By the end of this topic, you should be able to:
– Discuss the meaning and uses of performance management in an organization
– Explain the performance management cycle
-Explain the concept of performance appraisal
– Explain the purpose of performance appraisal
-Discuss methods of conducting performance appraisal
-Explain the benefits of performance appraisal
-Explain the challenges in performance appraisal
Effective human resources management (HRM) is essential for optimally utilizing creativity and attaining individual as well as organizational goals. Leadership has to ensure proper integration of various activities and harmonious functioning directed towards organizational goals. High motivation is essential for ensuring commitment of human resources to the given objectives. The key to motivation lies in integrating organizational and individual goals. Therefore, a manager has to concentrate on basic HRM tasks such as planning, development, compensation and evaluation. Evaluation includes performance planning, appraisal and counselling. These are critical in effective HRM.
The meaning of performance
Performance is often defined simply in output terms the achievement of quantified objectives. But performance is a matter not only of what people achieve but how they achieve it. The Oxford English Dictionary defines performance as: ‘The accomplishment, execution, carrying out, working out of anything ordered or undertaken.’ High performance results from appropriate behaviour, especially discretionary behavior, and the effective use of the required knowledge, skills and competencies.
The concept of performance has been expressed by human resource managers in terms of both behaviours and results. Behaviours emanate from the performer and transform performance from abstraction to action. Not just the instruments for results, behaviours are also outcomes in their own right i.e. the product of mental and physical effort applied to tasks and can be judged apart from results. This definition of performance leads to the conclusion that when managing performance both inputs (behaviour) and outputs (results) need to be considered. It is not a question of simply considering the achievement of targets, as used to happen in ‘management by objectives’ schemes. Competency factors need to be included in the process.
A performance appraisal (PA), also referred to as a performance review, performance evaluation,(career) development discussion, or employee appraisal is a method by which the job performance of an employee is documented and evaluated. Performance appraisal is the process by which a manager or consultant : examines and evaluates an employee’s work behavior by comparing it with preset standards; documents the results of the comparison; and uses the results to provide feedback to the employee to show where improvements are needed and why. It is therefore a management tool which is helpful in. It is a tool for discovering, analyzing and classifying the differences among workers in relation to job standards in order to motivate and effectively utilizing human resources. It refers to the formal system of appraisal, in which the individual is compared with others and ranked or rated. Generally, appraisal is made by the supervisor or manager once or twice in a year. Performance appraisals are employed to determine who needs what training, and who will be promoted, demoted, retained, or fired.
Performance appraisal is a term applied to a variety of processes that involve the assessment and development of an individual and their performance at work. While it is to a large extent about evaluating a person’s performance at work, three key issues are worth bearing in mind: first, Performance appraisal is a two-way process. As much as the employer wishes to measure and understand an employee’s performance, the employee wishes to gain something from the process; second, The appraisal process is about the development of staff as well as about assessing their performance; it is about exploring the appraisee’s potential for development in terms of their career; and finally, In appraisal there is an important issue about the extent to which one looks at the overall picture of the individual and what they bring to the workplace beyond doing the basic job tasks and activities. It is important to recognize that the appraisal process can be viewed from a number of different perspectives (e.g. the employee, line manager, senior manager etc.). All might have different views of the process and may have different goals in mind.
Characteristics of an Appraisal System
An effective Performance appraisal system must be accepted by all concerned. There should be a common and clear understanding of the distinction between evaluation and appraisal. Evaluation aims at ‘objective’ measurement, while appraisal includes both objective and subjective assessment of how well an employee has performed during the period under review. Thus performance appraisal aims at ‘feedback, development and assessment.’ The process of performance appraisal should concentrate on the job of an employee, the environment of the organization, and the employee him- or herself. These three factors are inter-related and inter-dependent. Therefore, in order to be effective, the appraisal system should be individualized, subjective, and qualitative and oriented towards problem-solving. It should be based on clearly specified and measurable standards and indicators of performance. Since what is being appraised is performance and not personality, personality traits which are not relevant to job performance should be excluded from the appraisal framework.
A performance appraisal system should be: Goal oriented i.e. The job description and the performance goals should be structured, mutually decided and accepted by both management and employees; Reliable and consistent in that it should include both objective and subjective ratings to produce reliable and consistent measurement of performance; Practical and simple format aimed at fulfilling its basic functions. Long and complicated formats are time consuming, difficult to understand, and do not elicit much useful information; Regular and routine since an appraisal system is expected to be formal in a structured manner, informal contacts and interactions can also be used for providing feedback to employees.
An effective appraisal system should also be participatory and open hence involve the employee’s participation, usually through an appraisal interview with the supervisor, for feedback and future planning. During this interview, past performance should be discussed frankly and future goals established. A strategy for accomplishing these goals as well as for improving future performance should be evolved jointly by the supervisor and the employee being appraised. Such participation imparts a feeling of involvement and creates a sense of belonging. Both positive and negative rewards should also be part of the performance appraisal system. Otherwise, the process lacks impact. The process should also incorporate timely feed back. Unless feedback is timely, it loses its utility and may have only limited influence on performance. Feedback must be impersonal if it is to have the desired effect. Personal feedback is usually rejected with contempt, and eventually de-motivates the employee. Feedback must be noticeable i.e. the staff member being appraised must be made aware of the information used in the appraisal process. An open appraisal process creates credibility.
Relevance and responsiveness Planning and appraisal of performance and consequent rewards or punishments should be relevant and responsive i.e. oriented towards the objectives of the programme in which the employee has been assigned a role. For example, if the objectives of a programme are directed towards a particular client group, then the appraisal system has to be designed with that orientation. In addition, Responsibility for the appraisal system should be located at a senior level in the organization so as to ensure commitment and involvement
Performance management is a systematic process for improving organizational performance by developing the performance of individuals and teams. It is a means of getting better results by understanding and managing performance within an agreed framework of planned goals, standards and competency requirements. Performance management processes exist for establishing shared understanding about what is to be achieved, and for managing and developing people in a way that increases the probability that it will be achieved in the short and longer term. It focuses people on doing the right things by clarifying their goals and is owned and driven by line management.
The overall aim of performance management is to establish a high performance culture in which individuals and teams take responsibility for the continuous improvement of business processes and for their own skills and contributions within a framework provided by effective leadership. Specifically, performance management is about aligning individual objectives to organizational objectives and ensuring that individuals uphold corporate core values. It provides for expectations to be defined and agreed in terms of role responsibilities and accountabilities (expected to do), skills (expected to have) and behaviours (expected to be). The aim is to develop the capacity of people to meet and exceed expectations and to achieve their full potential to the benefit of themselves and the organization. Importantly, performance management is concerned with ensuring that the support and guidance people need to develop and improve are readily available.
Characteristics of Performance Management
Performance management is a planned process of which the primary elements are agreement, measurement, feedback, positive reinforcement and dialogue. It is concerned with measuring outputs in the shape of delivered performance compared with expectations expressed as objectives. In this respect, it focuses on targets, standards and performance measures or indicators. It is based on the agreement of role requirements, objectives and performance improvement and personal development plans. Performance management focuses on future performance planning and improvement rather than on retrospective performance appraisal. It functions as a continuous and evolutionary process, in which performance improves over time. It provides the basis for regular and frequent dialogues between managers and individuals about performance and development needs. It is mainly concerned with individual performance but it can also be applied to teams.
It is also concerned with inputs and values. The inputs are the knowledge, skills and behaviours required to produce the expected results. Developmental needs are identified by defining these requirements and assessing the extent to which the expected levels of performance have been achieved through the effective use of knowledge and skills and through appropriate behaviour that upholds core values. Performance management is a continuous and flexible process, which involves managers and those whom they manage acting as partners within a framework that sets out how they can best work together to achieve the required results. Performance management is an important part of the reward system through the provision of feedback and recognition and the identification of opportunities for growth. It may be associated with performance or contribution-related pay, but its developmental aspects are much more important.
It is sometimes assumed that performance appraisal is the same thing as performance management. But there are significant differences. Performance appraisal can be defined as the formal assessment and rating of individuals by their managers at, usually, an annual review meeting. In contrast, performance management is a continuous and much wider, more comprehensive and more natural process of management that clarifies mutual expectations, emphasizes the support role of managers who are expected to act as coaches rather than judges, and focuses on the future.
Performance appraisal has been discredited because too often it has been operated as a top-down and largely bureaucratic system owned by the HR department rather than by line managers. It has been perceived as a means of exercising managerial control. Performance appraisal tends to be backward looking, concentrating on what had gone wrong, rather than looking forward to future development needs. Performance appraisal schemes existed in isolation. There is little or no link between them and the needs of the business. Line managers have frequently rejected performance appraisal schemes as being time-consuming and irrelevant. Employees have resented the superficial nature with which appraisals have been conducted by managers who lack the skills required, tend to be biased and are simply going through the motions. The differences between them are set out in the following table.
At the time of designing a job and formulating a job description, performance standards are usually developed for a position. These standards should be clear , and objective enough to be understood and measured. Weights and points are to be given to each factor of these standards and should be indicated on the appraisla form. These are used for appraising the performance of employees.
It is difficult for employees to guess what is expected of them, hence the standards of performance should be communicated to the employees. To make communications effective, ‘ffedback’ is necessary from the subordinates to the manager. Satisfactory ffedback ensures that the information communicated by the manager has been received and understood in the way as it was intended.
To determine what actual perormance is, it is necessary to acquire information about it. We should be concerned with how we measure and what we measure. Four sources of information are frequently used to measure performance :personal observation, statistical reports, oral reports and written reports.
The results of the appraisal are discussed periodicallywith the employees where strong points, weak points, and difficulties are indicated and discussed so that performance is improved. The information that the subordinate receives about his/her assessment has a great impact on his subsequent performance. Conveying good news is easy both for the manager and subordinate but it is considerably difficult when performance has been below expectation.
Step 6: Initiate corrective action, if necessary:
Corrective action can be of two types. One is immediate and deals mainly with symptoms. The other is basic and looks deep into the causes. Immediate corrective action is often described as “putting out fires”, whereas basic corrective action gets to the source of deviation and seeks to adjust the difference permanently. Counseling may be done or special assignments may be set. People may be sent for formal training courses, and decision-making responsibility and authority may be delegated to the subordinates. Attempts may also be made to recommend for salary increase or promotion, if it is required in light of the appraisals.
Performance appraisal is an important tool of HR management, and is used for a variety of purposes including: to appraise the quality of performance of different employees. It includes knowledge of the work, ability to do the work efficiently, spirit of coordination, dependability, punctuality, enthusiasm, self-confidence, leadership qualities etc. The appraisal procedure is standardized so that the management may rate all employees on the same qualities by the same method of measurement. Performance appraisal is also useful in training especially deciding the type and nature of training programmes for employees. It helps in placement of employees properly and also finding the ‘misfit’ who may be transferred to the right place. Performance appraisal also forms an unbiased and systematic basis for increase in wages of employees as well as identifying employees who may be considered for promotion.
To the employee, A properly designed performance appraisal system can: help each employee understand more about their role and become clear about their functions; be instrumental in helping employees to better understand their strengths and weaknesses with respect to their role and functions in the organization; increase mutuality between employees and their supervisors so that every employee feels happy to work with their supervisor and thereby contributes their maximum to the organization; act as a mechanism for increasing communication between employees and their supervisors; help employees internalize the culture, norms and values of the organization, thus developing an identity and commitment throughout the organization; help prepare employees for higher responsibilities in the future by continuously reinforcing the development of the behaviour and qualities required for higher-level positions in the organization; be instrumental in creating a positive and healthy climate in the organization that drives employees to give their best while enjoying doing so; and assist in a variety of personnel decisions by periodically generating data regarding each employee.
There are several techniques of performance appraisal, each with some strong points as well as limitations. Some of the commonly used performance appraisal techniques are summarized below:
(i) Essay appraisal method
The assessor writes a brief essay providing an assessment of the strengths, weaknesses and potential of the subject. In order to do so objectively, it is necessary that the assessor knows the subject well and should have interacted with them. Since the length and contents of the essay vary between assessors, essay ratings are difficult to compare.
(ii) Graphic rating scale
A graphic scale ‘assesses a person on the quality of his or her work (average; above average; outstanding; or unsatisfactory).’ Assessment could also be trait centered and cover observable traits, such as reliability, adaptability, communication skills, etc. Although graphic scales seem simplistic in construction, they have application in a wide variety of job responsibilities and are more consistent and reliable in comparison with essay appraisal. The utility of this technique can be enhanced by using it in conjunction with the essay appraisal technique.
(iii) Field review method
Since individual assessors differ in their standards, they inadvertently introduce bias in their ratings. To overcome this assessor-related bias, essay and graphic rating techniques can be combined in a systematic review process. In the field review method, ‘a member of the HRM staff meets a small group of assessors from the supervisory units to discuss each rating, systematically identifying areas of inter-assessor disagreement.’ It can then be a mechanism to help each assessor to perceive the standards uniformly and thus match the other assessors. Although field review assessment is considered valid and reliable, it is very time consuming.
(iv) Forced choice rating method
Unlike the field review method, the forced-choice rating method does not involve discussion with supervisors. Although this technique has several variations, the most common method is to force the assessor to choose the best and worst fit statements from a group of statements. These statements are weighted or scored in advance to assess the employee. The scores or weights assigned to the individual statements are not revealed to the assessor so that she or he cannot favour any individual. In this way, the assessor bias is largely eliminated and comparable standards of performance evolved for an objective. However, this technique is of little value wherever performance appraisal interviews are conducted.
360-degree feedback, also known as ‘multi-rater feedback’, is employee development feedback that comes from colleagues, peers and managers in the organization, as well as self-assessment, and sometimes sources such as clients, volunteers or other stakeholders. Senior managers (including executive directors) are responsible for assessing the performance of other employees but often do not receive adequate feedback themselves. 360-degree feedback allows the individual to understand how his or her effectiveness as an employee, manager, or coworker is viewed by others.
(vi) Critical incident appraisal method
In this method, a supervisor describes critical incidents, giving details of both positive and negative behaviour of the employee. These are then discussed with the employee. The discussion focuses on actual behaviour rather than on traits. While this technique is well suited for performance review interviews, it has the drawback that the supervisor has to note down the critical incidents as and when they occur. That may be impractical, and may delay feedback to employees. It makes little sense to wait six months or a year to discuss a misdeed, a mistake or good display of initiative.
(vii) Management by objectives
The employees are asked to set or help set their own performance goals. This avoids the feeling among employees that they are being judged by unfairly high standards. This method is currently widely used, but not always in its true spirit. Even though the employees are consulted, in many cases management ends up by imposing its standards and objectives. In some cases employees may not like ‘self-direction or authority.’ To avoid such problems, the work standard approach is used.
(viii) Work standard approach
In this technique, management establishes the goals openly and sets targets against realistic output standards. These standards are incorporated into the organizational performance appraisal system. Thus each employee has a clear understanding of their duties and knows well what is expected of them. Performance appraisal and interview comments are related to these duties. This makes the appraisal process objective and more accurate. However, it is difficult to compare individual ratings because standards for work may differ from job to job and from employee to employee. This limitation can be overcome by some form of ranking using pooled judgment.
- ix) Ranking methods
Some of the important forms of ranking for performance appraisal are:
(a) Alteration ranking method: The individual with the best performance is chosen as the ideal employee. Other employees are then ranked against this employee in descending order of comparative performance on a scale of best to worst performance. The alteration ranking method usually involves rating by more than one assessor. The ranks assigned by each assessor are then averaged and a relative ranking of each member in the group is determined. While this is a simple method, it is impractical for large groups. In addition, there may be wide variations in ability between ranks for different positions.
(b) Paired comparison: The paired comparison method systematizes ranking and enables better comparison among individuals to be rated. Every individual in the group is compared with all others in the group. The evaluations received by each person in the group are counted and turned into percentage scores. The scores provide a fair idea as to how each individual in the group is judged by the assessor.
(c) Person-to-person rating: In the person-to-person rating scales, the names of the actual individuals known to all the assessors are used as a series of standards. These standards may be defined as lowest, low, middle, high and highest performers. Individual employees in the group are then compared with the individuals used as the standards, and rated for a standard where they match the best. The advantage of this rating scale is that the standards are concrete and are in terms of real individuals. The disadvantage is that the standards set by different assessors may not be consistent. Each assessor constructs their own person-to-person scale which makes comparison of different ratings difficult.
(d) Checklist method: The assessor is furnished with a checklist of pre-scaled descriptions of behaviour, which are then used to evaluate the personnel being rated The scale values of the behaviour items are unknown to the assessor, who has to check as many items as she or he believes describe the worker being assessed. A final rating is obtained by averaging the scale values of the items that have been marked.
(e) Behaviorally anchored rating scales (BARS): This is a relatively new technique. It consists of sets of behavioral statements describing good or bad performance with respect to important qualities. These qualities may refer to inter-personal relationships, planning and organizing abilities, adaptability and reliability. These statements are developed from critical incidents collected both from the assessor and the subject.
(f) Assessment centres: This technique is used to predict future performance of employees were they to be promoted. The individual whose potential is to be assessed has to work on individual as well as group assignments similar to those they would be required to handle were they promoted. The judgment of observers is pooled and paired comparison or alteration ranking is sometimes used to arrive at a final assessment. The final assessment helps in making an order-of-merit ranking for each employee. It also involves subjective judgment by observers.
A performance appraisal system could be designed based on intuition, self-analysis, personality traits, behavioral methods and result-based techniques. Different approaches and techniques could be blended, depending on the goals of performance appraisal in the organization and the type of review. For example, management by objectives, goal-setting and work standard methods are effective for objective coaching, counseling and motivational purposes. Critical incident appraisal is best suited when supervisor’s personal assessment and criticism are essential. A carefully developed and validated forced-choice rating can provide valuable analysis of the individual when considering possible promotion to supervisory positions. Combined graphic and essay form is simple, effective in identifying training and development needs, and facilitates other management decisions.
Attributes considered in evaluating performance
There are many personality traits which could be considered when evaluating performance, and methods to facilitate such consideration include scaling methods that differentiate employees on a series of given traits. The important personality traits fall into two categories: personal qualities and demonstrated qualities.
Personality traits include: Adaptability, Appearance and bearing, Decisiveness, Dependability, Drive and determination,Ingenuity,Initiative,Integrity,Loyalty,Maturity,Tenacity,Verbal expression and Ability to express oneself clearly and concisely in writing. Demonstrated Performance Qualities include; Professional knowledge, Administrative ability, Responsibility for staff development, Foresight, Delegation, Motivation, Morale and Control
The main reason for the utilization of performance appraisals is performance improvement at individual level and ultimately at organizational level. Other fundamental reasons include: as a basis for employment decisions; as criteria in research; to aid with communication; to establish personal objectives for training” programs, for transmission of objective feedback for personal development; a means of documentation to aid in keeping track of decisions and legal requirements; and in wage and salary administration. Additionally, they can aid in the formulation of job criteria and selection of individuals “who are best suited to perform the required organizational tasks”. Other potential benefits include: Facilitation of communication: Enhancement of employee focus through promoting trust: Goal setting and desired performance reinforcement: Performance improvement and Determination of training needs:
Communication in organizations is considered an essential function of worker motivation. It has been proposed that feedback from PAs aid in minimizing employees’ perceptions of uncertainty. Fundamentally, feedback and management-employee communication can serve as a guide in job performance. Behaviors, thoughts, and/or issues may distract employees from their work, and trust issues may be among these distracting factors. Such factors consume psychological energy of an employee and can lower job performance and cause workers to lose sight of organizational goals. Properly constructed and utilized performance appraisals have the ability to lower distracting factors and encourage trust within the organization.
Organizations find it efficient to match individual worker’s goals and performance with organizational goals. Performance appraisals provide room for discussion in the collaboration of these individual and organizational goals. Collaboration can also be advantageous by resulting in employee acceptance and satisfaction of appraisal results. Well-constructed performance appraisals can be valuable tools for communication with employees as pertaining to how their job performance stands with organizational expectations. “At the organizational level, numerous studies have reported positive relationships between human resource management (HRM) practices and performance improvement at both the individual and organizational levels.
Employee training and development are crucial components in helping an organization achieve strategic initiatives. It has been argued that for performance appraisals to truly be effective, post-appraisal opportunities for training and development in problem areas, as determined by the appraisal, must be offered. Performance appraisals can especially be instrumental for identifying training needs of new employees. Finally, performance appraisals can help in the establishment and supervision of employees’ career goals.
Despite all the potential advantages of formal performance appraisals, there are some challenges. Determining the relationship between individual job performance and organizational performance can be a difficult task. Generally, there are two overarching problems from which several complications spawn. One of the problems with performance appraisals is they can have detrimental effects to the organization(s) involved if the appraisals are not used appropriately. The second problem is they can be ineffective if the system does not correspond with the organizational culture and system. Complications stemming from these issues are as follows:
Traditional performance appraisals are often based upon a manager’s or supervisor’s perceptions of an employee’s performance and employees are evaluated subjectively rather than objectively. Therefore the review may be influenced by many non-performance factors such as employee ‘likeability’, personal prejudices, ease of management, and/or previous mistakes or successes. Reviews should instead be based on data-supported, measurable behaviors and results within the performer’s control.
Quite often, individuals have negative perceptions of performance appraisals receiving and/or the anticipation of receiving performance appraisals can be uncomfortable and distressful and potentially cause “tension between supervisors and subordinates”. If the appraisee does not trust their employer, appraiser or believe that they will benefit from the process it may become a futile exercise.
