A personality profile is a tool used to provide an evaluation of an employee's personal attributes, values and life skills in an effort to maximize his or her job performance and contribution to the company. Questions in a personality profile test, which can be taken traditionally or online, are designed to seek out information about an employee's temperament, decision-making methods, communication style and general attitude towards work and recreation. The information is used to match the right employee to the right project or task, especially when group work or telecommuting is involved. There are two generally accepted categories of personality profile tests, trait and type.
Trait personality profile tests, such as Orpheus, 16 PF, and OPQ, operate on the assumption that personality is made up of a number of characteristics. The goal of the test is to document the employee's characteristics and match the characteristics to appropriate roles within the company.
Type personality profile tests, such as Myers-Briggs, Insights Discovery, and the Keirsey Temperament Sorter, propose that people fall into well-defined categories. The goal of the test is to identify the category the employee belongs to, share the information, and build team skills by having team members become aware of the talents associated with each category.
However, an employer shouldn’t weigh too much into personality profiling i.e. more than 30% when making a decision for recruitment as there is other valuable information to be made during interviews i.e. work experience and so forth. Therefore it is more supplementary as opposed to decision making tools.
Sunday, February 8, 2009
Friday, January 30, 2009
Contract of Service Vs Contract for Service
I’ve decided to write about this (with some reference from Industrial Relations practitioner as an advisor) as many HR practitioners that I’ve personally known could not differentiate the above while some might even suggest it’s just terminology differentiation.
Contract of Service
A contract of service is any agreement whether in writing or verbal, expressed or implied, whereby:
- One person agrees to employ another as an employee, and
- The other person agrees to serve the employer as an employee
Note: An apprenticeship contract or agreement is also considered a contract of service.
Contract of Service
A contract of service is any agreement whether in writing or verbal, expressed or implied, whereby:
- One person agrees to employ another as an employee, and
- The other person agrees to serve the employer as an employee
Note: An apprenticeship contract or agreement is also considered a contract of service.
A contract of service can be in the form of a letter of appointment/employment. The employer cannot change the terms and conditions of employment unless the employee agrees to it. Any terms and conditions of employment, in a contract of service, that is less favourable than the relevant provision under the Employment Act is illegal, null and void. The provision in the Act will take precedence over a particular contractual term that is less favourable.
Contract for Service
In a contract for service, there is no employer and employee relationship. The person is usually self-employed or may provide his/her services on a freelance basis at a fee. He/she is not an employee within the definition in the Employment Act.
Difference Between a Contract of Service and a Contract for Service
A contract of service is an agreement whereby one person agrees to employ another as an employee and the other agrees to serve his/her employer as an employee. The employer would need to contribute EPF and comply with relevant statutory benefits such as annual leave, sick leave and et cetera for its employees engaged under a contract of service.
On the other hand, a contract for service is an agreement whereby a person is engaged as an independent contractor, such as a self-employed person or vendor engaged for a fee to carry out an assignment or a project for the company. Under such a work arrangement, there is no employer-employee relationship, and the employee is not covered by the Employment Act.
There is no single conclusive test to distinguish a contract of service from a contract for service. Some of the factors to be considered in identifying a contract of service include (non-exhaustive):
• Control Test
• Independence Test
• Integration Test
• Economic Reality Test
The Tests
Control Test
The traditional test, how much control is being exercised over the worker by the employer. The more control that is being exercised, the more likely it is that the worker is an employee regardless of what the contract says.
Traditionally ‘masters’ exercised actual control over their ‘servants.’ However, in more recent days, because people are becoming more specialized, employees will often know more about the subject area they are working in than their employers. The control test does not therefore look at whether the employer is operating actual control, but rather asks whether the employer could exercise control.
Independence Test
It’s pretty much the flip side of the control test, does the worker have independence in deciding how his/her work is to be done, can he/she decide his/her own work hours, subcontract out work, and et cetera.
Integration Test
Is the work being performed under the contract integral to the operation of the business structure as a whole, or is it only works on the side of the main business? One feature which seems to run through the instances is that under a contract of service, a person is employed as part of the business and his/her work is done as an integral part of the business whereas under a contract for service, his/her work, although done for the business, is not integrated into it but is only an accessory to it.
