dollar value can deliver the message that the employer’s responsibility is to fairly compensate, rather than provide for many personal needs.
Not only is the content of communication defined by the strategic objectives, but the form of communication is also variable. The content of communication is important, since it provides information about how the employer views the nature of the employee-employer relationship. ” As worker motivation is very important in successful implementation of quality programs, another area of literature research was related to motivation of line-workers. The literature suggests three methods of increasing employee motivation.
The first is incentive-based compensation, the second employee ownership plans, and the third implementation of work-based teams. When using any motivational plan, it is extremely important to keep employees informed of how their cost savings are being utilized for the benefit of the company. The literature suggests that the most common method of capturing a sense of ownership is through employee stock ownership plans or ESOPs (NCEO, 1996). Under such plans, employees receive stock based on some form of incentive program. According to Oliver (1996), these programs work best when compensation is based upon team accomplishments.
To reward the individual, in the egalitarian union environment, less remunerative, but highly visible awards such as plaques and coffee mugs may be sufficient (Schuster and Zingheim, 1992). A different approach, used by Chrysler, is to define many different responsibilities for each person on the continuous improvement team, and then differentiate their pay scale based upon responsibility (Foundation for Enterprise Development, 1996). Although practical, this approach contradicts one school of thought that suggests the teams should be loosely structured to facilitate maximum employee participation
(Jones and Beyerlein, 1999). There is a need for employers to adequately inform employees of the cost and coverage of the benefits package. Where the employee benefits package contains only basic coverage, the professionals suggest one-way communications, however, complex, interactive communication forms are “a crucial aspect of an effective program when the employee benefits provided are more comprehensive. ” (Lucero & White) In summary, it appears the correct strategy is dependent upon the level of participation management wishes to create.