Performance appraisals should provide accurate and relevant ratings of an employee’s performance as compared to pre-established criteria/goals (i.e. organizational expectations). However, supervisors will sometimes rate employees more favorably than that of their true performance in order to please the employees and avoid conflict. Managers who have had unsatisfactory experiences with inadequate or poorly designed appraisal programs may be skeptical about their usefulness while other managers may not like to play the role of a judge and be responsible for the future of their subordinates or they may be uncomfortable about providing negative feedback to the employees. This tendency can lead them to inflate their assessments of the workers’ job performance, giving higher ratings than deserved.
When performance appraisals are not carried out appropriately, legal issues could result that place the organization at risk. Performance appraisals are used in organizational disciplinary programs as well as for promotional decisions within the organization. The improper application and utilization of performance appraisals can affect employees negatively and lead to legal action against the organization.
Performance goals and performance appraisals systems are often used in association. Negative outcomes concerning the organizations can result when goals are overly challenging or overemphasized to the extent of affecting ethics, legal requirements, or quality. Moreover, challenging performance goals can impede employees’ abilities to acquire necessary knowledge and skills. Especially in the early stages of training, it would be more beneficial to instruct employees on outcome goals than on performance goals.
Performance appraisal systems, and the premises of which they are based, may not have the transferability for effectual utilization in other countries or cultures. Performance “appraisal is be deeply rooted in the norms, values, and beliefs of a society. Appraisal reflects attitudes towards motivation and performance (self) and relationships (e.g. peers, subordinates, supervisors, organization), all of which vary from one country to the next”. Therefore, appraisal should be in conjunction with cultural norms, values, and beliefs in order to be operative. The deep-seated norms, values and beliefs in different cultures affect employee motivation and perception of organizational equity and justice. In effect, a performance appraisals system created and considered effectual in one country may not be an appropriate assessment in another cultural region.
Computers have been playing an increasing role in performance appraisal for some time. There are two main aspects to this. The first is in relation to the electronic monitoring of performance, which affords the ability to record a huge amount of data on multiple dimensions of work performance which facilitates a more continuous and detailed collection of performance data in some jobs. The second aspect is in mediating the feedback process, by recording and aggregating performance ratings and written observations and making the information available on-line; many software packages are available for this. The use of information technology in these ways undoubtedly helps in making the appraisal process more manageable, especially where multiple rating sources are involved, but it also raises many questions about appraisees’ reactions and possible effects on performance appraisals outcomes.
Mistakes made by raters are a major source of problems in performance appraisal. There is no simple way to completely eliminate these errors, but making raters aware of them through training is helpful. Ratter errors are based on the feelings and it has consequences at the time of appraisal. Rater errors include: Use of varying standards which occurs when a manager appraises (evaluates) his or her employees using different standards and expectations for employees who are performing similar jobs. Recency effects occur where the manager rates the employee according to the last performance, Example: When a supervisor rates based just in the performance of the employee in the last week. Primacy errors occur when the person who evaluating gives more weight according to information he received first. Central Tendency errors occur when the manager evaluate every employees within a narrow range, as the average because he or she is dismissing the differences in the performance that employees have done. Leniency errors occur where the manager rates all employees are at the high end of the scale.
Other rater errors are rater bias where the manager rates according to his or her values and prejudices which distort rating. Those differentiations can be made due to the ethnic group, gender, age, religion, sex, appearance e.t.c. Halo Effect is where a manager rates an employee high on all items because of one characteristic that he or she likes. Example: If a worker has few absences but the supervisor has a good relationship with that employee, the supervisor might give to the employee a high rating in all other areas of work, in order to balance the rating. Horns Effect is the opposite to the Halo effect and Horns effect occurs when a manager rates an employee low on all items because of one characteristic that he or she dislikes. Sampling may also lead to some errors e.g. When the rater evaluates the performance of an employee relying only on a small percentage of the amount of work done.
Managing Challenges of Performance Appraisals
Although performance appraisals can be so easily biased, certain steps that can be taken to improve the evaluations and reduce the margin of errors through: Training that involves creating an awareness and acceptance in the people conducting the appraisals that within a group of workers, they will find a wide range in difference of skills and abilities; providing feedback to raters, managers who evaluated their subordinates should be provided with feedback, including information on ratings from other managers to reduce leniency errors. In addition, Subordinate Participation should be encouraged. By allowing employee participation in the evaluation process, there is employee-supervisor reciprocity in the discussion for any discrepancies between self-ratings and supervisor ratings, thus, increasing job satisfaction and motivation.
- Distinguish between performance appraisal and performance management
- Explain five methods of conducting performance appraisal in an organization
- Briefly describe the performance appraisal process
- Outline the importance of performance appraisal in an organization
- Discuss the challenges of performance appraisal
1.Armstrong,M.,(2006), A Handbook of Human Resource Practice (10th Ed),Koganpage.London
- Dessler& Cole (2011), Human Resources Management in Canada (11th Ed) Pearson Canada Inc.
3.Joshi, M.,(2013),Human Resource Management (1st Ed), Manmohan. Bookboon.com
By the end of this topic, you should be able to:
-Explain the concept of training
-Explain the components of training
-Discuss types of training used in an organization
-Discuss the importance of training
The human resources or human relations department oversees a number of functions within the organization, including hiring, training, monitoring certain policies and even handling disputes. In addition, the human resources department must keep company employees updated on certain laws, such as safety and discrimination. Therefore, it is essential that all human resource managers and employees get the appropriate training. This topic explores the concept of training, components of training, types of training used in organization and the importance of training.
Meaning of Training and Development
Training is defined as a planned and systematic effort to modify or develop knowledge, skills and attitudes through learning experiences, to achieve effective performance in an activity or range of activities. It can also be described training as a designed process aiming at the development of attitude, knowledge or skill behaviour through learning in order to achieve performance in an activity or series of activities. The idea behind training in the situation of the work is to increase the capabilities of an individual so as to satisfy the current and prospective needs of the organisation. Armstrong, 1999, defines training as the systematic modification of behaviour through learning which occurs as a result of education, instruction, development and planned experience. Learning is a process of acquiring new knowledge, skills and capabilities whilst training is one of the actions an organization can take for the promotion of learning.
Training and development is a function of human resource management aimed at bettering the performance of individuals and groups in organizational settings. It is also known by several names, including “human resource development”, and “learning and development”. Training and development encompasses three main activities: training (individual development), education (career development), and development (organizational development).Individual development refers to the development of new knowledge, skills, and/or improved behaviors that result in performance enhancement and improvement related to one’s current job.
Career development focuses on providing the analysis necessary to identify the individual interests, values, competencies, activities, and assignments needed to develop skills for future jobs (development). Career development includes both individual and organizational activities. Individual activities include career planning, career awareness, and utilizing career resource centers. Organizational activities include job posting systems, mentoring systems, career resource center development and maintenance, using managers as career counselors, providing career development workshops and seminars, human resource planning, performance appraisal, and career pathing programs.
Organizational development is directed at developing new and creative organization solutions to performance problems by enhancing congruence among the organization’s structure, culture, processes, and strategies within the human resources domain. In other words, the organization should become a more functional unit as a result of a closer working relationship among these elements. The goal of organizational development is to develop the organization’s self-renewing capacity i.e. the organization’s ability to discover its problems and weaknesses and to direct the resources necessary for improvement. As a result, the organization will be able to regenerate itself over and over again as it confronts new and ever-challenging circumstances.
The term talent development is becoming increasingly popular in several organizations, as companies are now moving from the traditional term training and development. Talent development is the process of changing an organization, its employees, its stakeholders, and groups of people within it, using planned and unplanned learning, in order to achieve and maintain a competitive advantage for the organization. The term encompasses a variety of components such as training, career development, career management, and organizational development, and training and development. However, it is mostly used to refer to training for the top management it is becoming increasingly clear that career development is necessary for the retention of any employee, no matter what their level in the company.
Purpose of Training
Training, development and education of employees at all level of hierarchy in an organization is an essential tool in maintaining competitiveness .This is because it aids an organisation in achieving its purpose by adding value to its key resources, that is, the people it employs. Consequently, to attain the overall effectiveness and efficiency of an organisation, there is need to invest in its people to enable them to perform better and to empower them to make the best use of their natural abilities. Generally, the purpose of training and development can be explained as follows:
- Improving quality of workforce
Training and development programs can help in improving the quality of work produced by the workforce of organization. Mostly, training is given in a specific area like finance, marketing or HR, which helps in improving the quality of work in that particular area.
- Enhance employee growth
By attending training and development programs, employees are able master the work of their jobs and that’s how they develop and grow themselves in a professional way.
iii. Prevents obsolescence
These programs help employees to keep themselves up to date with the new trends in latest technology, which reduces the chances of termination of the job.
- Assisting new comer
These programs help new employees to adjust themselves in a new working environment, culture and technology. They feel themselves as regular employees of that organization.
- Bridging the gap between planning and implementation
It helps organizations to easily achieve their targets and goals what they actually planned for. Employees know their job better and they deliver the quality performance according to needs of top management. That’s why organizations can easily implement their plans.
- Health and safety measures
Training and development program clearly identifies and teaches employees about the different risk involved in their job, the different problems that can arise and how to prevent such problems. This helps to improve the health and safety measures in the company.
There are many benefits of training both to the organization and an individual employee. These benefits include: reducing cost of production by enhancing employee efficiency and effectiveness as it reduces wastage and accidents; Increasing the workers commitment as they are able to understand their organization better as well as what is expected of them; enables employees accommodate new technology as they acquire new skills to deal with such technology; It leads to flexibility among employees because they acquire a variety of skills which makes it possible to implement job rotation; and It can be useful in effecting changes in management whenever necessary for example in succession management.
Employee training also creates a positive culture of training in the organization where the management must budget for employee training at regular intervals. It also improves job satisfaction in the workplace since employees can utilize personal skills, abilities and talents to the full potential. In addition, improvement of work performance leads to better quality of products and services which may lead to increase in customer base as well as profits. Training also promotes good industrial relations through improving relationships amongst workers, as well as between workers and management which reduces conflicts in the organization.
Training facilitates reward system as it makes it possible to increase workers responsibilities and consequently the job group and salary. It also enhances employee loyalty because employees feel that the management is mindful about their welfare as well as improve organizations image to its customers and the general public.
Disadvantages of Training
It is common to discuss the advantages of training and development of employees, or the importance of work training, but the disadvantages of training or the negatives of employment training are rarely discussed. The following are the general reasons why training employees can be a disadvantage.
One of the biggest potential problems with employee training is the cost of the process. If handled the training internally, it costs money because employees will be paid for training instead of doing productive work. If an outside trainer used, he will also be paid. If employees are sent to a seminar or training conference in another location, the organization will also incur substantial cost for the training.
Information changes and whatever is learnt today will probably change in the near future and become irrelevant or inaccurate creating the need to do the training all over again. Furthermore, where online training is used for new employees, it might be de-motivating since majority of the new employees would rather learn from someone face-to-face than one-on-one with a computer because it’s more fun working with someone who can answer questions and add some energy into the process.
Another disadvantage with training employees is lack of enough time to do the training adequately. If sufficient time is not allowed for covering all the training material, and there is not enough time for questions and answers, the trainer may have to rush through the important parts of the job and skip over some of the other tasks that also need to be understood by the employee. In such circumstances, then either more time needs to be set aside for the training, or less material needs to be presented. Scheduling a training programme is therefore difficult whether it involves too many employees are being trained at one time or too few.
It is important to be careful with regard to what the employees are learning which makes some control over the training necessary. However, Control of the Training is another challenge especially when the process is delegated either to another employee or an outsider. If the trainer does not do the job as it should be done, employees might end up picking up some bad habits along the way which may reduce organizational efficiency and effectiveness. In addition, the trainer need to have a passion for training and to know what they’re talking about since employees being trained can quickly ascertain if the person doing the training is knowledgeable, competent, and approachable. The wrong trainer can do more harm than good.
Training may also have different effects if the staffs being trained possess different learning levels. Some of those being trained can be bored because it’s too elementary or otherswill be frustrated because it’s too complicated and the purpose of the employee training may be lost from the start.
Characteristics of Good Training Programme
Many organizations, even though they have a large training staff and spend a large amount on training programmes, don’t get good results. In order to ensure that the training programmes are effective and the organizations get good results from them, the following principles may be observed:
- Determination of training needs: The management should first decide the training needs of employees and then select a method of training that is most effective.
- Relevance to job requirements: Training programmes must be related to the requirements of the job for which they are intended.
- Allowance for individual differences: There are differences in ability, learning capacity and interest of trainees so the management should consider these factors while designing the training programmes.
- Training programme should be result oriented: Management should avoid “training for the sake of training;’ and show greater interest in the benefits of training programmes.
- Suitable incentives: There should be incentives to the trainees to make them take training programmes seriously.
- Management support: Top managers should take interest in and support the training programmes. Subordinates cannot be expected to take the training programmes seriously if their superiors themselves are not serious about them
Every company has a specific training procedure, depending upon its requirements. A general training procedure is explained below along with diagram:
Determining training needs of employee
In the very first step of training procedure, the HR department, identifies the number of people required training, specific area in which they need training, the age group of employee, the level in organization etc. in some cases the employee may be totally new to the organization. Here the general introduction training is required. Some employees may have problems in specific areas; here the training must be specific. This entire information is collected by HR department.
The objective in establishing needs analysis is to find out the answers to the following questions: Why is training needed; what type of training is needed; when is the training needed; where is the training needed; who needs the training; who will conduct the training; and how will the training be performed. The steps that are normally used to analyse training needs are as follows: Perform a gap analysis; Identify priorities and importance; Identify causes of performance problems and/or opportunities; Identify possible solutions and growth opportunities; and Present your findings
Selecting target group
Based on information collected in step 1 the HR department divides employee into groups based on the following: The area of training; Level in the organization; and the intensity of training
- Preparing trainers
Once the employees have been divided into groups, the HR department arranges for trainers. Trainers can be in house trainers or specialized trainers from outside. The trainers are given details by HR department, like number of people in group, their age, their level in organization, the result desired at the end of training, the area of training, the number of days of training, the training budget, facilities available etc.
- Preparing training packages
Based on the information provided by trainers, he prepares entire training schedule i.e. number of days, number of sessions each day, topics to be handled each day, depth of which the subject should be covered, the methodology for each session, the test to be given for each session, handout/printed material to be given in each session.
- Presentation/ Implementation (Performance)
This step is responsible for the instruction and delivery of the training program. Once you have designated your trainers, the training technique must be decided. One-on-one training, on-the-job training, group training, seminars, and workshops are the most popular methods. Before presenting a training session, make sure you have a thorough understanding of the following characteristics of an effective trainer. The trainer should have: A desire to teach the subject being taught; working knowledge of the subject; ability to motivate participants to “want” to learn; good sense of humor; dynamic appearance and good posture; strong passion for their topic; strong compassion towards their participants; and appropriate audio/visual equipment to enhance the training session. For a training program to be successful the trainer should be conscious of several essential elements, including a controlled environment, good planning, using different training methods; good communication skills; and trainee participation.
This step will determine how effective and profitable your training program has been. Methods for evaluation are pre-and post- surveys, the establishment of a cost/benefit analysis outlining your expenses and returns, and an increase in customer satisfaction and profits. The reason for an evaluation system is simple. The evaluation of training programs is the most important step in the training process. It is this step that will indicate the effectiveness of both the training as well as the trainer.
There are several obvious benefits for evaluating a training program. First, evaluations will provide feedback on the trainer’s performance, allowing them to improve themselves for future programs. Second, evaluations will indicate its cost-effectiveness. Third, evaluations are an efficient way to determine the overall effectiveness of the training program for the employees as well as the organization. The importance of the evaluation process after the training is critical since it enables the trainer to understand the effectiveness of the training. Evaluation is a systematic process to determine the worth, value, or meaning of something and involves forming value decision about the quality of programs, products, and goals.
There are several types of employee training programs. Employees may receive basic literacy training, interpersonal skills training, technical training, problem-solving training and diversity or sensitivity training. Each type of training targets a different facet of an organization’s overall culture and performance.
Basic literacy training is training for things like reading, writing and problem-solving skills. This is important especially in organizations that hire people from all part of the world. The training may involve the employee learning a language to improve communication. The benefits of literacy training are that employees are more likely to: meet company goals; perform job tasks; understand work processes; work in teams; make decisions; and learn technology.
Interpersonal skills training is training on how to maintain positive relationships, communicate better, resolve conflicts and build trust. This type of training may also involve team training where employee participate in planning, organizing and controlling activities as teams .The benefits of this training is that it assists employees to: Get along with each other; Exchange positive communication; Minimize conflict; and Influence others to be positive.
Technology training may involve training on computer software and hardware offered to employees depending on their position or training on use of other new technologies or machines. This training enables employees to: Perform at higher standards; Have more self-confidence; Develop higher skill levels; and Perform many different tasks.
Problem-solving training is training on how to analyze problems and make decisions. Employees learn how to identify problems, analyze problems, assess solutions, implement solutions and monitor outcomes. This enables them to offer creative solutions to problems collaborate on problem-solving and avert disasters.
Diversity or Sensitivity Training is mainly used in organizations where employees are drawn from many different cultures, religions, ethnic backgrounds etc.Diversity training encourages workers to accommodate and tolerate other people, ideas, beliefs and practices in order to create harmony among workers.
Behaviour training utilizes behavior modeling in order to expose employees to a particular behavior desirable in the organization e.g. integrity, punctuality, honesty etc.It is mainly used in training employees holding sensitive jobs which involve the use of their emotions and feelings such as per counselors, nurses etc.
There are several techniques used in employee training. These include lectures, discussions, case study, role playing and simulation. A training programme may involve the use of one or more of those techniques.
A lecture is a talk with little or no participation except a question-and-answer session at the end. It is used to transfer information to an audience with controlled content and timing. Lecture. The effectiveness of a lecture depends on the ability of the speaker to present material with the judicious use of visual aids. But there are several limits on the amount an inert audience can absorb. For maximum effectiveness, the lecture must not contain too much; must reinforce learning with appropriate visual aids (but not too many); and it must clearly indicate the action that should be taken to make use of the material.
The objectives of using discussion techniques are to: get the audience to participate actively in learning; give people an opportunity of learning from the experience of others; help people to gain understanding of other points of view; develop powers of self-expression. The aim of the trainer should be to guide the group thinking. He or she may, therefore, be more concerned with shaping attitudes than imparting new knowledge. The trainer has unobtrusively to stimulate people to talk, guide the discussion along predetermined lines, and provide interim summaries and a final summary.
A case study is a history or description of an event or set of circumstances that is analysed by trainees in order to diagnose the causes of a problem and work out how to solve it. Case studies are mainly used in courses for managers and team leaders because they are based on the belief that managerial competence and understanding can best be achieved through the study and discussion of real events. Case studies should aim to promote enquiry, the exchange of ideas, and the analysis of experience in order that the trainees can discover underlying principles that the case study is designed to illustrate. The danger of case studies is that they are often perceived by trainees to be irrelevant to their needs, even if based on fact.
Role-playing is used to give managers, team leaders or sales representatives practice in dealing with face-to-face situations such as interviewing, conducting a performance review meeting, counseling, coaching, dealing with a grievance, selling, leading a group or running a meeting. It develops interactive skills and gives people insight into the way in which people behave and feel. Role-playing enables trainees to get expert advice and constructive criticism from the trainer and their colleagues in a protected training situation. It can help to increase confidence as well as developing skills in handling people. The main difficulties are either that trainees are embarrassed or that they do not take the exercise seriously and overplay their parts.
Simulation is a training technique that combines case studies and role-playing to obtain the maximum amount of realism in classroom training. The aim is to facilitate the transfer of what has been learnt off the job to on-the-job behaviour by reproducing, in the training room, situations that are as close as possible to real life. Trainees are thus given the opportunity to practice behaviour in conditions identical to or at least very similar to those they will meet when they complete the course.
In a group exercise the trainees examine problems and develop solutions to them as a group. The problem may be a case study or it could be one entirely unrelated to everyday work. The aims of an exercise of this kind are to give members practice inworking together and to obtain insight into the way in which groups behave in tackling problems and arriving at decisions. Group exercises can be used as part of a team-building programme to develop interactive skills. It can be combined with other techniques such as the discovery method, encouraging participants to find out things for themselves and work out the techniques and skills they need to use.
There are different methods of training for employees. The methods can be broadly be divided into two categories namely on-the-job training and off-the –job training and can be explained with the help of following diagram
On the Job (in house) Training Methods
On the job method refers to training given to personnel inside the company. There are different methods of on the job training: It involves methods such as job rotation, planned progression, coaching and counseling, understudy, vestibule training, apprentice training etc.
Job rotation enables the organization to train employees on various jobs within a department. They are taught everything about the department starting from the lowest level job in the department to the highest level job. This helps when the person takes over as a manager and is required to check whether his juniors are doing the job properly or not. It may also involve transfer of an employee to different equipment for a fixed amount of time until he is comfortable with all the equipment so that at the end of the training the employee becomes comfortable with all the equipment.
In planned progression, juniors are assigned a certain job of their senior in addition to their own job. The method allows the employee to slowly learn the job of his senior so that when he is promoted to his senior job it becomes very easy for him to adjust to the new situation. It also provides a chance to learn higher level jobs.
Coaching refers to actually teaching a job to a junior. The senior person who is the coach actually teaches his junior regarding how the work must be handled and how decisions must be taken, the different techniques that can be used on the job, how to handle pressure. There is active participation from the senior. Counseling refers to advising the junior employee as and when he faces problems. The counselor superior plays an advisory role and does not actively teach employees. Apprenticeship training is a method in which both theory and practical session are conducted commonly applied in technical fields or in factories. The theory sessions give theoretical information about the plant layout, the different machines, their parts and safety measures etc. The practical sessions give practical training in handling the equipment. The apprentice may or may not be continued on the job after training.