Economic Reality Test
Is the worker dependent upon the job for economic survival (can other employment be undertaken, for example).
Thursday, January 29, 2009
Behavioral Based Interviewing
What exactly is behavior based interviewing?
Behavioral based interviewing is a new method of interviewing that more and more organizations are using in their hiring process. The basic premise behind behavioral interviewing is this, “The most accurate predictor of future performance is past performance in a similar situation”. It provides a more objective set of facts to make employment decisions than other interviewing methods. Traditional interview questions ask general questions such as “Tell me about yourself.” The process of behavioral interviewing is much more probing and works very differently.
Important points about behavior based interviewing:
- Employers predetermine which skills are necessary for the job for which they are looking and then ask very pointed questions to determine if the candidate possesses those skills.
- In the interview, interviewee response needs to be specific and detailed. Ask him/her about a particular situation that relates to the competencies required, not a general one. Ask him/her briefly the situation, what he/she did specifically, and the positive result or outcome. Frame it in a three step process (STAR):
1. Situation/Task
2. Action
3. Result
For example:
Question:
Tell me about a time when you went out of your way to satisfy a customer.
Situation/Task:
I was working in the production department of a large publishing company. We received a letter from a 12 year old girl who was unhappy because the gold design had worn off the cover of a book we had published. She wanted a refund. My boss gave the complaint to me to handle.
Action:
I immediately requested a refund cheque from our accounting department. I also called our printer, who investigated and identified one run of books in which the covers had been improperly printed. I obtained a copy of the book with a properly printed cover and sent the book, the refund cheque and a personal letter to the girl, thanking her for pointing out the problem and apologizing for the inconvenience.
Result:
The girl’s mother called to thank me for the response. She told me she would recommend our books to all her friends with children.
The interviewee tells a story for a few minutes, typically the interviewer will pick apart the story to try to get at the specific behavior(s). The interviewer can probe further for more depth or detail such as “What were you thinking at that point?” or “Tell me more about your meeting with that person,” or “Lead me through your decision process.”
Always listen carefully to the answer, ask for clarification if necessary, and make sure the interviewee answer the question completely.
Some typical questions are listed below:
- Describe a situation in which you were able to use persuasion to successfully convince someone to see things your way.
- Describe an instance when you had to think on your feet to extricate yourself from a difficult situation.
- Give me a specific example of a time when you used good judgment and logic in solving a problem.
- By providing examples, convince me that you can adapt to a wide variety of people, situations and environments.
- Describe a time on any job that you held in which you were faced with problems or stresses that tested your coping skills.
- Give an example of a time in which you had to be relatively quick in coming to a decision.
- Tell me about a time in which you had to use your written communication skills in order to get an important point across.
- Give me a specific occasion in which you conformed to a policy with which you did not agree.
- Give me an example of an important goal which you had set in the past and tell me about your success in reaching it.
- Describe the most significant or creative presentation which you have had to complete.
- Tell me about a time when you had to go above and beyond the call of duty in order to get a job done.
- Give me an example of a time when you were able to successfully communicate with another person even when that individual may not have personally liked you (or vice versa).
Behavioral based interviewing is a new method of interviewing that more and more organizations are using in their hiring process. The basic premise behind behavioral interviewing is this, “The most accurate predictor of future performance is past performance in a similar situation”. It provides a more objective set of facts to make employment decisions than other interviewing methods. Traditional interview questions ask general questions such as “Tell me about yourself.” The process of behavioral interviewing is much more probing and works very differently.
Important points about behavior based interviewing:
- Employers predetermine which skills are necessary for the job for which they are looking and then ask very pointed questions to determine if the candidate possesses those skills.
- In the interview, interviewee response needs to be specific and detailed. Ask him/her about a particular situation that relates to the competencies required, not a general one. Ask him/her briefly the situation, what he/she did specifically, and the positive result or outcome. Frame it in a three step process (STAR):
1. Situation/Task
2. Action
3. Result
For example:
Question:
Tell me about a time when you went out of your way to satisfy a customer.
