Human Resources Management in the eBusiness Age (page 1 of 3)

Certainly it's a balancing act of developing the right combination of direct and indirect pay versus the bottom line. Once the strategy is in place and the structure has been developed, other factors come into play. How is the information communicated to line managers and employees? How easy is it to allocate stock options or enroll in benefits? Is the process efficient? Accurate?

Management can look to several areas for solutions:

Compensation Structure and Value
Process Improvements
Technology Improvements

Compensation Structure and Value
Compensation and benefits professionals have a pretty good arsenal to throw at these issues. They can reduce costs by changing the components of the total compensation package and they can vary the cost itself.

From the simple salary perspective, they can restrict salary increases and bonuses, or go further by implementing pay cuts or layoffs. Restricting salary is drastic and a pay cut can send worker morale into a tailspin. Although economic conditions may demand it, layoffs are even less preferable.

Providing optional or nonrecurring forms of compensation such as performance-based stock options or bonuses allows companies to slow the increase of escalating salaries and avoid committing to a higher recurring employee payroll expense. Furthermore, employees are more motivated because they are rewarded based on their performance and the company's performance. To keep the distributions in the employee's sight, companies may also pay bonuses more frequently, e.g. semiannually or quarterly.

More companies are making variable compensation a larger piece of the direct compensation pie. A news release on the 2000-2001 WorldatWork (formerly ACA) salary survey cites: "Base salary increases have been in the 4 to 4.5 percent range for a few years now, but many compensation packages have been significantly bolstered by variable pay items like stock options," said Patricia Llantino, CCP, CBP, director of the compensation line of business for ACA. The release also states that "One of the key reasons spending has increased while salary increases have remained stable is the escalation in variable pay items, such as stock options and bonus programs, flowing further down the corporate ladder to more employees in the past few years."

Varying the balance of regular and variable pay can be effective, but other types of compensation are gaining wider usage. WorldatWork's 2002/2003 Total Salary Increase Budget survey asks members: "(In 2002) What actions has your organization taken to attract and retain employees?" The choices range from salary and variable pay changes to training opportunities to stock grants to work environment enhancements. Companies also have many choices when it comes to the types and price tags for benefits offered. The 2001 Employee Benefits Study released by the U.S. Chamber of Commerce cites that "employee benefits cost employers an additional 37.5% over wages in 2000". Considering the importance of benefits to employees and the large amounts of money spent, it's imperative to offer a suitable mix of benefits to their employee population at as reasonable a price possible.

A traditional approach widely used in North America is to provide flex credit programs. This approach allows employees to select the benefits most useful to themselves and their families. Flex credits and benefit costs can be structured to meet particular goals, such as cost-shifting or influencing benefit elections.