Under study is a kind of training method where a junior is deputed to work under a senior. He takes orders from the senior, observes the senior, attends meetings with him, learns about decision making and handling of day to day problems. The method is used when the senior is on the verge of retirement and the job will be taken over by the junior. Junior board is a method where a group of junior level managers are identified and they work together in a group called junior board. They function just like the board of directors.
The advantages of in-house training include: saving on training cost since cost per delegate is typically lower than public scheduled courses due to the fact the training company only has to send a trainer rather than set up an environment themselves; saving on travel and accommodation costs; Running an in-house training course for a single client can generally allow the training to be a lot more focused on the specific subjects and skills that are relevant to the organization; enables the use of real work examples because trainees are able to work on current work or examples of work which relates to their roles not a generic example; having In-House training courses makes working around people’s schedules a lot easier as you are cutting out logistical issues as well as the fact any candidates can be easily reached in case something arises that needs to be addressed quickly; and having a room full of delegates from different departments and levels can encourage team work. This is a fantastic result as it is often in this social learning that the most learning is done when ideas are being bounced off each other. This will lead to increased awareness and understanding of each other’s roles as well as staff morale.
The disadvantages of In-House Training include: Incurring extra administration costs related to training room, parking for the trainer, equipment such as projectors, laptops and tablets amongst other things which need to be sorted out and in advance to ensure the training works; Delegates staying onsite may also be a disadvantage because candidates could be pulled out of the classroom in order to help with other activities making it hard to get a candidate through an entire session without interruption; when training is not moved outside the organization, the employee may not view it as a serious event. They might just see it as a break from their usual job and some may even skip it. In addition, the convenience factor means it is easier to duck in and out the training. In house training may also lead to lack of innovation since the employees are used to the equipments and the environment hence there is a danger of the training course going stale. This type of training also limits Networking because staff will not meet anyone from other companies.
Off the job training refers to method of training given outside the organization. The different methods adopted in off the job training are classroom, simulation, business games, committees and readings.
The classroom method is used when a group of employees have to be trained in theoretical aspects. The training involves using lectures, audio visuals, case study, role play method, group discussions etc. The method is interactive and provides very good results. Simulation involves creating atmosphere which is very similar to the original work environment. The method helps to train manager handling stress, taking immediate decisions, handling pressure on the jobs etc. An actual feel of the real job environment is given here.
Business games method involves providing a market situation to the trainee and asking him to provide solutions. If there are many people to be trained they can be divided into groups and each group becomes a separate team and play against each other. A committee refers to a group of people who are officially appointed to look into a problem and provide solution. Trainees are put in the committee to identify how they study a problem and what they learn from it. Readings involves encouraging the trainee to increase his reading related to his subject and then ask him to make a presentation on what he has learned. Information can be collected by trainee manager from books, magazines and internet etc.
Importance of Training to an Individual
Training presents a prime opportunity to expand the knowledge base of all employees training and development provides both the company as a whole and the individual employees with benefits that make the cost and time a worthwhile investment. The main benefits to an employee include addressing weaknesses, improved performance, consistency, and increased employee satisfaction
Most employees have some weaknesses in their workplace skills. A training program allows them to strengthen those skills that each employee needs to improve. A development program brings all employees to a higher level so they all have similar skills and knowledge. This helps reduce any weak links within the organization that rely heavily on others to complete basic work tasks. Providing the necessary training creates an overall knowledgeable staff with employees who can take over for one another as needed, work on teams or work independently without constant help and supervision from others.
An employee who receives the necessary training is better able to perform her job. She becomes more aware of safety practices and proper procedures for basic tasks. The training may also build the employee’s confidence because she has a stronger understanding of the industry and the responsibilities of her job. This confidence may push her to perform even better and think of new ideas that help her excel. Continuous training also keeps employees on the cutting edge of industry developments.
A structured training and development program ensures that employees have a consistent experience and background knowledge. All employees need to be aware of the expectations and procedures within the company. This includes safety, discrimination and administrative tasks. Putting all employees through regular training in these areas ensures that all staff members at least have exposure to the information.
Employees with access to training and development programs have the advantage over employees in other companies who are left to seek out training opportunities on their own. The investment in training that a company makes shows the employees they are valued. The training creates a supportive workplace. Employees may gain access to training they wouldn’t have otherwise known about or sought out themselves. Employees who feel appreciated and challenged through training opportunities may feel more satisfaction toward their jobs.
Importance of Training to Organization
The benefits of training an organization include:
- Optimum Utilization of Human Resources: It helps an organization in optimizing the utilization of human resource that further helps the employee to achieve the organizational goals as well as their individual goals.
- Development of Human Resources: it helps to provide an opportunity and broad structure for the development of employees’ technical and behavioral skills in an organization.
- Increased Productivity and quality: Training and Development helps in increasing the productivity of the employees that helps the organization further to achieve its long-term goal as well as improving upon the quality of work and work-life.
- Develop Organization Culture and improve Organization Climate: Training helps to develop and improve the organizational culture and effectiveness. It helps in creating the learning culture within the organization. Training helps in building the positive perception and feeling about the organization. The employees get these feelings from leaders, subordinates, and peers.
- Health and Safety: Training and Development helps in improving the health and safety of the organization thus preventing obsolescence and accidents.
- Helps in creating a better corporate image.
- Aids in organizational development i.e. Organization gets more effective decision making and problem solving. It helps in understanding and carrying out organizational policies as well as developing leadership skills, motivation, loyalty, better attitudes, and other aspects that successful workers and managers usually display.
1.Armstrong,M.,(2006), A Handbook of Human Resource Practice (10th Ed),Koganpage.London
- Dessler& Cole (2011), Human Resources Management in Canada (11th Ed) Pearson Canada Inc.
3.Joshi, M.,(2013),Human Resource Management (1st Ed), Manmohan. Bookboon.com
Trainee should be able to;
- -Explain concept of remuneration
- -Explain elements of remuneration policy
- -Discuss types of remuneration systems
- -Discuss the factors influencing remuneration
- -Explain the principles of wage and salary administration
- –Describe various statutory deductions
- -Explain types of pay structures
- -Explain the role of job evaluation in determining remuneration
Remuneration is the compensation that one receives in exchange for the work or services performed. Typically, this consists of monetary rewards, also referred to as wage or salary. It can also be defined as Reward for employment in the form of pay, salary, or wage, including allowances, benefits (such as company car, medical plan, pension plan), bonuses, cash incentives, and monetary value of the noncash incentives.
The remuneration package of an employee therefore includes; wages/salary, incentives, fringe benefits, perquisites and finally non-monetary benefits. Wage is the payment given to employee by the employer. It is the hourly-rate of pay while salary refers to monthly rate of pay. Salary includes allowances and also annual increment. Salary payment is not uniform to all employees and depends upon nature of job, responsibilities, merits available, status, and seniority of the employee. Incentives are addition to regular wage payment and depend on productivity, sales, profit, cost reduction efforts etc. The purpose behind incentives is to encourage/motivate employees to take more interest in the work and according to the results get the incentives. Fringe benefits are monetary benefits provided to employees and includes; provident fund, gratuity, medical care, hospitalization payment, provision of uniforms to employees etc.
Importance of Compensation
Compensation decisions are strategic decisions and play a key role in achieving performance and sustainable competitive advantages for organizations. Its key objectives are to: Attract employees who are qualified, experienced and interested in the assignments at hand; provide a consistent and reasonable relationship between the pay levels of employees at different levels; and become cost effective by reducing unnecessary expenses. other aims of compensation are to: reward people according to what the organization values and wants to pay for as well as reward them for the value they create; develop a performance culture; motivate people and obtain their commitment and engagement; help to attract and retain the high quality people the organization needs; create total reward processes that recognize the importance of both financial and non-financial rewards; develop a positive employment relationship and psychological contract; align reward practices with both business goals and employee values; operate transparently since employees understand how reward processes operate and how they are affected by them; and to operate fairly as employees feel that they are treated justly in accordance with what is due to them because of their value to the organization.
Fair compensations also help in reducing conflicts in an organization because makes employees feel valued and enable them to create togetherness due to job satisfaction. In addition, it aids in organizational development since high productivity enable the organization to achieve its short and long term goals leading to continuity and sustainability.
Remuneration is made up of three sets of elements which can be grouped into primary, secondary and tertiary elements. Primary elements of remuneration are the pay in money or pay in kind, which includes all bonuses and allowances, holiday allowance, shift work premium, etc., granted directly to the employee in person. Of this gross pay, a proportion is deducted at source for collective charges levied on employees, tax, social security and pension contributions, etc., leaving the net pay actually received by the employee; Employee compensation and benefits are basically divided into four categories: Primary elements may be inform of guaranteed pay or variable pay. Guaranteed pay is the reward paid by an employer to an employee based on employee/employer relations. The most common form of guaranteed pay is the basic salary. Variable pay refers to reward paid by an employer to an employee that is contingent on discretion, performance or results achieved. The most common forms are bonuses and sales incentives.
Secondary elements of remuneration are those elements which, although their cost is apportioned on an individual basis, do not become available to the employee personally. These are the employer’s share of social security and pension contributions and any other contributions. Paid time off, such as leave of absence and annual holidays, is sometimes also included in this category. Tertiary elements of remuneration are the general staff costs borne by an employer, such as a staff association, company newspaper, company shop, canteen facilities and the cost of meal breaks. It is difficult to apportion the cost of these elements on an individual basis.
This categorization of remuneration elements is neither universally accepted nor watertight. A number of elements such as various fringe benefits (e.g. the right to take annual holidays in the form of scattered days off, medical care, pension contributions and education costs) are difficult to categorize. The primary and secondary elements together constitute gross wage costs .These can be calculated per hour worked, either per employee or for all the company’s employees combined.
Different employees of the same organization might be remunerated by different systems, according to the type of work they perform. In some organizations, a combination of two or more remuneration systems may be used e.g. piece work rates with guaranteed time pay. However, the following are the most common systems of remuneration:
Under this system, payment of an agreed amount is made for agreed period of working time which may be a day, a week or a month. Time rates are mainly used when output cannot be directly related to the wage or labour cost, or when the emphasis is on the quality of work to be performed rather than on quantity alone. If the same employee works for additional hours, he/she is likely to be paid extra for the time worked in excess of the agreed number of hours at an `overtime rate. This overtime rate may vary from organization to organization or from one department to another. Other employees such as managerial and supervisory staff, clerical and secretarial staff, professional and specialist staff etc. might be paid monthly.
The advantages of this method are that it: is simple to understand and administer; provides a basis for regular payment of employees; is reliable since pay time is known; leads to harmonious relationship in the work place since it is based on remuneration policies which determine wage differentials among employees ; makes it easy to budget and trackdown the amount of money spent on employees compensation ; and it is the most useful when paying employees who provide services that are not easily measureable and whose performance is not tangible. In addition, this system is useful in paying employees where the employee have no control over the quantity of output as well as rewarding collective responsibilities such as where tasks have been achieved by a team.
The disadvantages of this method are: it lacks a basis for rewarding high performers which de-motivates employees and some become indifferent since they are sure they will be paid at the end of the month; it requires close supervision of employees by their superiors which may lead to tension; and it is slow when implementing new salary scales.
Piece work rates
Under this system, payment is made according to the output: that is, the quantity of an acceptable quality of an item produced. It is therefore based on the amount of work completed by an individual within a given period of time. Every unit of output is assigned a particular amount of money and the employees are paid depending on number of units produced.
The main advantage of this method is that there is a direct relationship between effort and reward which makes it possible to motivate high performers by providing them with higher earnings. The method requires less supervision because employees have self-drive and want to maximize on their earnings. It is also fair since it prevents employees from soldiering on the job and reduces employee resistance to change especially if the change introduced will help enhance performance. Piece rate method also helps the management to distinguish between high and low performers which makes it easy to decide who deserves promotions or the manhunt of bonuses. In addition, it reduces the costs of production because employees want to reduce the amount of wastage of materials and time in order to maximize production.
The disadvantages of this system include: uncertainties in the earnings of employees since it is based on quantity produced; it creates frustration in the workforce if work is delayed by factors beyond the control of the employee such as power failure, machine breakdown, delayed supply of raw materials etc; Quality of the products may be compromised because employees are more interested in quantity; it discourages team work and makes the employees adapt an attitude of every one for himself. However, this method is useful where employees are working on temporary basis.
Team Based Pay
This is the provision of rewards to groups/ teams of employees who have carried out tasks that are linked to the team performance. This system encourages effective team effort and cooperation; leads to collective responsibility; encourage s team members to multi-skills and multi-task and encourages less effective team members to improve individual performance for the sake of the group.
The disadvantages of this system are that it can only work if the group is very mature and cohesive, high performers may resent, and it may result to undesirable behavior and attitudes as a result of peer pressure. However, the system is suitable where: teams are well established, the work carried out by team members is interrelated, when standards and targets of performance are agreeable amongst team mates and if there is an acceptable to be able to meet the final pay.
Other systems used in addition (together with) to the above are:
Bonus is a reward for output or achievement above previously agreed levels. Sonic schemes are based on an individual’s output, while others are based on the output of the group. This is usually paid at the end of the work year. Commissions or target bonuses generally applies to sales people, and is based on the values of sales achieved above a certain pre-determined ‘target. Some are paid on an individual salesperson’s achievement, while others are based on the performance of a group, and shared out proportionately.
They are usually given to employees for a variety of factors such as good timekeeping, increased productivity, reducing operational costs or wastage, or involving in innovative activities.
Depending on the nature of their work, some employees might be paid allowances, for example: Cost of transport; Cost of expenses incurred on entertaining existing or potential customers or clients; Cost of buying and maintaining clothing and accessories; Travel allowances etc
A number of factors influence the remuneration payable to employees. They can be categorized into: External and Internal factors. External Factors are those beyond the control of the organization and include: labour market; cost of living; labor unions; government legislations; the society; and the economy. Internal factors are those that the organization can control and include: ability to pay; employee related factors like Performance, Experience, Seniority and Potential; Job requirement; job evaluation and organization’s strategy.
- a) External Factors
Demand for and supply of labor influence wage and salary fixation. A low wage may be fixed when the supply of labour exceeds the demand for it. A higher wage will have to he paid when the demand exceeds supply, as in the case of skilled labour. Going rate of pay is another labour-related factor influencing employee remuneration. Going rates are those that are paid by different units of an industry in a locality and by comparable units of the same industry located elsewhere. This is the only way of fixing salary and wage in the initial stages of plant operations. Subsequently, a comparison of going rates would be highly useful in resolving wage-related disputes. Technological changes also influence the fixation of wage levels. Due to the advancements in the technology there may be shortage of skilled manpower in that area. So, the organisation will provide high wages for skilled personnel. For example, information technology (IT) is suffering from the shortage of IT experts and is therefore paying them higher wages.
Next in importance to labour market is the cost of living. This criterion matters during periods of rising prices, and is forgotten when prices are stable or falling. The justification for cost of living as a criterion for wage fixation is that the real wages of workers should not be allowed to be whittled down by price increases. Increase in the prices of commodities and decrease in value of the money is called inflation also affects wage rates. The causes of inflation are many which are raising costs; fall in the currency value in international markets, raising taxes by government and stagnation in the development of economy, etc.
The labour unions attempt to work and influence the wages primarily by regulating or affecting the supply of labour. The unions exert their influence for a higher wage and allowances through collective bargaining with the representatives of the management. If they fail in their attempt to raise the wage and other allowances through collective bargaining, they resort to strike and other methods where by the supply of labour is restricted. This exerts a kind of influence on the employees to concerned test partially the demands of the labour unions. The employers of strongly unionized employees therefore have no freedom in wage and salary fixation due to pressure of labour representatives in determining and revising pay scales.Employers in non-unionized factories enjoy the freedom to fix wages and salaries as they please. Because of large-scale unemployment, these employers hire workers at little or even less than legal minimum wages.
The laws passed and the labour policies formed by the Government have an important influence on wages and salaries paid by the employees. Wages and salaries can’t be fixed below the level prescribed by the government. The laws on minimum wages, hours of work, equal pay for equal work, payment of dearness and other allowances, payment of bonus, etc. have been enacted and enforced to bring about a measure of fairness in compensating the working class.
Society also affects remuneration in that remuneration paid to employees is reflected in the prices fixed by an organization for its goods and services. For this reason, the consuming public is interested in remuneration decisions. In addition, whether the wage is adequate and equitable depends not only upon the amount that is paid but also upon the perceptions and the views of the recipients of the wage. Even though the wage is above the going wage rate in the community if it is lower than that of fellow worker it may be deemed inferior, it will be regarded as inequitable in the eyes of the recipients of the wage. A man’s perception of the equity of his wage will undoubtedly affect his behaviour in joining and continuing in the organisation.
The last external factor that has its impact on wage and salary fixation is the state of the economy. While it is possible for some organisations to thrive in a recession, there is no question that the economy affects remuneration decisions. For example, a depressed economy will probably increase the labour supply. This, in turn, should serve to lower the going wage rate.
- b) Internal Factors
Ability to pay is one of the most significant internal factors influencing employee compensation. Generally, a firm, which is prosperous and successful, has the ability to pay more than the competitive rate. This way it can attract a superior caliber of personnel. Often the labour unions also demand an increase in compensation on the grounds that the organisation is prosperous and is able to pay more.
Numerous employees related factors also influence his or her compensation. These include performance, experience, seniority and potential. High performance is always rewarded with pay increase and as a result it motivates the workers to do better in future. Experience makes a person perfect by providing valuable insights and thus rewarded also. Employers presume that experienced candidate posses’ leadership skills which influence the other behavior and performance. Generally experience candidate perform the job without need of training which is time consuming and deals with matter of cost to company. Hence the experience candidates demand more pay than an inexperienced candidate.
In today’s environment seniority of employee also influences remuneration. Naturally senior employees demands for more salary than fresher because of their hold on related job and its functions. Today many companies are demanding senior employees for key positions by offering high pay and even sometimes offering retired employees handsome salary for key positions. Firms also pay their employees, especially young ones on the basis of their potential. Software companies are very good example for this, IT graduate just who completed his education having potential in the subject can gain a good job with high payment anywhere in the world.
Wages are also influenced by the requirements of a job such as physical and mental requirement. Jobs, which demand more skill, responsibility, efforts and are of hazardous in nature, will carry high wage tag with them. Job evaluation establishes a consistent and systematic relationship among base compensation rates for all jobs. In other words, it establishes the satisfactory wage differentials. The organization’s strategy regarding wages also influences employee compensation. For example, an organization, which wants rapid growth, will set higher wages than competitors. On the other hand, organizations that want smooth going and just maintain the current earning will pay average or below average.
The main objective of wage and salary administration is to establish and maintain an equitable wage and salary system. This is so because only a properly developed compensation system enables an employer to attract, obtain, retain and motivate people of required caliber and qualification in his/her organization. Other objectives include: To control pay-rolls; to satisfy people, reduce the incidence of turnover, grievances, and frictions; to motivate people to perform better; and to maintain a good public image. These objectives can be seen in more clearly from the point of view of the organization, its individual employees and collectively.
The compensation system should be duly aligned with the organisational need/ objectives and should also be flexible enough to modification in response to change. Accordingly, the objectives of system should enable the organization to: have the quantity and quality of staff it requires; Retain the employees in the organization; Motivate employees for good performance for further improvement in performance; Maintain equity and fairness in compensation for similar jobs; Achieve flexibility in the system to accommodate organisational changes as and when these take place; and Make the system cost-effective.
From individual employee’s point of view, the compensation system should have the following objectives: Ensure fair compensation; Provide compensation according to employee’s worth; avoid the chances of favoritism from creeping in when wage rates are assigned; and Enhances employee morale and motivation. Collective Objectives include: Compensation be ahead of inflation; Matching with market rates; Increase in compensation reflecting increase in the prosperity of the company; and Compensation system free from management discretion.
Principles of wage and salary administration
There are three general principles that govern wage and salary fixation namely External Equity; Internal Equity and Individual Worth. The principle of external equity acknowledges that factors/variables external to organization influence levels of compensation in an organization if these variables are not consideration while fixing wage and salary levels, the salaries may be insufficient to attract and retain employees in the organization.
The principles of external equity ensure that jobs are fairly compensated in comparison to similar jobs in the labour market. Internal equity acknowledges that organisations have various jobs which are relative in value term. In other words, the values of various jobs in an organisation are comparative. This relative worth of jobs is ascertained by job evaluation. Thus, an ideal compensation system should establish and maintain appropriate differentials based on relative values of jobs i.e., the compensation system should ensure that more difficult jobs should be paid more.
According to the principle of individual worth, an individual should be paid as per his/her performance. Thus, the compensation system, as far as possible, enables the individual to be rewarded according to his contribution to organization. This principle ensures that each individual’s pay is fair in comparison to others doing the same/similar jobs, i.e., ‘equal pay for equal work’.
Based on these three principles, Wage administration should be guided by the following basic considerations (principles):
- Wage policies should be carefully developed having in mind the interests of management, the employees, the consumers and the community.
- There should be a definite plan to ensure that differences in pay for jobs are based upon variations in job requirements such as skill, effort, responsibility or job or working conditions, mental and physical requirements.
- The general level of wages and salaries should be reasonably in line with that prevailing in the labour market.
- The plan should carefully distinguish between jobs and employees. A job carries a certain wage-rate and a person is assigned to fill it at that rate.
- Wage policies should be clearly expressed in writing to ensure uniformity and stability.
- Wage decisions should be checked against the carefully formulated policies.
- Management should see to it that employees know and understand the wage policies.
- Wage policies should be evaluated from time to time to make certain that they are adequate for current need.
- Departmental performance should be checked periodical against the standards set in advance.