Situation/Task:
I was working in the production department of a large publishing company. We received a letter from a 12 year old girl who was unhappy because the gold design had worn off the cover of a book we had published. She wanted a refund. My boss gave the complaint to me to handle.
Action:
I immediately requested a refund cheque from our accounting department. I also called our printer, who investigated and identified one run of books in which the covers had been improperly printed. I obtained a copy of the book with a properly printed cover and sent the book, the refund cheque and a personal letter to the girl, thanking her for pointing out the problem and apologizing for the inconvenience.
Result:
The girl’s mother called to thank me for the response. She told me she would recommend our books to all her friends with children.
The interviewee tells a story for a few minutes, typically the interviewer will pick apart the story to try to get at the specific behavior(s). The interviewer can probe further for more depth or detail such as “What were you thinking at that point?” or “Tell me more about your meeting with that person,” or “Lead me through your decision process.”
Always listen carefully to the answer, ask for clarification if necessary, and make sure the interviewee answer the question completely.
Some typical questions are listed below:
- Describe a situation in which you were able to use persuasion to successfully convince someone to see things your way.
- Describe an instance when you had to think on your feet to extricate yourself from a difficult situation.
- Give me a specific example of a time when you used good judgment and logic in solving a problem.
- By providing examples, convince me that you can adapt to a wide variety of people, situations and environments.
- Describe a time on any job that you held in which you were faced with problems or stresses that tested your coping skills.
- Give an example of a time in which you had to be relatively quick in coming to a decision.
- Tell me about a time in which you had to use your written communication skills in order to get an important point across.
- Give me a specific occasion in which you conformed to a policy with which you did not agree.
- Give me an example of an important goal which you had set in the past and tell me about your success in reaching it.
- Describe the most significant or creative presentation which you have had to complete.
- Tell me about a time when you had to go above and beyond the call of duty in order to get a job done.
- Give me an example of a time when you were able to successfully communicate with another person even when that individual may not have personally liked you (or vice versa).
Organizational Communication
Organizational communication can be both internal and external in nature. Internal communication is largely communicated to the employee by management and vice-versa in order to achieve synergized effort towards organizational effectiveness. External communication is mainly communicating to the outside world such as media, customers, government agencies, potential investors and so forth for the purpose of increasing market share and capital while creating brand awareness.
We can see that companies pour scads of money into communication, only not employee communication. Advertising usually gets the lion's share of the budget allocated to communication. Advertising creates awareness of a company's products or services, leading targeted customers to differentiate those products from what the competition offers. It creates brand, which is generally defined as the way someone feels about a company or its offerings.
But the fact is media relations efforts or any of the other kinds of communication will not succeed if employees don't understand and agree with the messages the company is delivering, and act accordingly. There are two reasons for this:
- Employees are a company's face to all its various constituencies.
- Employees execute the business plan that is at the heart of all the communication aimed at other audiences.
Integrate information and transactions. Policy documents about, for example, company travel can be linked directly to the page where employees can book their flights, rental cars, and hotels. A page providing information that a customer service rep might need can include a link to a related element of a customer satisfaction improvement initiative.
Deliver multimedia. Audio, video, and animation are relatively easy to incorporate on an intranet (given enough bandwidth to handle it).
Improvement Methods
All-Hands Meetings
Use the intranet to promote all-hands meetings. As part of the promotion, include the opportunity for employees to submit questions in advance. This will accommodate employees who cannot be at the live meeting, including those from off-site facilities. Use a question submission form on the intranet.
If the intranet has the infrastructure to support it, webcast the meeting to off-site facilities. Archive the video as a stream for employees who cannot watch it live (due to geographical widespread or business engagements). Webcasting requires adequate bandwidth, but if you have this capability, it is not an outrageously expensive proposition.
Following the meeting, prepare a news article about the highlights for the homepage news listing. The complete article will include all Q&As, access to the streaming video, and any documents used at the meeting (for example, memos or PowerPoint presentations).
Staff Movements and Others
If ever the intranet was the perfect place for something, it is this employee communication staple for showcasing promotions, transfers, retirements, retiree obituaries, new hires, weddings, babies, company sports league results, and so on.