- Job descriptions and performance ratings should be periodically checked to keep them up-to-date.
In Kenya, all payments made to employees for salary and wages are subject to the following statutory deductions:
Pay As You Earn (PAYE)
The Income Tax Act places on employers an obligation to deduct and remit monthly, income tax for Kenyan resident employees earning above Ksh 10,164/= per month. Employers are required also to tax benefits such as use of company vehicles. In addition, the employer is required to file Annual income tax returns for all employees whether subject to PAYE or not. The penalty for failing to comply is twenty five per cent of the amounts of tax involved or ten thousand shillings, whichever is greater. The employer is also subject to proceedings for the recovery of that tax plus interest thereon at two percent per month. Directors and managers are also liable to a fine of not less than ten thousand shillings but not more than two hundred thousand shillings or to imprisonment for a term not exceeding two years or to both.
National Social Security Fund (NSSF)
The National Social Security Fund Act (cap 258) establishes the NSSF as a compulsory contributory social security scheme whose objective is to receive contributions from employers and employees as well as make payments to employees when they leave the organization. The employer is expected to contribute fifty percent of the contribution while the employee contributes the other fifty percent. Standard NSSF (currently under review) contribution is Ksh 200/= deducted from employee’s salary, with employer contributing an equal amount. Failure to comply is a criminal offence subject to a penalty equal to five per cent of the amount payable and a fine of up to Ksh 15,000/=.
National Hospital Insurance Fund (NHIF)
The National Hospital Insurance Fund Act (cap 255) establishes the NHIF, which is an insurance fund, which: Caters for medical insurance and Pays for expenses incurred by a contributor, and his or her spouse and dependant children. All employers are required to deduct NHIF contribution from employee’s salary through check off system depending on their salary. Failure to comply is a criminal offence subject to a penalty equal to five times the amount of that contribution. The National Hospital Insurance Fund (NHIF) is the primary health insurance provider in Kenya with a mandate to enable all Kenyans to access quality and affordable health services. Membership is mandatory for all Kenyans above 18 years of age. The benefits package includes comprehensive medical coverage for all diseases meaning that NHIF members can be fully treated at cost to the NHIF without making additional payments.
Pay structures, also known as salary structures, set out the different levels of pay for jobs, or groups of jobs, by reference to: their relative internal value, as established by job evaluation; external relativities, via market rate surveys; and where appropriate, negotiated rates for the job.
The main characteristics of pay structures are they: indicate rates of pay for different jobs; provide scope for pay progression via performance, competence, contribution, skill or service; and contain pay ranges for jobs grouped into grades, individual jobs or job families. Pay structures are important in an organization because they: establish a logically-designed framework within which equitable, fair and consistent reward policies can be implemented; determine levels of pay for jobs and people; form a basis for the effective management of relativities; help monitor and control the implementation of pay practices; and communicate the pay opportunities available to employees. The most important types of pay structure, or salary structure are:
A narrow-graded structure consists of a sequence of job grades into which jobs of broadly equivalent value are placed. There may be ten or more grades and long-established structures, especially in the public sector. Grades may be defined by a bracket of job evaluation points so that any job for which the job evaluation score falls within the point’s bracket for a grade would be allocated to that grade. Alternatively, grades may be defined by grade definitions or profiles, which provide the information required to match jobs set out under job demand factor headings (analytical matching). This information can be supplemented by reference to benchmark jobs that have been already graded as part of the structure design exercise.
- b) Broad-graded structures
Broad-graded structures have six to nine grades. They may include ‘reference points’ or ‘market anchors’, which indicate the rate of pay for a fully competent performer in the grade and are aligned to market rates in accordance with ‘market stance’ policy. The grades and pay ranges are defined and managed in the same way as narrow-graded structures except that the increased width of the grades means that organizations sometimes introduce mechanisms to control progression in the grade so that staffs do not inevitably reach its upper pay limit. Broad-graded structures are used to overcome or at least alleviate the grade drift problem endemic in multi-graded structures. If the grades are defined, it is easier to differentiate them, and matching (comparing role profiles with grade definitions or profiles to find the best fit) becomes more accurate. But it may be difficult to control progression and this would increase the costs of operating them, although these costs could be offset by better control of grade drift.
- c) Broad-banded (pay ranges) structures
Broad-banded structures compress multi-graded structures into four or five ‘bands’. The process of developing broad-banded structures is called ‘broad-banding’. For example, all teaching jobs in universities are reduced to three broad grades namely, Professor, lecturer and tutorial fellow. Bands are unstructured and pay is managed much more flexibly than in a conventional graded structure (no limits may be defined for progression, which depended on competence and the assumption of wider role responsibilities) and much more attention is paid to market rates that governed what were in effect the spot rates for jobs within bands. Each grade or band has a pay range or scale with a minimum and a maximum. It also has a reference point. The reference point is the market rate i.e. the going rate for the job in the market and is equivalent to the mid-point or the maximum of the range depending on the pay progression method used.
- d) Job family structures
Job families consist of jobs in a function or occupation such as marketing, operations, finance, IT, HR, administration or support services, which are related through the activities carried out and the basic knowledge and skills required, but in which the levels of responsibility, knowledge, skill or competence levels required differ. In a job family structure, different job families are identified and the successive levels in each family are defined by reference to the key activities carried out and the knowledge and skills or competences required to perform them effectively. They therefore define career paths i.e. what people have to know and be able to do to advance their career within a family and to develop career opportunities in other families. Typically, job families have between six and eight levels as in broad-graded structures.
- e) Career family structures
Career family structures resemble job family structures in that there are a number of different ‘families’. The difference is that in career family, jobs in the corresponding levels across each of the career families are within the same size range and, if an analytical job evaluation scheme is used, this is defined by the same range of scores. Similarly, the pay ranges in corresponding levels across the career families are the same. In effect, a career structure is a single graded structure in which each grade has been divided into families. Career family structures focus on career mapping and career development as part of an integrated approach to human resource management. This is as important a feature of career families as the pay structure element, possibly even more so.
Pay spines consist of a series of incremental ‘pay points’ extending from the lowest to the highest paid jobs covered by the structure. They may be standardized from the top to the bottom of the spine, or the increments may vary at different levels, sometimes widening towards the top. Job grades are aligned to the pay spine and the pay ranges for the grades are defined by the relevant scale of pay points. The width of grades can vary and job families may have different pay spines. Progression through a grade is based on service, although an increasing number of organizations provide scope for accelerating increments or providing additional increments above the top of the scale for the grade to reward merit.
- g) Spot rates
Some organizations do not have a graded structure at all for any jobs or for certain jobs such as directors. Instead they use ‘spot rates’. They may also be called the ‘rate for the job’, more typically for manual jobs where there is a defined skilled or semiskilled market rate that may be negotiated with a trade union. Spot rates are quite often used in retail firms for customer service staff. Spot rates are sometimes attached to a person rather than a job. Unless they are negotiated, rates of pay and therefore relativities are governed by market rates and managerial judgement. Spot rates are not located within grades and there is no defined scope for progression while on the spot rate. There may, however, be scope for moving on to higher spot rates as skill, competence or contribution increases. Job holders may be eligible for incentive bonuses on top of the spot rate.
Concept of Job Evaluation
Job evaluation is the rating of jobs in an organisation. It is the process of establishing the value or worth of jobs in a job hierarchy. It attempts to compare the relative intrinsic value or worth of jobs within an organisation. Thus, job evaluation is a comparative process. According to the International Labour Office (ILO) “Job evaluation is an attempt to determine and compare the demands which the normal performance of a particular job makes on normal workers, without taking into account the individual abilities or performance of the workers concerned”. Wendell French defines job evaluation as “a process of determining the relative worth of the various jobs within the organisation, so that differential wages may be paid to jobs of different worth. The relative worth of a job means relative value produced. The variables which are assumed to be related to value produced are such factors as responsibility, skill, effort and working conditions”.
It is important to note that job evaluation is ranking of job, not job holder. Job holders are rated through performance appraisal. Job evaluation assumes normal performance of the job by a worker. Thus, the process ignores individual abilities of the job holder. It provides basis for developing job hierarchy and fixing a pay structure. It must be remembered that job evaluation is about relationships and not absolutes. That is why job evaluation cannot be the sole determining factor for deciding pay structures.
The starting point to job evaluation is job analysis. No job can be evaluated unless and until it is analyzed. Job analysis is a process of examining the various components of a job and the circumstances in which it is performed. Job description is a description of the duties, scope and responsibilities associated with the job while job specification refers to the minimum qualifications that a job incumbent must possess to perform the job successfully.
This is the most common non-analytical approach. Jobs as defined in job descriptions
are slotted into grades in a hierarchy by comparing the whole job with a grade definition and selecting the grade that provides the best fit. It is based on an initial definition of the number and characteristics of the grades into which jobs will be placed. The grade definitions may therefore refer to such job characteristics as skill, decision making and responsibility. Job descriptions may be used that include information on the presence of those characteristics but the characteristics are not assessed separately when comparing the description with the grade definition
Whole-job ranking is the most primitive form of job evaluation. The process involves comparing jobs with one another and arranging them in order of their perceived size or value to the organization. In a sense, all evaluation schemes are ranking exercises because they place jobs in a hierarchy. The difference between simple ranking and analytical methods such as point-factor rating is that job ranking does not attempt to quantify judgements. Instead, whole jobs are compared, they are not broken down into factors or elements although, explicitly or implicitly,
the comparison may be based on some generalized concept such as the level of responsibility.
Paired comparison ranking is a statistical technique that is used to provide a more sophisticated method of whole-job ranking. It is based on the assumption that it is always easier to compare one job with another than to consider a number of jobs and attempt to build up a rank order by multiple comparisons. The technique requires the comparison of each job as a whole separately with every other job. If a job is considered to be of a higher value than the one with which it is being compared it receives two points; if it is thought to be equally important, it receives one point; if it is regarded as less important, no points are awarded. The scores are added for each job and a rank order is obtained.
The advantage of paired comparison ranking over normal ranking is that it is easier to compare one job with another rather than having to make multi-comparisons. But it cannot overcome the fundamental objections to any form of whole-job ranking that no defined standards for judging relative worth are provided and it is not an acceptable method of assessing equal value. There is also a limit to the number of jobs that can be compared using this method. Paired comparisons can also be used analytically to compare jobs on a factor by factor basis.
Internal benchmarking is what people often do intuitively when they are deciding on the value of jobs, although it has never been dignified in the job evaluation texts as a formal method of job evaluation. It simply means comparing the job under review with any internal job that is believed to be properly graded and paid, and placing the job under consideration into the same grade as that job. The comparison is often made on a whole-job basis without analysing the jobs factor by factor.
Market pricing is the process of assessing rates of pay by reference to the market rates for comparable jobs and is essentially external benchmarking. Strictly speaking, market pricing is not a process of job evaluation in the sense that those described above only deal with internal relativities and are not directly concerned with market values, although in conjunction with a formal job evaluation scheme, establishing market rates is a necessary part of a programme for developing a pay structure. However, the term ‘market pricing’ in its extreme form is used to denote a process of directly pricing jobs on the basis of external relativities with no regard to internal relativities.
Point-factor schemes are the most commonly used type of analytical job evaluation. The methodology is to break down jobs into factors or key elements representing the demands made by the job on job holders, the competencies required and, in some cases, the impact the job makes. It is assumed that each of the factors will contribute to job size (i.e. the value of the job) and is an aspect of all the jobs to be evaluated but to different degrees. Using numerical scales, points are allocated to a job under each factor heading according to the extent to which it is present in the job. The separate factor scores are then added together to give a total score, which represents job size.
Like point-factor job evaluation, analytical matching is based on the analysis of a number of defined factors. Grade or level profiles are produced which define the characteristics of jobs in each grade in a grade structure in terms of those factors. Role profiles are produced for the jobs to be evaluated set out on the basis of analysis under the same factor headings as the grade profiles. The roles profiles are then ‘matched’ with the range of grade or level profiles to establish the best fit and thus grade the job.
Alternatively or additionally, role profiles for jobs to be evaluated can be matched analytically with generic role profiles for jobs that have already been graded. Analytical matching may be used to grade jobs following the initial evaluation of a sufficiently large and representative sample of ‘benchmark’ jobs, ie jobs that can be used as a basis for comparison with other jobs. This can happen in large organizations when it is believed that it is not necessary to go through the whole process of point factor evaluation for every job. This especially applies where ‘generic’ roles are concerned, ie roles that are performed by a number of job holders, which are essentially similar although there may be minor differences.
The original and now little used factor comparison method compared jobs factor by factor using a scale of money values to provide a direct indication of the rate for the job. The main form of factor comparison now in use is graduated factor comparison, which involves comparing jobs factor by factor with a graduated scale. The scale may have only three value levels – for example lower, equal, higher – and factor scores are not necessarily used.
It is a method often used by the independent experts engaged by Employment Tribunals to advice on an equal pay claim. Their job is simply to compare one job with one or two others, not to review internal relativities over the whole spectrum of jobs in order to produce a rank order. Independent experts may score their judgements of comparative levels, in which case graduated factor comparison resembles the point factor method, except that the number of levels and range of scores are limited, and the factors may not be weighted.
There are a number of job evaluation schemes offered by management consultants. By far the most popular is the Hay Guide Chart Profile Method, which is a factor comparison scheme. It uses three broad factors (know-how, problem solving and accountability) each of which is further divided into sub-factors, although these cannot be scored individually. Definitions of each level have been produced for each sub-factor to guide evaluators and ensure consistency of application.
· Thorough in analysis and impartial application in its application, the scheme should have
been carefully constructed to ensure that its analytical framework is sound and
appropriate in terms of all the jobs it has to cater for. It should also have been
tested and tried to check that it can be applied impartially to those jobs.
· Comprehensive – the scheme should be applicable to all the jobs in the organization
covering all categories of staff, and the factors should be common to all those jobs. There should therefore be a single scheme that can be used across different occupations or job families and to enable benchmarking to take place as required.
Procedure of Job Evaluation
Though the common objective of job evaluation is to establish the relative worth of jobs in a job hierarchy, there is no common procedure of job evaluation followed by all organisations. As such, the procedure of job evaluation varies from organisation to organisation. However, a job e valuation procedure may consist of the eight stages as outlined below:
- Preliminary Stage:
This is the stage setting for job evaluation programme. In this stage, the required information’s obtained about present arrangements, decisions are made on the need for a new programme or revision of an existing one and a clear cut choice is made of the type of programme is to be used by the organisation.
- Planning Stage:
In this stage, the evaluation programme is drawn up and the job holders to be affected are informed. Due arrangements are made for setting up joint working parties and the sample of jobs to be evaluated is selected.
iii. Analysis Stage:
This is the stage when required information about the sample of jobs is collected. This information serves as a basis for the internal and external evaluation of jobs.
- Internal Evaluation Stage:
Next to analysis stage is internal evaluation stage. In the internal evaluation stage, the sample of bench-mark jobs are ranked by means of the chosen evaluation scheme as drawn up at the planning stage. Jobs are then graded on the basis of data pending the collection of market rate data. Relative worth of jobs is ascertained by comparing grades between the jobs.
- External Evaluation Stage:
In this stage, information is collected on market rates at that time.
- Design Stage:
Having ascertained grades for jobs, salary structure is designed in this stage.
vii. Grading Stage:
This is the stage in which different jobs are slotted into the salary structure as designed in the preceding stage 6.
viii. Developing and Maintaining Stage:
This is the final stage in a job evaluation programme. In this stage, procedures for maintaining the salary structure are developed with a view to accommodate inflationary pressures in the salary levels, grading new jobs into the structure and regarding the existing jobs in the light of changes in their responsibilities and market rates.
Other procedures may have less steps, for example the Indian Institute of Personnel Management, suggests five steps namely: Analyze and Prepare Job Description ; Select and Prepare a Job Evaluation Programme/Plan; Classify Jobs; Install the Programme; and Maintain the Programme
Advantages of Job Evaluation
Job evaluation offers the following advantages:
- Job evaluation being a logical process and objective technique helps in developing an equitable and consistent wage and salary structure based on the relative worth of jobs in an organisation.
- By eliminating wage differentials within the organisation, job evaluation helps in minimizing conflict between labour unions and management and, in turn, helps in promoting harmonious relations between them.
- Job evaluation simplifies wage administration by establishing uniformity in wage rates.
- It provides a logical basis for wage negotiations and collective bargaining.
- In the case of new jobs, job evaluation facilitates spotting them into the existing wage and salary structure.
- In the modem times of mechanization, performance depends much on the machines than on the worker himself/herself. In such cases, job evaluation provides the realistic basis for determination of wages.
- The information generated by job evaluation may also be used for improvement of selection, transfer and promotion procedures on the basis of comparative job requirements.
- Job evaluation rates the job, not the workers. Organisations have large number of jobs with specializations. It is job evaluation here again which helps in rating all these jobs and determining the wages and salary and also removing ambiguity in them.
Disadvantages of job evaluation:
In spite of many advantages, job evaluation suffers from the following drawbacks/limitations:
- Job evaluation is susceptible because of human error and subjective judgment. While there is no standard list of factors to be considered for job evaluation, there are some factors that cannot be measured accurately.
- There is a variation between wages fixed through job evaluation and market forces. Say Kerr and Fisher, the jobs which tend to rate high as compared with the market are those of junior, nurse and typist, while craft rates are relatively low. Weaker groups are better served by an evaluation plan than by the market, the former places the emphasis not on force but on equity”.
- When job evaluation is applied for the first time in an organisation, it creates doubts in the minds of workers whose jobs are evaluated and trade unions that it may do away with collective bargaining for fixing wage rates.
- Job evaluation methods being lacking in scientific basis are often looked upon as suspicious about the efficacy of methods of job evaluation.
- Job evaluation is a time-consuming process requiring specialised technical personnel to undertake it and, thus, is likely to be costly also.
- Job evaluation is not found suitable for establishing the relative worth of the managerial jobs which are skill-oriented. But, these skills cannot be measured in quantitative terms.
- Given the changes in job contents and work conditions, frequent evaluation of jobs is essential. This is not always so easy and simple.
- Job evaluation leads to frequent and substantial changes in wage and salary structures. This, in turn, creates financial burden on organisation.
1.Armstrong,M.,(2006), A Handbook of Human Resource Practice (10th Ed),Koganpage.London
- Dessler& Cole (2011), Human Resources Management in Canada (11th Ed) Pearson Canada Inc.
3.Joshi, M.,(2013),Human Resource Management (1st Ed), Manmohan. Bookboon.com
Trainee should be able to;
- -Explain the concept of staff welfare and benefits
- -Explain elements of staff welfare and benefits policy
- -Describe procedure for administration of staff insurance schemes
- -Describe the procedure for administration of retirement benefits schemes
Employee welfare measures are also known as fringe benefits and services. The International Labour Organization (ILO) defines labour welfare as a term which means services, facilities and amenities as may be established in or outside the vicinity of undertakings to enable the persons employed in them to perform their work in healthy, congenial surroundings and to provide them with amenities conducive to good health and high morale. Employee Welfare can also be defined the efforts to make life worth living for workmen and is provided over and above the wages.. According to Todd “employee welfare means anything done for the comfort and improvement, intellectual or social, of the employees over and above the wages paid which is not a necessity of the industry.
Welfare services may be provided for matters concerning employees which are not immediately connected with their jobs although they may be connected generally with their place of work. These matters will include individual services relating to employees’ welfare such as private help with counselling on personal problems, assistance with problems of health or sickness and special services for retired employees. Group services may include the provision of social and sporting activities and restaurants. Child-care facilities may be provided for individual employees but on a collective basis.
Objectives of Employee welfare
Objectives of Employee Welfare Employee welfare is in the interest of the employee, the employer and the society as a whole. These objectives of employee welfare are: To provide better life and health to the workers; To relieve workers from industrial fatigue and to improve intellectual, cultural and material conditions of living of the workers; It reduces labor turnover and absenteeism; Welfare measures help to improve the goodwill and public image of the enterprise; It helps to improve industrial relations and industrial peace; It helps to improve employee productivity; and It improves the loyalty and morale of the employees
Theories of Employee Welfare
There are several theories relating to welfare. These include: The Police Theory which is based on the contention that a minimum standard of welfare is necessary for labourers. Here the assumption is that without policing, that is, without compulsion, employers do not provide even the minimum facilities for workers; The Religious Theory based on the concept that man is essentially a religious animal. The Philanthropic Theory based on man’s love for mankind; Trusteeship Theory also called the Paternalistic Theory of Labour Welfare which is based on the fact that the industrialist or employer holds the total industrial estate, properties, and profits accruing from them in a trust.
The Placating Theory argues that timely and periodical acts of labour welfare can appease the workers. They are some kind of pacifiers which come with a friendly gesture; The Public Relation Theory which provides the basis for an atmosphere of goodwill between labour and management, and also between management and the public, labour welfare programmes under this theory, work as a sort of an advertisement and help an organization to project its good image and build up and promote good and healthy public relations; and The Functional Theory also called the Efficiency Theory which is based on the fact that welfare work is used as a means to secure, preserve and develop the efficiency and productivity of labour, It is obvious that if an employer takes good care of his workers, they will tend to become more efficient and will thereby step up production.
Types of Employee Welfare Schemes
Welfare services fall into two categories: individual or personal services in connection with sickness, bereavement, domestic problems, employment problems, and elderly and retired employees; group services, which consist of sports and social activities, clubs for retired staff and benevolent organizations. Whether individual or group, employee services will either be intramural or extramural; or statutory or voluntary. Intramural services are provided within the organization like Canteen, Rest rooms, Uniform etc. Extramural are provided outside the organization like Housing, Education, Child welfare, Leave travel facilities, Interest free loans etc. Statutory welfare services are those provided for in various pieces of labor legislation. While Voluntary welfare services includes those activities which are undertaken by employers for their voluntary work.
The statutory welfare schemes include provision of: safe Drinking Water at all the working places; Facilities for sitting; First aid appliances; adequate Latrines and Urinals: proper and sufficient Lighting; adequate Washing places; adequate Changing rooms; Rest rooms; Harassment Policy as well as Maternity & paternity Leave.
Non statutory welfare schemes include: Personal Health Care (Regular medical check-ups) provided by some companies; Flexi-time that provide employees an opportunity to work with flexible working schedules; Employee Assistance Programs like external counseling service so that employees or members of their immediate family can get counseling on various matters; Medical Insurance Scheme; Employee Referral Scheme to encourage employees to refer friends and relatives for employment in the organization and Canteen facilities.
The basic elements of labor welfare measures are: Labor welfare includes various facilities, services and amenities provided to workers for improving their health, efficiency, economic betterment and social status; Welfare measures are an addition to regular wages and other economic benefits available to workers due to legal provisions and collective bargaining; Labor welfare schemes are flexible and ever changing. New welfare measures are added to the existing ones from time to time; Welfare measures may be introduced by the employers, government, employees (trade unions) or by any social or charitable agency. The purpose of labor welfare is to bring about the development of the whole personality of the workers to make a better workforce, improve the lot of the working class and thereby make a worker a good employee and a happy citizen; and Employee welfare is an essential part of social welfare. It involves adjustment of an employee’s work life and family life to the community or social life.
The most important characteristics of employee benefits are: They are not directly related to merit but they often improve with status and length of service; they do not necessarily benefit all employees e.g. a person who has good health will not benefit from medical schemes; they are not universal. Large company’s usually have a wide range of fringe benefits while small company’s tend to have very few or none at all; Once established they are difficult to abolish and become accepted by the employees as a normal condition of service rather than a benefit; They do not necessarily attract candidates to an organisation but it is possible they discourage employees from leaving; and They probably increase job satisfaction but will certainly bring dissatisfaction if they are inconsistently and carelessly administered.
Importance of Welfare Schemes
The very logic behind providing welfare schemes is to create efficient, healthy, loyal and satisfied labor force for the organization. The purpose of providing such facilities is to make their work life better and also to raise their standard of living. The important benefits of welfare measures can be summarized as follows: to provide better physical and mental health to workers and thus promote a healthy work environment; Facilities like housing schemes, medical benefits, and education and recreation facilities for workers’ families help in raising their standards of living which makes workers to pay more attention towards work and thus increases their productivity; Workers take active interest in their jobs and work with a feeling of involvement and participation resulting to a stable labour force. In addition, employee welfare measures increase the productivity of organization and promote healthy industrial relations thereby maintaining industrial peace and to a greater extent reduce social evils prevalent among the labors such as substance abuse, etc.
The objectives of the employee benefits policies and practices of an organization are to: provide an attractive and competitive total remuneration package which attracts and retains high-quality employees; provide for the personal needs of employees; increase the commitment of employees to the organization; and provide for some people a tax-efficient method of remuneration. Normal benefits provided by a business seldom make a direct and immediate impact on performance. They can, however, create more favourable attitudes towards the business which can improve commitment and organizational performance in the longer term.
Benefits are any perks offered to employees in addition to salary. The most common benefits are medical, disability, and life insurance; retirement benefits; paid time off; annual holidays; and other fringe benefits. Benefits can be quite valuable for example medical insurance can costly hence it’s important to consider benefits as part of your total compensation. The main types of employee benefits are:
These are generally regarded as the most important employee benefit. Retirement benefits are funds set aside to provide people with an income or pension when they end their careers. Some are statutory while others are voluntary. Retirement plans fit into two general categories: defined benefit plans and defined contribution plans. A defined benefit plan guarantees a certain payout at retirement, according to a fixed formula which usually depends on the member’s salary and the number of years’ membership in the plan. A defined contribution plan will provide a payout at retirement that is dependent upon the amount of money contributed and the performance of the investment vehicles utilized. Retirement benefits schemes are defined as any scheme or arrangement under which persons are entitled to benefits in the form of payments, determined by age, length of service, amount of earnings or otherwise and payable primarily upon retirement, or upon death, termination of service.
- b) Personal security
These are benefits which enhance the individual’s personal and family security with regard to illness, health, accident or life insurance. Medical insurance covers the costs of physician and surgeon fees, hospital rooms, and prescription drugs. Coverage can sometimes include the employee’s family (dependents).Employers usually pay all or part of the premium for employee medical insurance. Disability insurance covers all or part of the income that is lost when a worker is unable to perform their job because of illness or injury. They cover two main types of disability (disablement): temporary disablement (incapacity) and permanent incapacity that provides benefits to an employee when a long-term or permanent illness, injury, or disability leaves the individual unable to perform his or her job. Life insurance protects employee’s family in case of death. Benefits are paid all at once to the beneficiaries of the policy usually a spouse or children. Company-sponsored life insurance plans are standard for almost all full-time workers in medium and large firms across many countries.
- c) Financial assistance
These may include provision of company loans, house purchase schemes, relocation assistance and discounts on company goods or services.
- d) Personal needs
These are entitlements which recognize the interface between work and domestic needs or responsibilities, e.g. holidays and other forms of leave, child care, career breaks, retirement counseling, financial counseling and personal counseling in times of crisis, fitness and recreational facilities. Paid time off (also referred to as PTO) is earned by employees while they work. The three common types of paid time off are holidays, sick leave, and vacation leave.
- e) Other benefits
Employees are literally the life of the business. Losing employees as a result of death, disability or certain illness can significantly impact business operations. Thus, organizations purchase employee insurance as part of their risk management strategy. Others offer insurance as part of their benefits package. In some countries, employee insurance is mandatory. Although insurance is considered an expense, it is necessary to attract good employees and avoid unforeseen expenses which could ultimately be higher than the premiums you paid for. There are basically three types of insurance employers can provide their employees: life insurance, disability insurance and health insurance.
Life insurance provides life protection for employees. This insurance plan will pay a lump sum amount (sum insured) when any of the following events happen to the insured employee during the period of the insurance: death due to any case; total and permanent disability; or terminal illness. Life insurance can be purchased on the group with a set limit for the group or set limits by job or class. The coverage is term, is reasonably priced and is available while the individual is employed by the company.
Health insurance is an important part of an employee benefit package. Sickness can be emotionally draining for workers, especially if they do not have enough funds to pay for medical bills. Even after he recovers, a worker may worry about how to settle hospital bills. Anxiety may just get them sick again. Health insurance avoids those costly employee sick days. In Kenya, health insurance under the National Hospital insurance Fund (NHIF) is mandatory.
Health insurance is the most common of all employee insurance packages that employers create for their staff. Human resource managers need to understand the fact that motivated employees are naturally more productive than their less motivated counterparts. Accordingly, employee benefits such as health insurance are critical to the success of any organization, particularly because such benefits make the staff members to feel that their efforts and contributions in the company are being recognized and rewarded. This comes with various advantages for both the employees and the company offering the said reimbursements.
If an organization has employees that travel a lot, then consider getting a travel insurance plan. Business owners should make sure that they and their employees are covered by a comprehensive travel insurance policy that will cover medical and evacuation expenses. Such costs could cripple an employee’s finances and he or she may look to the employer to cover these medical costs, especially if they are on company business. If employees are traveling more than one time per year, a multi-trip travel insurance plan may be the most cost effective travel insurance plan.
Because of rising insurance premiums, some companies have asked employees to co-share the cost with employees. There are many insurance companies with many different types of plans and options, hence it is important to research on the best insurance company for your organization and employee’s needs.
Benefits of Employee Insurance
There is no doubt that health insurance, along with other forms of employee incentives, plays a key role in motivating employees, which in turn translates to more productivity. When employees feel that their contributions to the growth of their employer are being appreciated, they derive job satisfaction. This is critical to their performance and increases their probability of continuing to offer their services to the employers, without harboring thoughts of leaving for greener pastures. Besides, employee insurance means that workers have access to affordable and readily available, high quality preventive healthcare. This implies that employees wellness is maintained, and that they are healthy hence able to attend to their roles in the company. Cases of absenteeism due to health-related issues are thus reduced.
A company which invests in insurance among other employee benefits positions itself to attract quality employees, resulting in an enviable workforce that translates to increased productivity and profitability. Quality employees are also associated to efficiency within any organization.
It is always a good idea to afford employees a set of benefits which will motivate them. This is because the workers feel that they are appreciated as a part of the organization. This results in motivation on the part of employees. This way, the staff members invest their efforts towards the success of their organization.
Employee retention is another benefit associated with employee insurance. When workers are afforded a reliable health insurance among other benefits, they develop a positive attitude towards their employers and are motivated to continue offering their services. This eliminates chances of employees leaving the firm for other employers who could be having more attractive employee benefits. This is especially essential since it helps the company to avoid brain-drain and retain its talented and experienced workers. Another benefit that a company can derive from insuring its workers is tax advantages. In some states, companies can offer their employees health insurance benefits and profit from tax cuts, which reduce their out-of-pocket costs per se.
A pension is a fixed sum to be paid regularly to a person, typically following retirement from service. There are many different types of pensions, including defined benefit plans, defined contribution plans, as well as several others. Pensions should not be confused with severance pay; the former is paid in regular installments, while the latter is paid in one lump sum.
The terms retirement plan and superannuation refer to a pension granted upon retirement of the individual. Retirement plans may be set up by employers, insurance companies, the government or other institutions.
A pension created by an employer for the benefit of an employee is commonly referred to as an occupational or employer pension. Occupational pensions are a form of deferred compensation, usually advantageous to employee and employer for tax reasons. Many pensions also contain an additional insurance aspect, since they often will pay benefits to survivors or disabled beneficiaries
Occupational Pension Schemes
An occupational pension scheme is an arrangement under which an employer provides pensions for employees when they retire, income for the families of members who die, and deferred benefits to members who leave. A ‘group scheme’ is the typical scheme which provides for a number of employees. The reasons for having a worthwhile pension scheme are that it: demonstrates that the organization is a good employer; attracts and retains high-quality people by helping to maintain competitive levels of total remuneration; and indicates that the organization is concerned about the long-term interests of its employees.
Occupational pension schemes are administered by trusts which are supposed to be outside the employer’s control. The trustees are responsible for the pension fund from which pension benefits are paid. The pension fund is fed by contributions from employers and usually (but not always) employees. The size of the fund and its capacity to meet future commitments depend both on the size of contributions and on the income the trustees can generate. They do this by investing fund money with the help of advisers in stocks, shares and other securities, or through an insurance company. In the latter case, insurance companies offer either a managed fund (a pool of money managed by the insurance company for a number of clients) or a segregated fund which is managed for a single client.
An occupational scheme in which employees aw well as employers make contributions is called a contributory scheme. Pensionable earnings are total earnings from which may be excluded such payments as overtime or special bonuses. The level of contributions varies considerably, although in a typical contributory scheme, employees would be likely to contribute about five per cent of their earnings and employers would contribute approximately twice that amount. A scheme that has been approved by the ministry of finance is called an approved scheme and Members of such a scheme and their employers obtain full tax relief on their contributions. The company also recovers tax on its contributions and the income tax deductible
Pension Industry in Kenya
The Pensions Act, Cap 189 (Revised 2009), provides for the granting and regulating of pensions, gratuities and other allowances in respect of the public service of officers under the Government of Kenya. In addition there are private retirement benefits schemes governed by the Retirement Benefits Act, 1997(Revised 2010) through which private employers and their employees as members make contributions towards retirement. A Retirement Benefits Authority was established for the regulation, supervision and promotion of retirement benefits schemes, which have been largely taken up by formal employers and workers.
In case of formal workers, the rules provide that on the death of a member the lump-sum benefits payable from the scheme shall be paid to the nominated beneficiary, and if the deceased member has not named a beneficiary then the trustees shall exercise their discretion in the distribution of the benefits to the dependants of the deceased member.
The retirement benefits industry in Kenya is composed of the civil service scheme, the National Social Security Fund (NSSF), occupational schemes and the individual pension schemes. The coverage of the pension schemes is currently estimated at less than 15% of the total labour force. The NSSF has the highest proportion of membership at 67% with estimated membership of 800,000 followed by the civil service pension scheme at 22%. The occupational retirement benefits schemes and individual retirement benefits schemes, which are currently about 1350, account for about 11% of total scheme membership in the country.
Prior to 1997, the retirement benefits industry was unregulated with the only regulations governing the sector being those in the Income Tax Act and Trust Laws which were very broad. Some of the problems that faced the pension industry which led to the enactment of the Retirement Benefits Act in 1997 include: Mismanagement of schemes’ funds; Schemes were not adequately funded; Arbitrary investment of funds without independent professional advice; Records and books were not well kept; lack of protection of the interests of members and dominance of sponsors (employers) in scheme affairs and many schemes were run through insurance companies that tended to operate in a non-transparent manner. Hence many investment decisions were made in the best interest of vested parties and not in the interest of members or of the economy as a whole.
Employee Provident Fund (EPF) is an employee benefit scheme generally prescribed by a statutory body of the government which provides facilities to the employees of an organization with regard to medical assistance, retirement, education of children, insurance support and housing. Provident fund means a scheme for the payment of lump sums and other similar benefits to employees when they leave employment or to the dependants of employees on the death of those employees, while in a pension fund a proportion of the retirement fund is paid as lump sum at retirement and the remainder paid out as periodical payments.
Provident fund vary by country, but in general their purpose is to provide financial support for those who meet the plan’s defined retirement age. Governments set the age limit at which withdrawals are allowed to begin (penalty-free), though some pre-retirement withdrawals may be allowed under special circumstances, such as for medical emergencies.
If a worker dies before receiving benefits, his or her surviving spouse and children may be able to receive survivors’ benefits from the provident fund. Some countries also allow individuals to receive an early payout if they emigrate to another country. Those who work past the minimum retirement age may face restricted withdrawals until full retirement.
Retirement Benefit Scheme can be classified into: Defined Contribution and Defined Benefit schemes. Defined contribution Schemes are arrangements where the retirement benefit is not known or defined in advance. Rather the level of retirement income receivable on pay-out date is related to the: level of contributions made over the accumulation period; the charges deducted by the product provider; the investment returns of the fund during the accumulation phase; and the annuity rates at retirement. Member’ and employer’ contributions are fixed either as a percentage of pensionable earnings or as a shilling amount, and a member’s retirement benefits has a value equal to those contributions, net of expenses accumulated in an individual account with investment return and any surpluses or deficits as determined by the trustees of the scheme.
A defined benefit (DB) Scheme is an arrangement where the benefits, which are ordinarily determined by the scheme rules, are defined in advance. Benefits are often related to the final salary and/or years of service of the employee. The main risk for beneficiaries is the solvency of the employer so as to be in a position to meet the promised benefits. Hybrid Schemes seek to combine features of DB and DC schemes in some way and can take a variety of forms. For purposes of categorization, hybrid schemes are DB schemes because of the promises they make to members.
Individual Retirement Benefits Schemes in Kenya
IRBS also known as Personal Pensions Plans (PPPs) are recognized independent legal entities established for the sole purpose of operating a retirement savings fund. Regardless of the sponsor, the assets of the IRBS are kept separate from the assets of the sponsors usually under the name of the scheme. The scheme has to be registered with the Retirements Benefits Authority and must constitute a Trust and Deed as the legal structure upon which the scheme is governed. The provisions of the Trust Deed and Rules must necessarily comply with the Retirement Benefits Act provisions. The scheme must appoint trustees who are fully liable and accountable to all matters regarding the scheme.
IRBS are open to the general public regardless of employment or income affiliations and have a wide geographical branch network for easy accessibility. IRBS are however most convenient for all those willing to save for their retirement and have limited access to any other scheme. These include, workers in companies where the employer fail to set up an occupational scheme; very small companies where setting up an occupational scheme is not viable; self employed professionals including lawyers, architects, doctors and accountants; business people and the informal sector; and, anyone who needs to make additional savings for their retirement. Employers who are unable to start their own schemes are encouraged to enjoin their employees as a group to own preferred scheme and also make contributions on behalf of their employees. The employers will be required to periodically remit the contributions collectively for all members to the plan.
In 2003, the government harmonized the IRBS terms with those of occupational schemes. Upon registration with the Kenya Revenue Authority (KRA), members enjoy a tax exempted lump-sum benefits payout on exit of Kshs 48,000 per year of savings for a maximum of ten years; tax deductible contributions up to the given limit of Kshs 17,500 at that time, which has since then gone up to Kshs 20,000, and investment returns tax exempted.
Factors That Influence Participation in Personal Pension Plans
A number of factors come into play in influencing participation by individuals in Pension schemes. These include: Age, educational background, occupation, gender, number of children, marital status, homeownership, individual expectations of future financial position. In addition, there are other factors such as pension education, alternative investments, government policies and existence of employer based occupational schemes, some of which are discussed below.
The young cohorts purchase personal pensions to take advantage of compound interest effect which increases the financial value of contributions. The necessity to keep old age savings for financial security in retirement becomes more vivid as individuals grow old. Individuals and households with a higher propensity to save and keep other forms of saving have a higher propensity to make additional voluntary contributions for retirement. Such individuals generally start saving at an earlier age enabling them accumulate more assets. Individuals with no pension savings are most likely not to have other forms of savings.
Individuals with higher incomes and financial assets besides having the capacity to save place a higher discount factor for the future and would therefore save for retirement. Low income earners have a low capacity to save and low discount factor for the future. They would place higher present value for consumption. Married households are more likely to save than singles as a way of building up assets. Saving practices rise with educational attainment. The more educated the individual the more appreciative of role of saving for retirement. Education attainment is specific to saving for retirement because the more educated individuals the more appreciative and the more their understanding on importance of keeping savings for retirement.
Education campaign is a communication that seeks to influence behavior. The benefits of saving for retirement as a wise choice, if well articulated, have positive outcomes in retirement savings. A few hours of general pension education increases the tendency to save a lot, although the effects diminish or reverse with time. Personal pensions are affordable alternative options for employers to enjoin their employees to the retirement benefits schemes, when employers are unable to set up occupational schemes for their employees. Employees caught up in such a predicaments can then save for their retirement benefits. On the other hand, employers provided pension schemes act as disincentive to individuals to make voluntary contributions to pensions.
Government policies influence participation in personal pensions. Favourable policies attract greater participation and unfavourable policies tend to discourage participation. When returns on pensions are lower than alternative investments, members are motivated to evade contributions or altogether withdraw from membership. A low rate of return on a defined contribution scheme in comparison to what the worker could have earned acts as a hidden tax that workers seek to evade. Fixed expenses charged against individual accounts, or high administration expenses are factors that cause the low rate of return to arise. Because of the better rate of return elsewhere individuals opt to save in alternative ways.
Advantages of Pension Plans
i)Portability of Benefits
Pensions are defined contribution based which favours easy portability of benefits whenever members change jobs without loss in benefit value.
- ii) Tax efficient way of saving
Pensions offer a tax efficient way of saving for retirement. Because pension savings are long term in nature, governments provide fiscal incentives to attract savers. Commonly, governments directly exempt savings in the pensions and investment incomes from taxation. In some instances for every given amount of savings with the pension the Government tops up or matches by a given percentage of the contribution.
iii) Contributions to National Savings
Debate on whether promotion of voluntary savings to pensions enhances new savings or crowd out personal savings has been ongoing. It is deduced that because pension savings enjoy favourable tax treatment, personal pensions increase the net return to saving. However, income-substitution determines the net effect on savings. Whereas the favourable tax application for pension savings acts as an attraction for individuals to save more pension savings, to the extent of substituting other savings,
Disadvantages of Personal Pension Plans
When the costs of maintaining a persona pension account is fixed, not varying by the amount in the account, then they end up penalizing low income workers in terms of charges for expenses. Low income workers with small accounts generally bear higher charges relative to their account balances than high income workers. This causes the net rate of return on pension’s accounts to be higher for large accounts. This is made worse when charges are waived for large account balances or the fee diminishes as a percentage of the account balance as the account balance grows.
Where charges on pensions are on a continuous basis, the low income workers are again disadvantaged. Lower income workers are more likely to be in the labor force intermittently and they are more likely to be at times unemployed. Charging this group of individuals for periods when they genuinely are not financially capable of making their regular contributions is by itself retrogressive.
In cases where members of members move in and out of the formal sector, eventually returning to rural areas, because of lack of knowledge as to how to claim benefits or because of difficulty in claiming benefits, many never claim benefits to which they are eligible.
Choosing a Personal Pension Plan
Since Individual Retirement Benefits Schemes (personal pension plans) are private in nature and many in existence, it is necessary for individuals to shop around for the one that best suits their needs. When choosing a personal pension plan, individuals compare schemes by considering the following:
- personal circumstances and plans for the future
- the reputation of the company directors and shareholders,
- technical capacity of the provider
- Customer care and Services e.g. do they offer personalised services
- record keeping
- Past results taking note that past performance does not guarantee future success.
- what were the causes of failure if any administrative costs
- penalties and charges imposed when one is not able to make regular contributions due to, for example, loss of employment, illness or career break
- contribution payments – whether regular amount of contributions are to be paid for a given number of years or one has the flexibility to change the amount and whether it is at a cost
- whether one can participate in selecting investments of the funds
- extras such as educational programs, annual general meeting
- Outline the characteristics of employee benefits
- Discuss the procedure for administration of employee benefits scheme
- Describe the procedure for administration of pension schemes
- Explain the benefits of employee welfare services to an organization
1.Armstrong,M.,(2006), A Handbook of Human Resource Practice (10th Ed),Koganpage.London
- Dessler& Cole (2011), Human Resources Management in Canada (11th Ed) Pearson Canada Inc.