I am the last person to suggest that this is a waste of time. As much as many people argue that communicators need to focus 100 percent on business-related matters, I would argue that this is business related. Employees with whom you work might start out as colleagues, but later they may become friends. Making that social aspect of work a little more evident can increase job satisfaction and, by extension, commitment. Besides, people like to read this stuff. If you are already publishing it and try to take it away, you will hear complaints.
Thanks to the intranet, though, you don't have to dedicate anywhere near the kind of time to this communication it requires in print. For example, you can have a page created with hooks to the Human Resources Information System so that current anniversaries, promotions, transfers, and the like are automatically posted, set to update weekly. You could also invite employees to submit birth announcements and other such notable information through a content-publishing interface: Select the appropriate type of information (sports league score or wedding announcement, for instance), the salient information, and any dates, and it appears automatically on the page.
Create and maintain this page, and I am sure it will become one of the top visited pages on the intranet.
Q&A
Another staple of employee communications is the submit-your-question program. The employee communications department takes the questions and distributes them to appropriate subject-matter experts for an answer that appears in the company publication. With the intranet, employees don't need to wait for the publication to get an answer. Given support from senior management, you can remove employee communications from the mix. Make sure the subject-matter experts check the discussion forum every couple of days to answer any questions in their area, and you can let employees post the questions themselves.
News
One nice thing about a print publication is that everything is conveniently situated in one place. The nature of the news does not matter, news issued via press release to the media, marketplace news, or news from outside sources can all be found between the covers of the magazine.
On the intranet, news is everywhere. On some systems, you would need to follow dozens of links to find it all. Press releases are on one site, news generated by the employee communications department is on another. Competitor news is somewhere else, and who knows where to find marketplace news?
If you want employees to have access to news, ensure that they can do it from one place regardless of the nature of the news.
As for the news you want every employee to see, consider placing articles on more than one page. Using content management systems, news briefs can be tagged for inclusion on any number of pages. For example, an article about a competitor working in the financial services marketplace in Singapore could appear on the "Competitor" news brief page, the "Singapore" news brief page, and the "Financial Services" news brief page.
Once readers are on the news page, offer a couple of other conveniences, such as:
- Let employees print out a page of all of today's (or this week's) news items so they can read it on the go rather than be restrained to their computers.
- Let employees download a summary of the news to handheld devices such as a PDA. You can even make this feature available in a wireless configuration so employees away from a computer can still stay in the know.
Make It Viral
Online communications can get into the hands of employees who may not otherwise see it. The way to achieve this is through a viral approach. (The term viral, in this context, means that your employees distribute the news for you.) Include a link that invites employees to "e-mail this article to a colleague."
We can see that companies pour scads of money into communication, only not employee communication. Advertising usually gets the lion's share of the budget allocated to communication. Advertising creates awareness of a company's products or services, leading targeted customers to differentiate those products from what the competition offers. It creates brand, which is generally defined as the way someone feels about a company or its offerings.
But the fact is media relations efforts or any of the other kinds of communication will not succeed if employees don't understand and agree with the messages the company is delivering, and act accordingly. There are two reasons for this:
- Employees are a company's face to all its various constituencies.
- Employees execute the business plan that is at the heart of all the communication aimed at other audiences.
Hewlett Packard CEO Carly Fiorina was quoted in The Wall Street Journal as saying, "Employee communication is as vital right now as shareholder communication."
To be effective, employee communication must achieve the following three results, which are critical to an organization's success:
1. Employees represent the company to external audiences in a manner consistent with the image the company's leaders want the outside world to see. They walk the talk. They are brand ambassadors. Their behavior represents the ideal that company leaders’ desire.
2. Employees produce quality work that satisfies the needs of customers. They innovate and collaborate to produce what the company needs them to produce, helping the company achieve competitiveness and profitability.
3. Employees don't quit and go to work some place better. Companies that experience high turnover particularly among higher level staff and key contributors struggle to find the talent required to execute the company's plans.
Therefore it is imperative that an organization communicates effectively internally before reaching out to their audience.
As we know, technology can be a catalyst in communication if it’s been employed in a careful manner, converting suitable traditional communication channels into modern communication tools. Therefore, I would recommend intranet as an improvement process to basically anyone as it is capable of:
Improve access and speed of delivery. Look at nearly any internal communication audit. Invariably, one of the biggest complaints is that information is hard to find and that news reaches employees late. The intranet can store unlimited volumes of information and deliver news almost instantaneously.
Integrate information and transactions. Policy documents about, for example, company travel can be linked directly to the page where employees can book their flights, rental cars, and hotels. A page providing information that a customer service rep might need can include a link to a related element of a customer satisfaction improvement initiative.
Deliver multimedia. Audio, video, and animation are relatively easy to incorporate on an intranet (given enough bandwidth to handle it).
Improvement Methods
All-Hands Meetings
Use the intranet to promote all-hands meetings. As part of the promotion, include the opportunity for employees to submit questions in advance. This will accommodate employees who cannot be at the live meeting, including those from off-site facilities. Use a question submission form on the intranet.
If the intranet has the infrastructure to support it, webcast the meeting to off-site facilities. Archive the video as a stream for employees who cannot watch it live (due to geographical widespread or business engagements). Webcasting requires adequate bandwidth, but if you have this capability, it is not an outrageously expensive proposition.
Following the meeting, prepare a news article about the highlights for the homepage news listing. The complete article will include all Q&As, access to the streaming video, and any documents used at the meeting (for example, memos or PowerPoint presentations).
Staff Movements and Others
If ever the intranet was the perfect place for something, it is this employee communication staple for showcasing promotions, transfers, retirements, retiree obituaries, new hires, weddings, babies, company sports league results, and so on.
I am the last person to suggest that this is a waste of time. As much as many people argue that communicators need to focus 100 percent on business-related matters, I would argue that this is business related. Employees with whom you work might start out as colleagues, but later they may become friends. Making that social aspect of work a little more evident can increase job satisfaction and, by extension, commitment. Besides, people like to read this stuff. If you are already publishing it and try to take it away, you will hear complaints.
Thanks to the intranet, though, you don't have to dedicate anywhere near the kind of time to this communication it requires in print. For example, you can have a page created with hooks to the Human Resources Information System so that current anniversaries, promotions, transfers, and the like are automatically posted, set to update weekly. You could also invite employees to submit birth announcements and other such notable information through a content-publishing interface: Select the appropriate type of information (sports league score or wedding announcement, for instance), the salient information, and any dates, and it appears automatically on the page.
Create and maintain this page, and I am sure it will become one of the top visited pages on the intranet.
Q&A
Another staple of employee communications is the submit-your-question program. The employee communications department takes the questions and distributes them to appropriate subject-matter experts for an answer that appears in the company publication. With the intranet, employees don't need to wait for the publication to get an answer. Given support from senior management, you can remove employee communications from the mix. Make sure the subject-matter experts check the discussion forum every couple of days to answer any questions in their area, and you can let employees post the questions themselves.
News
One nice thing about a print publication is that everything is conveniently situated in one place. The nature of the news does not matter, news issued via press release to the media, marketplace news, or news from outside sources can all be found between the covers of the magazine.
On the intranet, news is everywhere. On some systems, you would need to follow dozens of links to find it all. Press releases are on one site, news generated by the employee communications department is on another. Competitor news is somewhere else, and who knows where to find marketplace news?
If you want employees to have access to news, ensure that they can do it from one place regardless of the nature of the news.
As for the news you want every employee to see, consider placing articles on more than one page. Using content management systems, news briefs can be tagged for inclusion on any number of pages. For example, an article about a competitor working in the financial services marketplace in Singapore could appear on the "Competitor" news brief page, the "Singapore" news brief page, and the "Financial Services" news brief page.
Once readers are on the news page, offer a couple of other conveniences, such as:
- Let employees print out a page of all of today's (or this week's) news items so they can read it on the go rather than be restrained to their computers.
- Let employees download a summary of the news to handheld devices such as a PDA. You can even make this feature available in a wireless configuration so employees away from a computer can still stay in the know.