3.Joshi, M.,(2013),Human Resource Management (1st Ed), Manmohan. Bookboon.com
Trainee should be able to;
- -Explain the importance of health and safety programmes in an organization
- -Discuss health and safety hazards in an organization
- -Explain the health and safety measures in an organization
The achievement of the highest standards of health and safety in the workplace is important because the elimination, or at least minimization, of health and safety hazards and risks is the moral as well as the legal responsibility of employers. Close and continuous attention to health and safety is important because ill-health and injuries inflicted by the system of work or working conditions cause suffering and loss to individuals and their dependants. In addition, accidents and absences through ill-health or injuries result in losses and damage for the organization. Research has established that the tangible benefits from better health and safety management include higher productivity, lower absence, avoiding the cost of accidents and litigation, meeting client demands, and improved staff morale and employee relations. Some organizations have managed to overcome the common perception that health and safety is a compliance or staff welfare issue, and used initiatives in this area to add value to the business.
Managing health and safety at work is a involves: developing health and safety policies; conducting risk assessments which identify hazards and assess the risks attached to them; carrying out health and safety audits and inspections; implementing occupational health programmes; managing stress; preventing accidents; measuring health and safety performance; communicating the need for good health and safety practices; training in good health and safety practices; and organizing health and safety.
HR Department’s Responsibilities
Although line managers are primarily responsible for maintaining a safe and healthy working environment, HR department staff provides expertise to assist them to deal adequately with these important matters. In addition, HR manager is usually responsible for coordinating and monitoring specific health and safety programmes.
Most countries enact laws governing health, safety and basic welfare of employees in the workplace, and it is essential for the HR manager to ensure that management and employees are fully aware of their moral and legal obligations and responsibilities. These responsibilities
include a number of preventive measures which can be taken under the coordination of HR department.
The main responsibilities of HR department include: prevention of accidents; creating safety consciousness; making people safe; Making the job safe; Making the work environment safe; Making the work environment safe; provision of Adequate training in the correct use of machinery and equipment is essential as well as establishing Safety committees
Health and Safety Policies
Written health and safety policies are important to show that top management is concerned about the protection of the organization’s employees from hazards at work and to indicate how this protection will be provided. They are, therefore, first, a declaration of intent, second, a definition of the means by which that intent will be realized, and third, a statement of the guidelines that should be followed by everyone concerned including all employees in implementing the policy. The policy statement should consist of three parts: the general policy statement; the description of the organization for health and safety; and details of arrangements for implementing the policy.
The general policy statement should be a declaration of the intention of the employer to safeguard the health and safety of employees and should emphasize four fundamental points: that the safety of employees and the public is of paramount importance; that safety takes precedence over expediency; that every effort will be made to involve all managers, team leaders and employees in the development and implementation of health and safety procedures; and that health and safety legislation will be complied with in the spirit as well as the letter of the law.
The Organization section of the policy statement should describe the health and safety organization of the company through which standards are set and achieved by people at all levels in the organization.
This statement should state the responsibility of top management for the health and safety performance of the organization. It should then indicate how key management personnel are held accountable for performance in their areas. The role of safety representatives and safety committees should be defined, and the duties of specialists such as the safety adviser and the medical officer should be summarized.
A Hazard is a potential source of harm or adverse health effect on a person or persons’. ‘Risk is the likelihood that a person may be harmed or suffers adverse health effects if exposed to a hazard.’ The terms Hazard and Risk are often used interchangeably but this simple example explains the difference between the two. If there was a spill of water in a room then that water would present a slipping hazard to persons passing through it. If access to that area was prevented by a physical barrier then the hazard would remain though the risk would be minimised.
The level of risk is often categorized upon the potential harm or adverse health effect that the hazard may cause the number of times persons are exposed and the number of persons exposed. For example exposure to airborne asbestos fibers will always be classified as high because a single exposure may cause potentially fatal lung disease, whereas the risk associated with using a display screen for a short period could be considered to be very low as the potential harm or adverse health effects are minimal.
Hazards should be ranked according to their potential severity as a basis for producing one side of the risk equation. A simple three-point scale can be used such as low, moderate and high. A more complex severity rating scale has been proposed by Holt and Andrews (1993), as follows:
Catastrophic (imminent danger exists, hazard capable of causing death and illness on a wide scale); Critical (hazard that can result in serious illness, severe injury, property and equipment
Damage); Marginal (hazard that can cause illness, injury, or equipment damage, but the results would not be expected to be serious); and Negligible (hazard that will not result in serious injury or illness; remote possibility of damage beyond minor first-aid case).
Risk assessments are concerned with looking for hazards and estimating the level of risk associated with them. The purpose of risk assessments is, of course, to initiate preventive action because they enable control measures to be devised on the basis of an understanding of the relative importance of risks. There are two types of risk assessment. The first is quantitative risk assessment, which produces an objective probability estimate based upon risk information that is immediately applicable to the circumstances in which the risk occurs. The second is qualitative risk assessment, which is more subjective and is based on judgments backed by generalized data. Quantitative risk assessment is preferable where data are available. Qualitative risk assessment may be acceptable if there are little or no specific data available.
Risk assessment starts with identification of hazards. Once the hazards have been identified it is necessary to assess how high the risks are. This involves answering three questions: What is the worst result? How likely is it to happen? And how many people could be hurt if things go wrong? A probability rating system can be used such as the one recommended by Holt and Andrews: Probable – likely to occur immediately or shortly; reasonably probable – probably will occur in time; Remote – may occur in time; and extremely remote – unlikely to occur.
Risk assessment should lead to action. The type of action can be ranked in order of potential effectiveness in the form of a ‘safety precedence sequence’ and include: Hazard elimination (use of alternatives, design improvements, change of Process); Substitution (for example, replacement of a chemical with one which is less Risky); Use of barriers ( removing the hazard from the worker or removing the worker from the hazard.); Use of procedures ( limitation of exposure, dilution of exposure, safe systems of work depending on human response);Use of warning systems ( signs, instructions, labels); and Use of personal protective clothing (this depends on human response and is used as a side measure only when all other options have been exhausted).
Once you hazards have been ranked, appropriate methods to control each hazard should be established. Hazard control methods are often grouped into the following categories: elimination or substitution (Elimination of the hazard is not always achievable though it does totally remove the hazard and thereby eliminates the risk of exposure. An example of this would be that petrol station attendants are no longer exposed to the risk of lead poisoning following the removal of lead from petrol products); engineering controls Engineering (Controls involve redesigning a process to place a barrier between the person and the hazard or remove the hazard from the person, such as machinery guarding, proximity guarding, extraction systems or removing the operator to a remote location away from the hazard); administrative controls (Administrative controls include adopting standard operating procedures or safe work practices or providing appropriate training, instruction or information to reduce the potential for harm and/or adverse health effects to person(s). Isolation and permit to work procedures are examples of administrative controls); and personal protective equipment.
There are generally four main of Hazards: Physical, chemical, biological and psychological. Physical hazards are conditions or situations that can cause the body physical harm or intense stress. Physical hazards can be both natural and human made elements. Physical hazards are the most common hazards and are present in most workplaces at some time. This category also includes the hazards from working in confined spaces, being hit by flying objects, caught in explosions, falling from heights and tripping on obstacles, electrical hazards, unguarded machinery, Temperature hazards, exposed moving parts, constant loud noise, vibrations, lighting hazards, spills etc.
Chemical hazards are substances that can cause harm or damage to the body, property or the environment. Chemical hazards can be both natural and human made origin. Chemicals can affect the skin by contact or the body either through the digestive system or through the lungs if air is contaminated with chemicals, vapor, mist or dust. There can be an acute (immediate) effect, or a chronic (medium to long-term) effect from the accumulation of chemicals or substances in or on the body. Examples include: cleaning products and solvents, vapors and fumes, carbon monoxide or other gases, gasoline or other flammable materials.
Biological hazards are biological agents that can cause harm to the human body. Biological hazards come from working with people, animals or infectious plant material. They can be viruses, parasites, bacteria, food, fungi, and foreign toxins. Examples include: blood or other bodily fluids, bacteria and viruses, insect bites, animal and bird droppings.
Psychological hazards are created during work related stress or a stressful environment. The most common are Ergonomic hazards which occur when the type of work you do, your body position and/or your working conditions put a strain on your body. Ergonomics hazards are difficult to identify because an employee does not immediately recognize the harm they are doing to his health. Examples include: poor lighting, improperly adjusted workstations and chairs, frequent lifting, repetitive or awkward movements. Other psychological hazards include stress, fatigue, the effects of shift work, and even assaults from other people
There are three basic causes of workplace accidents chance occurrence, unsafe conditions, and employees’ unsafe acts and chance occurrences which are in most cases beyond the management’s control. However, unsafe conditions are a main cause of accidents. They include things like: Improperly guarded equipment; Defective equipment; Hazardous procedures in, on , or around machines or equipment; Unsafe storage such as congestion, overloading; Improper illumination; and Improper ventilation .The solution to these causes is to identify and eliminate the unsafe conditions and observing the laid down Occupational Safety and Health Act (OSHA) standards.
Unsafe acts can undo even the best attempts to reduce unsafe conditions. It may seem that some people are simply accident prone, However, there is growing evidence that people with specific traits may indeed by accident prone. For example, people who are impulsive, sensation seeking, extremely extroverted and less conscientious are more likely to have accidents. A person who is accident prone on one job may not be so on a different job. Examples of unsafe acts include: distraction by cell phones, eating, drinking while working and so on. Other causes of accidents involve workplace climate or psychology such as strong pressure within the organization to complete the work as quickly as possible , employees who are under a great deal of stress, and a poor safety are examples of psychological conditions leading to accidents .
Hazards and Risks in an Organization
Most accidents are caused by a few key activities. Risk assessors are advised to concentrate initially on those activities that could cause serious harm. The following are typical activities where accidents happen or there are high risks:
- receipt of raw materials, e.g. lifting, carrying;
- stacking and storage, e.g. falling materials;
- movement of people and materials, e.g. falls, collisions;
- processing of raw materials, e.g. exposure to toxic substances;
- maintenance of buildings, e.g. roof work, gutter cleaning;
- maintenance of plant and machinery, e.g. lifting tackle, installation of equipment;
- using electricity, e.g. using hand tools, extension leads;
- operating machines, e.g. operating without sufficient clearance, or at an unsafespeed; not using safety devices;
- failure to wear protective equipment, e.g. hats, boots, clothing;
- distribution of finished jobs, e.g. movement of vehicles;
- dealing with emergencies, e.g. spillages, fires, explosions;
- health hazards arising from the use of equipment or methods of working etc
- · Identifying the causes of accidents and the conditions under which they are most likely to occur;
- · Taking account of safety factors at the design stage
- · Designing safety equipment and protective devices and providing protective clothing;
- · Carrying out regular risk assessments audits, inspections and checks and taking action to eliminate risks;
- · Investigating all accidents resulting in damage to establish the cause and to initiate corrective action;
- · Maintaining good records and statistics in order to identify problem areas and unsatisfactory trends;
- · Conducting a continuous programme of education and training on safe working habits and methods of avoiding accidents;
- · Encouraging methods of leadership and motivation that do not place excessive demands on people
Almost 20 million working days a year are lost all over the world because of work-related illness. Two million people suffer from illness they believe was caused by their work such as Muscular disorders and back pain. The next biggest problem is stress, which 500,000 people say is so bad that it is making them ill. These are large and disturbing figures and they show that high priority must be given to creating and maintaining programmes for the improvement of occupational health. The control of occupational health and hygiene problems can be achieved by:
- · Eliminating the hazard at source through design and process engineering;
- · Isolating hazardous processes and substances so that workers do not come into contact with them;
- · Changing the processes or substances used, to promote better protection or eliminate the risk;
- · Providing protective equipment, but only if changes to the design, process or specification cannot completely remove the hazard;
- · Training workers to avoid risk;
- · Maintaining plant and equipment to eliminate the possibility of harmful emissions, controlling the use of toxic substances and eliminating radiation hazards;
- · Good housekeeping to keep premises and machinery clean and free from toxic substances;
- · Regular inspections to ensure that potential health risks are identified in goodtime;
- · Pre-employment medical examinations and regular checks on those exposed to risk;
- · ensuring that ergonomic considerations (ie, those concerning the design and use of equipment, machines, processes and workstations) are taken into account in design specifications, establishing work routines and training – this is particularly important as a means of minimizing the incidence of repetitive strain injury(RSI);
- · Maintaining preventive medicine programmes which develop health standards for each job and involve regular audits of potential health hazards and regular examinations for anyone at risk.
- · Particular attention needs to be exercised on the control of noise, fatigue and stress.Control of stress should be regarded as a major part of any occupational health programme.
- Explain how occupational hazards can be minimized in an organization
- State the responsibilities of HR department relating to health and safety issues in an organization
- Distinguish between a hazard and a risk
- State ten hazards and risks in an organization
- Describe the risk assessment process
1.Armstrong,M.,(2006), A Handbook of Human Resource Practice (10th Ed),Koganpage.London
- Dessler& Cole (2011), Human Resources Management in Canada (11th Ed) Pearson Canada Inc.
3.Joshi, M.,(2013),Human Resource Management (1st Ed), Manmohan. Bookboon.com
Trainee should be able to;
- -Explain the concept of separation
- -Discuss various separation methods
- -Explain the separation process for each method
- -Discuss the factors that lead to employee separation
An employee works for an employer and gets paid for his work and nothing else. The relation of an employer and employee has a beginning; they stay together for a while and then they separate. Beginning of the relation is called as recruitment process or talent acquisition that passes through selection phase and followed by induction. Staying together in the relation comprises the various phases such has performance management; career management; professional growth; development and etc. And the final stage of the relation is the separation.
Employee Separation is the process of ensuring that an employee who quits the company is exited in a structured and orderly manner. The process of employee separation is taken quite seriously by many firms and there is a dedicated department to handle employee exits from the company. “Separation of employment” is also broadly defined as the process of managing the termination of employment, whether involuntary (such as discharge, layoff, plant closure, disability or death) or voluntary (such as resignation, job abandonment or retirement.
There are numerous reasons for an organization to handle employee separation in an ethical, rational and consistent fashion. Separation affects recruiting, retention, employee relations, morale and productivity. In addition, numerous legal risks arise whenever an employer fires an employee. There are differing practical and legal considerations depending on the type of separation. Given the particular circumstances, an employee who is involuntarily terminated may take legal action against the employer. There are a many causes of action against the employer in involuntary terminations, so employers should plan and implement these types of termination with the utmost care.
It is therefore important to include an employee separation process in a policies and procedures handbook as it can help an organization to avoid legal problems, improve upon the performance of its managers and make sure the organization takes the appropriate steps leading up to the departure of an employee. It is a good idea to use an employee checklist or worksheet to list the steps in the process.
Employee separation methods include; Retirement; Death; Layoffs, redundancy, retrenchment; Discharge/dismissal and resignation. Some of these methods are voluntary and others involuntary. Voluntary separation is when the employee quits the company on his or her own accord. This is the most common form of employee separation though in these recessionary times, involuntary separation or the act of asking the employee to leave by management is quite common. This form of employee separation where an employee is asked to quit is called involuntary separation. The difference in these two forms of separation is that for voluntary exits, the employee stands to get most of the benefits and perks due to him or her whereas when an employee is asked to leave, he or she might get a separation package or in instances where disciplinary or performance related exits take place, the employee might not get anything at all.
Steps in Separation
- a) Steps in Voluntary Terminations
Voluntary termination of employment occurs when an employee informs his or her supervisor of the employee’s resignation or when an employee is abscond his work. In most cases, the procedure for voluntary terminations involves the employee providing a written resignation letter to his or her manager. The Employees is requested to provide a minimum notice outlined in his employment contract of their intention to separate from the company to allow a reasonable amount of time to transfer ongoing workload. Upon receipt of an employee’s resignation, the manager will notify the human resource (HR) department by sending a copy of the resignation letter or notification to HR and any other pertinent information (e.g. employee’s reason for leaving, last day of work).The HR administrator will coordinate the employee’s out-processing. This process will include: The employee’s returning all company property (e.g. keys, ID cards, parking passes); a review of the employee’s post-termination benefits status; and the employee’s completion of an exit interview.
Once a company learns about a voluntary separation, it should give the employee a list of tasks to complete to tie up any loose ends, monitor or restrict the employee’s emails and seize the employee’s virtual and physical files before she can delete or take them. The employee should receive her final paycheck on her last day of work.
When an employee absconds, he quits without notice or reason. In some instances, an employee may simply not show up for work or hand in the organization’s property. In such an event, an organization should attempt to call the employee to learn more about the situation. If managers cannot contact the employee, they should mail three separate letters in an attempt to communicate, immediately confiscate the items in his work station, begin to analyze his emails and stop his pay. If the employee possesses items that belong to the company, it may need to seek the help of the police and lawyers to recover them.
- b) Steps in Involuntary Terminations
An involuntary termination of employment is a management-initiated dismissal. The inability of an employee to perform the essential functions of his or her job with or without a reasonable accommodation may also result in an involuntary termination. An employee may also be discharged for any legal reason, e.g., misconduct, tardiness, absenteeism, unsatisfactory performance or inability to perform.
Before any action is taken to discharge an employee, the employee’s manager must request a review by the termination review board, which consists of HR department and the employee’s department head. The termination review board will be responsible for reviewing the situation and determining if discharge is warranted. If the board recommends discharge, the employee’s manager and an HR representative will notify the employee.
Before discharging an employee, a company must take care to document the incidents or events that led to the decision to terminate the worker. When the appropriate managers notify the employee of their decision, they should immediately confiscate the items the company owns that are in the employee’s possession, including ID cards, access cards, business cards, company files, uniforms and computers. Upon notification of this decision, the employee should receive a termination letter that clearly states the reasons for the termination, along with a final paycheck.
In the event of layoffs or downsizing, it is important to let an employee know if the separation is with or without prejudice to indicate if there is a possibility that she can have her job back if it becomes available. Employers should also not use manipulative tactics to make an employee quit in lieu of having to fire her. The employee may perceive such actions as harassment, discrimination or retaliation, and the actions may be illegal in your state.
Retirement may be defined as the exit from an organisation or career path, taken by individuals after middle age and with an intention of reducing psychological commitment to work. There are two types of retirement: Mandatory retirement also known as fixed/compulsory retirement. This form of retirement employees are compulsorily retired after attaining the retirement age set by organisation or the law; and voluntary/ flexible retirement which refers to the type of retirement where organisations allow employees to retire voluntarily before attaining the mandatory retirement age. Early retirement may be on medical grounds or inducement to retire under structural adjustment programmes e.g. Golden handshakes.
The Benefits of Mandatory Retirement include: It is simple to administer with no complications to prove that older people no longer meet the job requirements; Openings are created to which younger employees can advance; Human resource planning is facilitated when retirement schedules are known; and It stimulates employees to make plans for retirement in advance of a known date. The Disadvantages of Mandatory Retirement are: Fixed retirement age will often lead to a ‘short time’ attitude in the years just prior to retirement ‘short timers’ tend to be less committed to the organisations challenges or problems and may even ‘retire’ on the job; and Fixed retirement age may also lead an organisation to suffer losses or lower productivity when there highly experienced personnel leave.
Managing the Retirement Process
This involves designing programmes intended to prepare prospective retirees prior to and after retirement. Pre-retirement programmes are basically conducted with the intention of reducing anxiety associated with retirement. Lack of pre-retirement programmes for employees to prepare employees psychologically and emotionally may lead to damage of their physical and mental health. Pre- retirement programmes in terms of counseling are therefore given to educate employees on the benefit of retirement and also actively facilitate effective transition from the working to the retirement role.
The following instructional devices are used in administrating a pre-retirement programme:
- Organizing group meetings where expert speakers are invited to speak on certain areas e.g. a lawyer to speak on estate taxes, a doctor to speak on health problems of senior citizens, a state employment service represented to speak on availability of part time jobs etc.
- Meetings may be held with former retirees for an informal exchange on the problems of switching roles
- Work sessions are conducted where a potential retiree is asked to fill out a personal affairs check list so that retirement income can be estimated. In relation to that income a prospective budget can be worked out.
- Some organisations may provide access to a library with materials on retirement as well as subscribing to publications on retirement planning.
- In large organisations specialized counselors may be provided to counsel individuals on problems of adjustment.
- Training programmes may be conducted for running small business.
Pre-retirement programmes can be beneficial for the organisation and society. The organization benefits in that Successful retirees are walking ambassadors of goodwill for the organisation and Productivity of prospective retirees prior to retirement are enhanced because of the lessening of anxiety about the future. The society benefits because retirees possess a valuable societal resource, Programmes inform prospective retirees of places where they can continue to serve in their free time in voluntary organisation which enhance society’s wealth and the Programs that enable greater self-reliance and self-sufficiency in financial planning do much to reduce the burden of the society for taking care of old age citizens.
Layoffs, Redundancies, Retrenchment
Layoffs refer to the release of a qualified employee who is no longer needed by the organisation. Layoff may be temporary or permanent. Redundancy occurs when workers no longer needed by the organisation are laid off. Redundancy may also occur when the employer has ceased or intends to cease carrying out the business. Under redundancy employees are paid terminal dues in accordance with the statutory requirements individuals may be declared redundant when his position is no longer needed by the organisation as a result of major restructuring. Retrenchment: is the humanly way of carrying out redundancy. It does not always result after ceasing business but it can result out of the need to improve business. Under retrenchment programme employees are paid enhanced retirement packages and pension/provident fund provided they have the minimum years of qualifying service. Retrenchment is usually done when there is surplus staff. The possible selection criteria for the staff to be retrenched may be; age, skills/professional qualifications, last in first out (LIFO), Work performance or discipline
Death of an Employee
A termination due to the death of an employee will be made effective as of the date of death. Upon receiving notification of the death of an employee, the employee’s manager should immediately notify the benefits administrator. The benefits administrator will process all appropriate beneficiary payments from the various benefits plans.