Make It Viral
Online communications can get into the hands of employees who may not otherwise see it. The way to achieve this is through a viral approach. (The term viral, in this context, means that your employees distribute the news for you.) Include a link that invites employees to "e-mail this article to a colleague."
Flexi-Benefit
Definition
Benefits plan that allows employees to select from a pool of choices, some or all of which may be tax-advantaged. Potential choices include cash, retirement plan contributions, vacation days, and insurance. It is also known as Cafeteria Plan (though there are other infamous names such as Modular Plans, Private Health Services Plans, Core Plus Option Plans).
Introduction
Historically, employee benefit plans have been provided on a one-size-fits all basis, designed to meet the perceived needs of the assumed ‘typical employee and family.’
The diversity of employee needs and the advent of technology have contributed to a growing trend towards more flexible benefit arrangements. According to surveys, flexible benefit plans continue to grow in popularity and offer employees the opportunity to select those benefits they need, while helping the employer manages benefit plan costs. As a concept, flexible benefit plans have been around for about two decades. What is new, however, is that more employers seem to be using them. Benefits or options are paid for using the credits the employee has been assigned. Unused credits are commonly deposited into a health care spending account, cashed out, carried forward and etc. Employers determine how much they wish to contribute towards the plan, usually based on a flat dollar amount per employee or a percentage of each employee’s salary.
Flexible benefits are a natural choice for employers seeking to partner with employees in managing benefit plan costs.
For some organizations, a comprehensive flexible benefit plans with many benefits is the best solution. For others, a more practical approach might be to focus flexibility on three or four particular benefits. Others organizations may prefer to introduce flexibility one step at a time.
The best plan may not necessarily be the one that offers the greatest amount of employee choice while it is important that the plan design reflects the business reasons for introducing flexibility and the on-the-ground realities of the organization as well as employee demand.
Employer Benefits
In a tight employment market it can be very difficult to recruit and retain key employees. A 'flexible' approach to employee benefits can be very useful in achieving this goal.
Flexible benefit plans also allow the employer to pre-determine, control and fix their annual benefit contribution costs. Prior to the end of each year, the employer determines the amount of contributions for each employee for the next calendar year and the employer’s selected contribution amount remains fixed. The cost of the program is known and controlled by the plan sponsor.
Employee Benefits
Flexible benefits can help employees to utilize their benefits by increasing coverage in particular areas or by not duplicating coverage between spouses and it covers a wide range of non-taxable services.
Employees are looking for control over their health and well-being. Two of the top five attractors for Canadian employees according to a survey by Towers Perrin in 2002, were competitive health care benefits and recognition for work. At various points in their careers employees may require an assortment of benefits that cover diverse health strategies particular to their health or their family health needs. An employee with young children may have very different health coverage needs then someone who is approaching retirement. Flexible benefit plans adapt to these changing needs and can reduce the stress associated with these concerns. Flexible benefit plans can also be used as part of a workplace recognition program or as a reward for adapting healthy lifestyle choices that in turn save on future benefit plan usage.
Potential Problems
Flexible benefit plans are more difficult to administer and may not be accessible to companies with fewer than 100 people. Unwise employee benefit selection may result when employees may not have the expertise to select the proper benefits from the alternatives offered. An unwise selection can result in inadequate employee protection and losses. Another disadvantage to these plans is that if you do not spend the whole amount by the end of the plan year, you forfeit the remaining dollars. This is called the "USE IT OR LOSE IT" provision.
Recommendation
Defining the Strategy
Before drawing up a flexible benefit plans, it is important to consider fully the reasons for adopting this approach. If, because of the nature of the organization only a limited amount of flexibility is possible, then it may be better to save the time and expense of introducing a fully flexible benefit plans, instead consider a more limited approach. This might include allowing cash alternatives to company cars, or giving employees the ability to buy or sell holiday. Alternatively, it may consider voluntary benefits or total reward benefit statements.
Any new plan should be considered within the context of the existing reward strategy and should assess the motivational as well as the financial value of both current and future benefits. Typically it will take at least 12 months to design, implement and communicate a flexible benefit plans.