An employee who resigns or is discharged will be paid all his dues, less outstanding loans, advances or other agreements the employee may have with the company. In cases of an employee’s death, the final pay due to that employee will be paid to the deceased employee’s estate. The employee’s manager should ensure that the payroll office receives the deceased employee’s timecard.
The employee separation process starts from the time the employee gives notice to his or her employer about the intention to quit. This is usually called “putting in one’s papers” because in earlier times, an employee was required to submit a formal resignation letter, though in recent times, this is being done by email. Once the employee gives notice, all the financial transactions and records of the employee are “frozen” by the HR department and the employee’s manager is tasked with the process of ensuring proper handover and closure of work tasks allotted to the employee. Usually, the notice period ranges from a month to two to three months depending on the employment contract. Further, there has to be a well-defined handover plan drawn up by the employee’s manager that covers all aspects of closing out on the work that the employee is performing.
Typically the employee separation process proceeds along two parallel tracks. One involves the employee and the manager and is concerned with the handover of work and other tasks. The other track is by the separations team and deals with the employee benefits accruing as a result of separation as well as other benefits like Provident Fund, Gratuity (If applicable) etc. The HR manager is needed at all steps of this process and in the final exit interview that is conducted to assess the reasons for the employee leaving the company and taking the employee’s views on work and the company in general as well as any “de-motivating” factors that might have caused the employee to resign.
An exit interview is a survey conducted with an individual who is separating from an organization or relationship. Most commonly, this occurs between an employee and an organization. An organization can use the information gained from an exit interview to assess what should be improved, changed, or remain intact. More so, an organization can use the results from exit interviews to reduce employee turnover and increase productivity and engagement, thus reducing the high costs associated with turnover. Some examples of the value of conducting exit interviews include shortening the recruiting and hiring process, reducing absenteeism, improving innovation, sustaining performance, and reducing possible litigation if issues mentioned in the exit interview are addressed. It is important for each organization to customize its own exit interview in order to maintain the highest levels of survey validity and reliability.
The exit interview is the last stage of the employee life cycle (ELC) and spans from the moment an employee becomes disengaged until his or her departure from the organization. This is the key time that an exit interview should be administered because the employee’s feelings regarding his or her departure are fresh in mind. An off-boarding process allows both the employer and employee to properly close the existing relationship so that company materials are collected, administrative forms are completed, knowledge base and projects are transferred or documented, feedback and insights are gathered through exit interviews, and any loose ends are resolved.
The factors that lead to employee separation depend on the cause/ method of separation and can be outlined as follows:
Factors leading to retrenchment include:
- Poor business performance owing to decline in market share. This may be due to competitive pressure from competitors among other reasons.
- Poor management and inadequate planning
- Business mergers, takeovers and divestments.
- Introduction of high performance work systems which may entail
- Employment of multi skilled personnel capable of increasing productivity and responding to change.
- Introduction of new method of production
- Introduction of organisation structures designed to enable quick decisions fast responses and empowered employees.
- b) Resignation
This is the most common way of separation. Employee leaves his job and employment with his employer to pursue better opportunities; a better position at a better compensation package in a branded company (or better known company) in a same city and country or in a different city or different country. So, an employee resigns for: Better compensation and benefits; Higher position / level; Challenging role; To move from an unknown or lowly branded company to a highly branded and reputed company (Top 10 or 25 companies in the world etc.); and For foreign or international assignments
- c) Termination
Usually, this process is perceived negatively by employees. In termination, an employer uses his right to terminate the contract of an employment. There can be many reasons for an employer to terminate the contract of employment but some of the common reasons are: Non-Performance, Indiscipline, Misconduct, Insubordination, and theft etc.
This is one of the most unethical, unexpected and unprofessional way to terminate the contract of an employment. Employees can abscond in either or all of the below mentioned circumstances / situations:
- After stealing the confidential information or documents or database from the company
- If the employee intendeds to commit a crime
- If there is a work-pressure and stress and the individual is not able to cope-up with it
- If the employee has committed any crime outside the office and after working hours (such as murder or getting involved in terrorist activities or theft or any other civil crime)
- When priorities are different e.g. Employee has asked for leave due to some urgency at his home (or might be he is trying to escape from his work responsibilities) and at the same time his team also needs him in the office and his leaves are not approved.
- If he has got some exceptionally good opportunity that requires him to join immediately and he feels that the process of separation in his company is a bit too complicated. He assumes few things and do not really try to face the challenge.
- Employees that abscond have different personalities. They are low in confidence. They are too weak to face the reality and challenges of life. They feel that running away from the problem is as good as solving the problem. They are cowards to take the problems head-on.
- Explain four instructional devices that are used in administration of employee per-retirement programme
- Outline the steps used in voluntary separation of an employee
- Define the term employee separation
- Discuss the factors that may lead to retrenchment of an employee
- State five reasons that may make an employee to abscond from employment
1.Armstrong,M.,(2006), A Handbook of Human Resource Practice (10th Ed),Koganpage.London
- Dessler& Cole (2011), Human Resources Management in Canada (11th Ed) Pearson Canada Inc.
3.Joshi, M.,(2013),Human Resource Management (1st Ed), Manmohan. Bookboon.com
Trainee should be able to;
- -Explain the concept of counseling
- -Describe the counseling process
- -Explain the considerations in counseling programme
- -Explain the qualities of a counselor
- -Discuss employee behavior that may lead to counseling
Life circumstances, personal issues or conflicts at work can affect an employee’s emotional state and have a negative impact on performance. When an otherwise valuable employee starts to behave inconsistently or fall short of expectations, supervisors can use basic employee counseling techniques to resolve the issue without the need for disciplinary action. If an employee’s behavior and performance suddenly change for the worse, counseling may help the employee and correct the problem. An employee, who becomes easily annoyed with coworkers, seems exhausted or cannot pay attention may be suffering from personal problems outside work. Employees who drink too much alcohol or have some other kind of substance abuse issue may require counseling, as well as employees caught up in personality conflicts with each other.
Employee counselling is a psychological health care intervention which can take many forms. Its aim is to assist both the employer and employee by intervening with an active problem-solving approach to tackling the problems at hand. Employee counselling can do much to prevent the negative effects of stress at an individual level and ultimately at an organizational level. It gives individuals a valuable opportunity to work through problems and stresses in a strictly confidential and supportive atmosphere. Counselling provides access to several basic forms of helping: giving information, direct action, teaching and coaching, advocacy, and providing feedback and advice.
Counselling is: The process that occurs when a client and counsellor set aside time in order to explore difficulties which may include the stressful or emotional feelings of the client; the act of helping the client to see things more clearly, possibly from a different view-point. This can enable the client to focus on feelings, experiences or behaviour, with a goal to facilitating positive change; a relationship of trust since Confidentiality is paramount to successful counselling. Professional counsellors will usually explain their policy on confidentiality, they may, however, be required by law to disclose information if they believe that there is a risk to life.
Counselling is Not: Giving advice; Judgmental; Attempting to sort out the problems of the client; Expecting or encouraging a client to behave in a way in which the counsellor may have behaved when confronted with a similar problem in their own life; Getting emotionally involved with the client or Looking at a client’s problems from your own perspective, based on your own value system.
Typically, counselling involves the individual employee meeting with a psychological adviser, usually on a one-on-one basis. It is not uncommon for the individual employee and counsellor to meet once or twice a week for several weeks. However, the number and frequency of meetings required will depend upon the nature of the perceived difficulty and the nature of the intervention needed. The focus of counselling sessions is to encourage discussion of personal and work-related difficulties. This is often followed by the adoption of an active problem-solving approach to tackle the problems at hand.
The specific aims of employee counselling are to: Explore and find the key sources of difficulty; Review the individual’s current strategies and styles of coping; Implement methods of dealing with the perceived problem, thereby alleviating the issue; and evaluate the effectiveness of the chosen strategies.
The Role of the Counsellor
The role of the counsellor is to enable the client to explore many aspects of their life and feelings, by talking openly and freely. It is important that the counsellor is not emotionally involved with the client and does not become so during counselling sessions. The counsellor neither judges, nor offers advice. The counsellor gives the client an opportunity to express difficult feelings such as anger, resentment, guilt and fear in a confidential environment.
Generally, the role of the counsellor is to support the client in the following ways: Listening to client; identify the stage the client is at; be able to move the client into the next stage; Helping the client; Understanding the choices that need to be made; Considering the options available; Helping the client to make her own decision hence empowering the client; observing confidentiality; and Developing trust in the client.The ultimate aim of counselling is to enable the client to make their own choices, reach their own decisions and to act upon them accordingly.
Benefits of Counselling
The benefits of counselling to an employee include: Helping them to understand and help themselves; assist them to understand the situations and look at them with a new perspective and positive outlook; help in making better decisions; enable them to explore alternate solutions to problems; and help them cope with the situation and the stress.
The benefits to the organization are: Decrease in costs related to turnover, burnouts, absenteeism and accident-related disability; Improvement in employee performance & therefore increase in productivity; and help in managing behavioral Problems brought about by organizational changes.
Employee Counselling Process
The counselling process is a planned, structured dialogue between a counsellor and a client. It is a cooperative process in which a trained professional helps a person called the client to identify sources of difficulties or concerns that he or she is experiencing. Together they develop ways to deal with and overcome these problems so that person has new skills and increased understanding of themselves and others. The fact that counselling is described as a process, there is the implicit meaning of a progressive movement toward an ultimate conclusion. Hackney and Cormier (1987) describes the counselling process as a series of steps through which the counsellor and client move as discussed below:
Step 1: Relationship Building
The first step involves building a relationship and focuses on engaging clients to explore issue that directly affect them. The first interview is important because the client is reading the verbal and nonverbal messages and make inferences about the counsellor and the counselling situation.
Step 2: Problem Assessment
While the counsellor and the client are in the process of establishing a relationship, a second process is taking place, i.e. problem assessment. This step involves the collection and classification of information about the client’s life situation and reasons for seeking counselling
Step 3: Goal Setting
Setting goals is very important to the success of counselling. It involves making a commitment to a set of conditions, to a course of action or an outcome
Step 4: Counselling Intervention
There are different points of view concerning what a good counsellor should do with clients depending on the theoretical positions that the cousellor subscribes to. The counsellor can apply any theoretical approaches and each approach suggests different types of intervention. For example, the person-centred approach suggests that the counsellor gets involved rather than intervenes by placing emphasis on the relationship. The behavioural approach attempts to initiate activities that help clients alter their behaviour.
Step 5: Evaluation, Termination or Referral
For the beginning counsellor, it is difficult to think of terminating the couselling process, as they are more concerned with beginning the counselling process. However, all counselling aims towards successful termination. Terminating the counselling process will have to be conducted with sensitivity with the client knowing that it will have to end.
The counselling process has three main stages. These are: Exploration Stage; Understanding Stage (middle stage); and Action Stage. In Exploration stage: the counsellor addresses the client’s questions, for example what are my (client’s) problems, issues, concerns and undeveloped opportunities; helps the client clarify their current difficulties, problems, issues, concerns and undeveloped opportunities; and establishes a relationship with client so that they feel safe enough to explore the issues that they face by identifying and clarifying problem situations, unused opportunities and the key issues calling for change. To achieve this, The counsellor should: concentrate on the clients agenda; not impose ones own agenda or try to satisfy ones own curiosity; stay with the client; and help the client be specific and to focus on core concerns
In the Understanding or middle stage: The counsellor seeks to promote understanding and insights into new perspectives of the problem at hand; The client’s questions are addressed to, for example finding out “what do they (client) need or want in place of what they have”; The client is assisted to look at the preferred scenario; The counsellor reaches a greater depth of understanding with client which helps the client determine what he/she needs or wants; and The counsellor helps client determine what he/she needs and wants, provides accurate empathy, works with the here and now (i.e. current situation) , promotes self disclosure, helps set appropriate goals and is genuine in support. The client must feel supported yet challenged to face the difficulties ahead and the counsellor helps the client to get an idea of which direction they should to go.
The aim of action stage is for the client to: develop a realistic set of choices and Make decisions and formulate an action plan. The counsellor assist the client implement the chosen plan and uses different decision making strategies and problem solving techniques. It is important to understand that the counselling process is not a linear one, that is, it does not necessarily follow these stages in order. The counsellor needs to be aware of which stage the client is at, and when it is appropriate to facilitate moving the client to the next stage. This decision is the client’s; the counsellor offers guidance but does not make the decisions.
In attempting to help an employee who has a problem, a variety of counseling approaches/ techniques are used. All of these counseling approaches, however, depend on active listening. Sometimes the mere furnishing of information or advice may be the solution to what at first appeared to be a problem. More frequently, however, the problem cannot be solved easily because of frustrations or conflicts that are accompanied by strong feelings such as fear, confusion, or hostility. A manager, therefore, needs to learn to use whatever approach appears to be suitable at the time. Flexibility is a key component of the employee counseling process.
Directive Counselling centers on the counselor. It is the process of listening to an employee’s problem, deciding with the employee what should be done and telling and motivating the employee to do it. This type of counseling mostly does the function of advice, reassurance and communication. It may also perform other functions of counseling. But directive counselling seldom succeeds, as people do not wish to take up advice normally, no matter how good it might be.
Non-directive Counseling is where; the employee is permitted to have maximum freedom in determining the course of the interview. It is the process of skillfully listening and encouraging a counselee to explain troublesome problems, understand them and determine appropriate solutions. Fundamentally, the approach is to listen, with understanding and without criticism or appraisal, to the problem as it is described by the employee. The employee is encouraged, through the manager’s attitude and reaction to what is said or not said, to express feelings without fear of shame, embarrassment, or reprisal. The free expression that is encouraged in the non-directive approach tends to reduce tensions and frustrations. The employee who has had an opportunity to release pent-up feelings is usually in a better position to view the problem more objectively and with a problem-solving attitude. Non-directive counseling works best for more complicated performance issues such as personal conflicts, communication difficulties or changes in behavior caused by problems outside work. The unique advantage of this type of counselling is its ability to cause the employees reorientation. The main stress is to ‘change’ the person instead of dealing with his immediate problem only.
Cooperative/ participative Counselling is the process in which both the counselor and client mutually cooperate to solve the problems of the client. It is neither wholly client centered nor wholly counselor centered but it is centers both counselor and client equally. It is defined as mutual discussion of an employee’s emotional problem to set up conditions and plans of actions that will remedy it. This is because the Counselor and counselee mutually apply their different knowledge, perceptions, skills, perspectives and values to problem into the problems and find solutions. This form of counselling appears to be more suitable to managerial attitude and temperament in our country.
Among the three from of counselling, the advice offered in directive counseling considers the surface crises; the nondirective counselling goes to the underlying cause, the real crisis that leads the employee to understand his problem. It is thus suggested that nondirective to counselling is, probably, the best among the three forms.
Effectiveness of counselling largely depends on the methods and techniques as well as the skills used by the counselor. Methods and techniques of counseling change from person to person and from situation to situation. Every counselor must concentrate his full attention on two aspects viz., using of assessment tools, and utilizing counselling methods, choice of which differs from person to person, situation to situation, and from case to case. Normally employee counseling involves the following methods:
According to Desensitization, once an individual is shocked in a particular situation, he gives himself no chance for the situation to recur. This method can be used to overcome avoidance reactions, so as to improve the emotional weak spots. If an employee is once shocked by the behavior, approach or action of his superior, he would continue to avoid that superior. It is difficult for such superiors to be effective counselors, unless such superiors prove otherwise through their behavior or action on the contrary. Similarly, once an employee is shocked by a particular situation, he can be brought back to that situation only if he will be convinced through desensitization that the shock will not to take place further. Counselor can make use of desensitization in such situations.
- b) Catharsis
Discharge of emotional tensions can be called catharsis. Emotional tensions can be discharged by talking them out or by relieving of the painful experience which engendered them. It is an important technique as a means of reducing the tensions associated with anxiety, fear, hostility, or guilt. Catharsis helps to gain insight into the ways an emotional trauma has been affecting the behavior.
- c) Insight
With the help of insight one may find that he has devalued himself unnecessarily, or his aspirations were unrealistic, or that his childish interpretation of an event was inaccurate. Then he can overcome his weakness.
- d) Developing the new patterns
Developing new patterns becomes very often necessary when other methods to deal with weak spots remain ineffective. In order to develop new, more satisfying emotional reactions, the individual needs to expose himself to situations where he can experience positive feelings. The manager who deals with such individuals may motivate or instigate them to put themselves into such situations, so that their self-confidence may increase.
7.3 Considerations in Counseling Programme
The basic requisites of employee counselling are:
- Employee Counselling needs to be tackled carefully, both on the part of the organisation and the counselor. The counselling can turn into a sensitive series of events for the employee and the organisation; therefore, the counselor should be either a professional or an experienced, mature employee.
- The counselor should be flexible in his approach and a patient listener. He should have the warmth required to win the trust of the employee so that he can share his thoughts and problems with him without any inhibitions.
- Active and effective listening is one of the most important aspects of the employee counselling.
- Time should not be a constraint in the process.
- The counselor should be able to identify the problem and offer concrete advice.
- The counselor should be able to help the employee to boost the morale and spirit of the employee, create a positive outlook and help him take decisions to deal with the problem.
While conducting a counselling session remember to always:
- Demonstrate professionalism and maintain rapport throughout the session;
- Convey to the client that his or her confidentiality will be strictly protected;
- Speak with the client at his or her level of understanding;
- Conduct an interactive session focused on risk reduction (i.e. both the counsellor and the client contribute to the discussion);
- Clarify important misconceptions but avoid extended talk on issues not related to risk;
- Stay organized and avoid counselling outside the protocol’s structure;
- Know that it is all right to tell the client you will be covering something later;
- Avoid collecting data about the client during the counselling session.
A counsellor is a person trained in the skills of: listening to the client present with issues that are of concern to them; asking supportive questions pertaining to those issues; discussing options the client comes up, with as possible coping strategies; and Encouraging the client to make their own informed decisions, giving practical information and planning follow-up. For the counselling process to succeed, the counsellor has to demonstrate the following qualities: high levels of maturity and Understanding, thorough knowledge and experience; assurance of absolute confidentiality; accurate listening and Acceptance.
These Counselling skills can be broadly classified into two, namely, attending and responding skills. Attending skills are those that indicate that the counsellor is actually paying attention to the client. Responding skills are those demonstrated by the counsellor as they communicate back to the patient. These skills are important as they assist in confirming to the client that they have the full attention of the counsellor. They are also useful for the counsellor when practised appropriately, as they help to move the session along in a meaningful manner, with both parties fully understanding what each means when they say what they say. Examples of Attending and responding skills are: Social skill; physically attending skills; Observing and Listening. Responding skills include: Questioning; paraphrasing and Summarising.
i) Social Skills
These social skills include greeting people nicely, introducing yourself to the client and allowing the client to introduce themselves to you (mutual self-introduction), politeness and kindness. Politeness skills are the expression of one’s sensitivity to the feelings and opinions of others, of one’s gratitude to others and of one’s respect for others. Kindness skills involve having good wishes for others and the readiness to do something for others. Social skills assist to generate trust by showing that one is genuinely interested in the other and is a way of acknowledging other people and what they want to say.
ii) Physically Attending Skills
Physically attending skills are demonstrated by the following: Sitting position: Sit facing the client in an appropriate position (Be aware of the clients culture and what she may expect of you);Posture: Position yourself in a way that shows interest in the client; Making eye contact if the client feels comfortable; Eliminating any distracting behaviour such as yawning, looking at the wristwatch, narrowing the eyes, raising the eyebrows, harsh tone of voice, suddenly leaning forward, shuffling papers, or turning body away.
Observing skills are the counsellor’s ability to see the client’s behaviour and pick up non-verbal messages in order to understand experiences. Observation can be from three points of view: Physical: e.g. body build, physical appearance, level of energy (that is whether client looks fatigued, happy, etc); Emotional: e.g. facial expression, posture, grooming; and Interpersonal: e.g. how they relate to you: positively, negatively, neutrally.
- iv) Listening Skills
Active listening is the active process of paying undivided attention to what the client is saying and “what they are not saying”. Active listening helps establish rapport, trust, and bridges differences; it helps clients disclose their feelings; it helps gather information and create a base of influence; it helps clients assume responsibility. People want the presence of the other person not only the physical presence, but also their presence psychologically, socially and emotionally. Listening is an important part of effective communication and takes place at two levels namely the level of content or words and the level of feeling.
- v) Reflecting feelings
This involves understanding a client’s emotional responses and communicating this back to him or her.
- i) Questioning
The type of questions used determine how the session progresses. This is because they can solicit answers that are brief, accurate, informative, misleading or vague. There are two types of questions that can be used: Close-ended Questions and open ended questions. Closed-ended questions solicit a “Yes” or “No” answer. These kinds of questions do not encourage the person being counselled to talk more. Open-ended questions allow the patient to express as much information as he feels is necessary when answering a question. These questions usually have: who, why, where, what, when, can and how at the beginning.
- ii) Paraphrasing and Summarizing
Summaries are brief statements which bring together the key points from a counselling session. The purpose of summarizing is to help ensure that the counsellor and client understand each other correctly. The counsellor should review the important points of the discussion and highlight any decisions made. Summarizing should be used through out the counselling session, not only at the end. Offer support and encouragement to clients to help them carry out the decisions they have made. Paraphrasing involves restating something that a client has said using different words in order to make clear what the client is saying.
The principles of counselling are easy to learn but difficult to apply and service providers can easily make mistakes, such as the following:
- Controlling rather than encouraging the client’s spontaneous expression of feelings and needs;
- Judging, as shown by statements that indicate that the client does not meet the service provider’s standards;
- Moralizing, preaching, and patronizing i.e. telling people how they should behave or lead their lives;
- Labelling, rather than finding out the person’s motivations, fears and anxieties;
- Reassuring unwarrantedly i.e. trying to induce undue optimism by making light of the client’s own version of a problem;
- Not accepting the client’s feelings by saying that they should be different;
- Advising, before the client has had enough information or time to arrive at a personal solution.
- Interrogating e.g. using questions in an accusatory way; ‘why’ questions may sound accusatory.
Apart from their personal problems, there are various reasons which can create stress for the employees at the workplace like unrealistic targets or work-load, constant pressure to meet the deadlines, career problems, responsibility and accountability, conflicts or bad inter-personal relations with superiors and subordinates, problems in adjusting to the organizational culture. Counselling helps the employee to share and look at his problems from a new perspective, help himself and to face and deal with the problems in a better way. Counselling at workplace is a way of the organisation to care about its employees.
Some of the employee conditions that may require counselling are:
- Anxiety, depression, and other mental and emotional problems and disorders
- Family and relationship issues
- Substance abuse and other addictions
- Sexual abuse and domestic violence
- Career change and job stress
- Social and emotional difficulties related to disability and illness
- Adopting to life transitions
- The death of a loved one
- Appropriate referrals after assessment.
7.6 Review Questions
1.Armstrong,M.,(2006), A Handbook of Human Resource Practice (10th Ed),Koganpage.London
- Dessler& Cole (2011), Human Resources Management in Canada (11th Ed) Pearson Canada Inc.
3.Hackney and Cormier (2005), The Professional Counselor, Boston. Pearson
4.Joshi, M.,(2013),Human Resource Management (1st Ed), Manmohan. Bookboon.co
Trainee should be able to;
- -Explain the concept of IHRM
- -Discuss the characteristics of IHRM
- -Discuss human resource management challenges in IHRM
- – Discuss ways of managing the challenges.
IHRM is concerned with HRM issues that cross national boundaries or are conducted in locations other than the home country headquarters. IHRM is concerned with the relationships between the HRM activities of organisations and the foreign environments in which the organisations operate. IHRM includes comparative HRM studies. International Business must procure, motivate, retain and effectively utilize services of people both at the corporate office and at the foreign plant. The process of procuring, allocation, effectively utilizing human resources in an international business is called International Human Resources Management. IHRM can be defined as set of activities aimed managing organizational human resources at international level to achieve organizational objectives and achieve competitive advantage over competitors at national and international level.
The reasons for growing interest in IHRM are: Globalization of business leading to the need mobilization of resources; Effective management of human resources; To minimize the risk of underperformance or failure in overseas assignments; Implementation of international strategies by competent managerial personnel to man overseas assignments; Movement from traditional hierarchical organizational structures towards the network organization; and the need to play a significant role in implementing and control of strategies in an international business.
Types of International Employees
International employees can be placed in three different classifications. Parent country nationals (PCNs), a parent-country national is a person working in a country other than their country of origin. Such a person is also referred to as an expatriate; Host country nationals (HCNs) which are those employees of an organization who are the citizens of the country in which the foreign subsidiary is located; and Third Country Nationals who are the citizens of a country other than the country where the organization is headquartered and the country that is hosting the subsidiary.
Several types of expatriates may be differentiated by job assignment, because not all individuals who decide to work as expatriates are similar in the assignments undertaken. Volunteer expatriates are persons who want to work abroad for a period of time because of career or self-development interests. Often, these expatriates volunteer for shorter-term assignments of less than a year so that they can experience other cultures and travel to desired parts of the world. Traditional expatriates are professionals and managers assigned to work in foreign operations for one to three years. They then rotate back to the parent corporation in the home country. Career development expatriates are individuals placed in foreign jobs to develop the international management capabilities of the firm. They may serve one to three “tours” in different countries; so that they can develop a broader understanding of international operations. Global expatriates comprise those individuals who move from one country to another. Often, they prefer to work internationally rather than in the home country.
International HRM Approaches
There are mainly four IHRM approaches. These include ethnocentric approach, polycentric approach, geocentric approach, and regiocentric approach. The suitability of the type of staffing policy adopted by MNEs depends on the strategy used by the company.
- a) Ethnocentric approach
In the ethnocentric approach, all key positions in the host country subsidiary are filled by nationals of the parent company. The policy makes most sense for firms pursuing an international strategy.
An ethnocentric staffing policy is attractive when: the firm believes there is a lack of qualified individuals in the host country to fill senior management positions; the firm sees an ethnocentric staffing policy as the best way to maintain a unified corporate culture; and when the firm wants to transfer knowledge of core competencies to the foreign operation. The disadvantages of ethnocentric approach are that it limits the advancement of host country nationals. This can lead to resentment, lower productivity, and increased turnover and it can lead to cultural myopia (the firm’s failure to understand host-country cultural differences that require different approaches to marketing and management)
- b) Polycentric approach
Polycentric approaches to staffing policy emphasis on recruiting host country nationals to manage the subsidiaries in their own country. This means that host country nationals are recruited to manage subsidiaries in their own country, while parent country nationals occupy the key positions at corporate headquarters. This allows the MNE to take lower profile in sensitive economic and political situations and helps to avoid intercultural management problems. This approach minimizes the dangers of cultural myopia, but it also helps create a gap between home and host country operations. The polycentric policy is best suited to firms pursuing a localization strategy.
The advantages of the polycentric policy are that the firm is less likely to suffer from cultural myopia and it may be less expensive to implement .The disadvantages of the polycentric policy are that host country nationals have few opportunities to gain foreign experience and so cannot progress beyond senior positions in their own subsidiaries as well as a gap can form between host country managers and parent country managers
- c) Geocentric approach
This approach utilizes the best people for all key jobs throughout the organization, whatever their nationality or whatever the geographical location of the post to be filled. In this way an international executive team can be developed. This approach is consistent with building a strong unifying culture and informal management network. It makes sense for firms pursuing either a global or transnational strategy to adopt geocentric staffing policies. However immigration policies of national governments may limit the ability of a firm to pursue geocentric staffing policy.
The advantages of a geocentric approach to staffing are that it: enables the firm to make the best use of its human resources; builds a cadre of international executives who feel at home working in a number of different cultures. The disadvantages of geocentric approach include difficulties with immigration laws and high costs associated with implementing the strategy
Training and Development in an International Context
Training and development refer to the efforts of the MNC to provide education and other programs to better equip its employees to do their job. Such training at work may involve formal training, informal training, learning embedded in the workplace and other forms of learning. Training and development increases in complexity as MNEs moves abroad. Some of the training programs involve: Environmental briefing regarding geography, climate, housing and schools ; Cultural orientation designed to familiarize the individual with cultural institutions and value systems of the host country; Cultural assimilations to provide participants with inter-cultural encounters; Language training; Sensitivity training designed to help develop attitudinal flexibility; and field experience which sends the participants to the country of assignment to get them used to the emotional stress of living and working with people of different culture.
There are some commonalities in IHRM and domestic HRM practices, particularly in areas like; HR planning and staffing, recruitment and selection, appraisal and development, rewards, etc the main distinctions, however, lies in the fact that while domestic HRM is involved with employees within only one national boundary, IHRM deals with three national or country categories.
International HRM differs from domestic HRM in a number of ways. One difference is that IHRM has to manage the complexities of operating in, and employing people from, different countries and cultures. A major reason for the failure of an international venture is the lack of understanding of the differences between managing employees in the domestic environment and in a foreign one. A management style successful in the domestic environment often fails if applied to a foreign environment without the appropriate modifications. The reasons that IHRM is more complex than domestic HRM are described below.
International HRM addresses a broader range of activities than domestic HRM. These include international taxation, coordinating foreign currencies and exchange rates, international relocation, international orientation for the employee posted abroad, etc.
Human resource managers working in an international environment face the problem of addressing HR issues of employees belonging to more than one nationality. Hence, these HR managers need to set up different HRM systems for different locations. Human resource managers in a domestic environment administer HR programmes to employees belonging to a single nationality.
International HRM requires greater involvement in the personal life of employees. The HR manager of an MNC must ensure that an executive posted to a foreign country understands all aspects of the compensation package provided in the foreign assignment, such as cost of living, taxes, etc. The HR manager needs to assess the readiness of the employee’s family to relocate, support the family in adjusting to a foreign culture through cross-cultural training, and to help in admitting the children in schools. The HR department may also need to take responsibility for children left behind in boarding schools in the home country by the employees on foreign postings. In the domestic environment, the involvement of the HR manager or department with an employee’s family is limited to providing family insurance programmes or providing transport facilities in case of a domestic transfer.
There is heightened exposure to risks in international assignments. These risks include the health and safety of the employee and family. A major aspect of risk relevant to IHRM today is possible terrorism. Several MNCs must now consider this factor when deciding on international assignments for their employees. Moreover, human and financial consequences of mistakes in IHRM are much more severe than in domestic business. For example, if an executive posted abroad returns prematurely, it results in high direct costs as well as indirect costs.
International HRM has to deal with more external factors than domestic HRM. For example, government regulations about staffing practices in foreign locations, local codes of conduct, influence of local religious groups, etc. If an American organization is sanctioned license by the Kenyan government to set up its subsidiary in Kenya, the American company is under legal obligations to provide employment to local residents.
Globalization is the system of interaction among the countries of the world in order to develop the global economy. Globalization involves technological, economic, political, and cultural exchanges made possible largely by advances in communication, transportation, and infrastructure. The advent of the era of globalization along with the advancements in information technology (IT) has transferred the world around us. It has brought to center stage the importance of human resources, more than ever before. The pressures it poses on IHRM include: Remaining competitive throughout the world; Efficient Locally; Responsive; Flexible and adaptive Capable to transforming learning across their globally dispersed units. Other obstacles to effective HR management are cross-cultural adaptation, different organizational/workforce values, differences in management style, and management turnover. Doing business globally requires that adaptations be made to reflect these factors. It is crucial that such concerns be seen as interrelated by managers and professionals as they do business and establish operations globally. Each of those factors will be examined briefly.
The nature and stability of political systems vary from country to country. In many nations, the legal and political systems are turbulent. Some governments regularly are overthrown by military coups. Others are ruled by dictators and despots who use their power to require international firms to buy goods and services from host-country firms owned or controlled by the rulers. In some parts of the world there is pervasive corruption, while in others governments’ changes constantly. Also, legal systems vary in character and stability, with business contracts sometimes becoming unenforceable because of internal political factors.
HR regulations and laws also vary among countries in character and detail. In many countries, laws on labor unions and employment make it difficult to reduce the number of workers because required payments to former employees can be very high. In some countries, laws address issues such as employment discrimination and sexual harassment. In others, because of religious or ethical differences, employment discrimination may be an accepted practice. All of these factors reveal that it is crucial for HR professionals to conduct a comprehensive review of the political environment and employment-related laws before beginning operations in a country. The role and nature of labor unions should be a part of that review.
Different countries have different economic systems. Some operate with a modified version of communism, which has essentially failed. But as the government attempts to move to a more mixed model, it is using unemployment and layoffs to reduce government enterprises bloated with too many workers. Many lesser-developed nations are receptive to foreign investment in order to create jobs for their growing populations. Global firms often obtain significantly cheaper labor rates in these countries than they do in Western Europe, Japan, and the United States. However, whether firms can realize significant profits in developing nations may be determined by currency fluctuations and restrictions on transfer of earnings.
Cultural forces represent another important concern affecting international HR management. Culture is composed of the societal forces affecting the values, beliefs, and actions of a distinct group of people. Cultural differences certainly exist between nations, but significant cultural differences exist within countries also. One only has to look at the conflicts caused by religion or ethnicity parts of the world to see the importance of culture on international organizations. Getting individuals from different ethnic or tribal backgrounds working together may be difficult in some parts of the world. Culture can lead to ethical differences among countries.
The dimension of power distance refers to the inequality among the people of a nation. In countries such as Germany, the Netherlands, and the United States, there is a smaller power distance which means there is less inequality. As power distance increases, there are greater status and authority differences between superiors and subordinates. One way in which differences on this dimension affect HR activities is that the reactions to management authority differ among cultures. A more autocratic approach to managing is more common in countries with greater power distance while participatory management is prevalent where power distance is small.
Another dimension of culture identified by Hofstede is individualism, which is the extent to which people in a country prefer to act as individuals instead of members of groups. On this dimension, people in African countries tend to be less individualistic and more group-oriented, whereas those in most European countries score the highest in individualism. An implication of these differences is that more collective action and less individual competition is likely in those countries that deemphasize individualism.
Finding and retaining the talent for highly skilled jobs or the one that knows the national and international markets can be tough. In some countries there is acute shortage of people with the required skills. In such cases, an organization may need the help of immigration departments or to leverage on the international talent pool. Sometimes, organizations may rely on executive search firms to search for the right employees who may not be aware of organizational culture.
Changes in various labor laws, from a local level to national and international level is very relevant in making sure employees perform tasks in accordance with them. An international human resource manager must be aware of the labour laws in all the host nations where the organization is operating as well as international regulations which must be complied with.
- h) Global Health and Safety
Health and safety issues may be of concern to employees overseas, and security has become a very difficult issue in certain areas of the world. Safety and health laws and regulations vary from country to country, ranging from virtually nonexistent to very stringent. With more and more expatriates working internationally, especially in some of the less-developed countries, significant health and safety issues are arising, and addressing these issues is part of the HR role. Another consideration is provision of emergency evacuation services. For instance, how to evacuate and care for an expatriate employee who is working in a country when war breaks out or there are disease outbreaks such as Ebola.
- i) International Security and Terrorism
As more firms operate internationally, the threat of terrorist actions against those firms and the employees working for them increases. Many of the terrorism acts target company facilities and offices. Nevertheless, individual employees and their families living abroad must constantly be aware of security issues. Countries vary in the extent to which they are likely to see violence at the workplace. In addition, Kidnapping, murder, home invasion, robberies, and car-jacking are relatively frequent in some places.
- a) Developing an international approach
A truly international approach to human resource management must consider:
- An explicit recognition by the parent organization that its own peculiar ways of managing human resources reflect some of the assumptions and values of its home culture.
- An explicit recognition by the parent organization that its peculiar ways are neither universally better nor worse than others, but are different and likely to exhibit strengths and weaknesses, particularly abroad.
- An explicit recognition by the parent organization that its foreign subsidiaries may have other preferred ways of managing people that are neither intrinsically better nor worse, but could possibly be more effective locally.
- Willingness from headquarters not only to acknowledge cultural differences, but also to take action in order to make them discussable and therefore useable.
- The building of a genuine belief by all parties that more creative and effective ways of managing people could be developed as a result of cross-cultural learning.
- b) Think Globally and Act Locally
The cultural differences can be managed by ‘thinking globally and acting locally’. This means that an international balancing act is required, which leads to the fundamental assumption that: ‘Balancing the needs of co-ordination, control and autonomy and maintaining the appropriate balance are critical to the success of the multinational company.’ To achieve this balancing act, there are six capabilities that enable firms to integrate and concentrate international activities and also separate and adopt local activities. These are: being able to determine core activities and non-core activities; achieving consistency while allowing flexibility; building global brand equity while honoring local customs; obtaining leverage (bigger is better) while achieving focus (smaller is better); sharing learning and creating new knowledge; and engendering a global perspective while ensuring local accountability.
- C) Managing Expatriates
The management of expatriates is a major factor determining success or failure in international business. Expatriates are expensive; they can cost three or four times as much as the employment of the same individual at home. They are difficult to manage because of the problems associated with adapting to and working in unfamiliar environments, concerns about their development and careers, difficulties encountered when they re-enter their parent company after an overseas assignment, and how they should be remunerated. Resourcing, recruitment and selection policies to address all these issues are required.
Role specifications should take note of the behaviours required for those who work internationally. International workers should be able to:
- recognize the diversity of overseas countries;
- accept differences between countries as a fact and adjust to these differences effectively;
- tolerate and adjust to local conditions;
- cope in the long term with a large variety of foreign contexts;
- manage local operations and personnel abroad effectively;
- gain acceptance as a representative of one’s company abroad
- obtain and interpret information about foreign national contexts (institutions, legislations, practices, market specifics, etc);
- inform and communicate effectively with a foreign environment about the home company’s policies;
- take into account the foreign environment when negotiating contracts and partnerships;
- identify and accept adjustments to basic product specifications in order to meet the needs of the foreign market;
- develop elements of a common framework for company strategies, policies and operations;
- Accept that the practices that will operate best in an overseas environment will not necessarily be the same as the company’s ‘home’ practices.
8.5 Review Questions
- Distinguish between global HRM and IHRM
- Explain five factors that have influenced the growth of IHRM
- Discuss three approaches of IHRM
- Discuss five challenges of IHRM
- Outline five factors affecting IHRM
1.Armstrong,M.,(2006), A Handbook of Human Resource Practice (10th Ed),Koganpage.London
2.Dessler& Cole (2011), Human Resources Management in Canada (11th Ed) Pearson Canada Inc.
3.Joshi, M.,(2013),Human Resource Management (1st Ed), Manmohan. Bookboon.com
4.Wall, S., Minocha, S., and Rees, B. (2010). International Business, (3rd Edition), Prentice Hall
Note: The KNEC theory and practice of human resource management paper consists of seven questions all carrying twenty marks. Candidates are required to answer five out of the seven questions.
KNEC JULY 2009
- a) Explain the reasons that would make an organization prefer to adopt on-the-job training rater that off-the-job training programme for its employees
- b) Explain the benefits that may accrue from an organization from establishing a health scheme for all its workers
- a) Explain five ways in which ineffective appraisal may contribute to poor relations between management and subordinate sin an organization
- b) Explain the reasons that may lead to separation of an employee from an organization
- a) Kaba Ltd has been experiencing an increased rate of accidents resulting to employees deaths and injuries. Outline the measures that should be taken by the management to reduce the accidents
b)Mambo Company is in the process of designing a benefits structure that is expected to enhance performance of its employees. Explain the requirements that the structure must meet I n order to achieve the intended objective.
- a) Highlight the benefits that may accrue to a company that carries out staff performance appraisal
- b) Explain the obligations of an employee to his employer when resigning from his job
- a) There are various statutory deductions that can be made from an employee salary. Explain the ways in which five of such deductions may benefit an employee.
- b) Outline the legal requirements that an applicant person should meet in order to be registered as a manager of a retirement benefits scheme
- a) Explain the benefits that an organization may derive from using job rotation as a method of staff development)
- b) Outline the ways in which an organization may benefit from using a performance based remuneration for its workers
- a) Masani Ltd is a multi-National Corporation which operates in several countries. For each of these countries the company has put in place different remuneration for its employees give the reasons that may account for the different schemes
- b) Fasha, the Human Resource Manager at Tuamini Ltd has noticed that some employees in the organization have developed defensive attitudes in their relationship with other employees. Outline the measures that Fasha can Take to assist the employee overcome this attitude.
KNEC NOVEMBER 2013
- a) Highlight the factors that a Human Resource Manager should consider when determining merit pay for employees in an organization
- b) Explain the benefits that an organization may get fro staffing its international operations with national s from host country
- a) Explain the characteristics that differentiate fringe benefits from other benefits that are offered by organizations
- b) Explain the circumstances under which a Human Resource Manager may opt to use the team approach in appraising the performance of employees in an organization
- a) The management of human resources at the international level has certain characteristics. Explain these characteristics
- b) The management of Blanco Ltd conducts employee exit interviews on an ongoing basis. Highlight the reasons that may account for this practice
- a) Explain five factors that may cause job dissatisfaction among employees in an organization
- b) Explain five benefits that an organization m ay drive from the provision of safe work environment for its employees
- a) Explain the ways through which a counselor may help an employee manage work related stress I an organization
- b) Describe five methods that a Human Resource Manager may adopt when training employees in an organization
- a) Explain five benefits that an organization may obtain from adopting a group wide incentive scheme for its employees.
- b) Outline five health and safety issues that a human resource manager may have to address in organizations today
- a) Explain five objectives that an organization may set to achieve in the training of its managerial staff
- b) Explain the reasons that may make it necessary for an organization to conduct employee performance appraisal
KNEC JULY 2012
- a) Mataifa Ltd is a multinational company which operates in different countries across the world. Explain the challenges that may be encountered in carrying out human resource management activities in the company
- b) Highlight the measures that an organization should take to minimize accidents in the workplace
- a) Explain the benefits that a firm may obtain from carrying to employee performance appraisal
- b) Highlight the circumstances under which an organization may use on-the-job training for its employees
- a) ABC Co. Ltd intends to retrench a number of employees as a cost cutting measure. Explain the ethical considerations that should be taken into account when carrying out the exercise.
- b) Highlight five types of individual behavior that may necessitate counseling for an employee.
- a) Tena Ltd, a newly established firm is in the process of developing an employee benefits policy. Highlight the objectives that such a policy should aim to achieve
- b) Describe five methods that can be used to carry out employee performance appraisal
- a) Even though employee training is an expensive undertaking for most organizations, it is still a necessary exercise. Outline five reasons that may justify such spending
- b) Multi National Companies often have to make a choice between staffing international operations with local employees or foreigners. Explain the factors that should be considered in making such a decision.
- a) Explain the circumstances under which an organization may find it necessary to review the salaries of its employees
- b) Explain five non-financial benefits that may be provided to employees in an organization
- a) Explain the benefits that an organization may derive from carrying out exit interviews on employees leaving the organization