Organizing the Plan
Most flexible benefit plans are initially based on the existing benefits provision which is used to construct a new package. Certain benefits, such as sick pay and maternity benefit, ought to remain outside the plan. Some employers also prefer to exclude pensions from flexible benefits.
The employee is given a benefit allowance and a list of available benefits. The value of these benefits is not usually uniform across the workforce. For example, it is more expensive to provide life assurance for older employees and this must be reflected in an increased benefit allowance that enables an older member of staff to buy the same level of benefit as a younger one. Employees are also advised of the current level of their benefits and 'cost' of buying or selling these to suit their individual needs. There is typically a limit set on how much of the salary can be used to buy extra benefits and equally there is a baseline of benefits that must be kept and therefore to the extra salary that can be obtained by selling benefits.
Cash or Points?
Some plans show each of the benefits with a cash value and the employee uses this as the basis for calculating the effect of changes. The advantage of showing a cash value is that it gives employees an idea of what the benefit is truly worth and the cost that the employer is bearing. The danger of a cash system is that it may encourage employees to feel that they are being forced to buy benefits out of their own salary. Other plans use a points plan, where each benefit has a points rating and the employee has an allowance of a certain number of points.
Regardless of whether a points or a cash value plan is used, all plans make a clear distinction between notional salary and the final value of salary that is actually paid in the year (regardless of whether this is higher or lower than the notional salary). The actual value of salary continues to be used as the basis for items such as pension calculations and salary reviews.
Deciding On the Amount of Flexibility
When plans are being introduced, it is important to estimate the likely take-up of specific benefits. This will enable employers to obtain the most accurate possible quotations for the provision of each benefit. One problem associated with the introduction of flexible benefit plans is that the process of making selections actually changes the profile of the group requiring a particular benefit.
All plans are costed on the basis of predicted selections; where employees make significantly different choices, these are regarded as 'adverse selections'. For the success of the plan, the relative values of the benefits should be set so as to avoid too many adverse selections. They should also be arranged such that employees are not encouraged to make imprudent selections that will jeopardize their own security provision. The inclusion of core benefits guarantees a minimum level of protection. There must be a compromise between excessive flexibility that encourages inappropriate choices and too narrow a choice that does not meet the employees' expectations.
Before implementing a flexible benefit plans, organizations may find it worthwhile to survey their employees as to the type of benefits they favour and value. This would also assist in maximizing the value of the package to both employer and employee.
Choosing and Changing Benefits
Once the plan has been agreed, the choice of benefits is presented to the employees. To ensure a positive reception, it is important that the choices (and the implications of those choices) are clear. If the options are too complicated, or the method of making the choices is perceived as being difficult, then employees will simply default to their existing benefits package and much of the time and money spent in introducing the plan will have been wasted.
Many of the computerized systems that are used for administering such plans include an option that allows employees to model their own choices. Various selections can be made until the employee is satisfied with the outcome.
Most plans allow for changes in benefit selection to be made by a fixed date, once a year. Prior to this date, employees are sent a personalized document reminding them of their current selection and benefit allowance for the forthcoming year, and giving them the opportunity to amend the selection. It is important that this document is simple to use with the costs of the options laid out clearly. If the document is not returned by the specified date, the benefit package will typically remain at the previous levels or default to a standard package. Organizations should consider how to deal with those employees who will be off work during the selection period, for example on maternity leave, on extended holiday or secondment.Plans may restrict the amount of change between one year and the next. Typically if there are several levels of available benefit, employees may only alter benefit by one level at each renewal. In addition, benefits (such as life assurance) for a spouse or partner may not exceed those for the employee.
Although reviews take place annually, most organizations will allow changes to be made to the selection outside the normal renewal dates in exceptional circumstances. These typically include:
- marriage or divorce
- birth or adoption of a child
- death of a dependant
- long-term sickness absence
- promotion
Who Should Be Included In the Plans?
Early plans were often only for senior employees (because they received more benefits and also represented a small proportion of the workforce), but this tended to be divisive. Many companies who have flexible benefit plans now offer them to all permanent employees. If the wider workforce is to be included in the plan, it is important that any pilot should be based on a representative sample of the final spread.
Contents of Flexible Benefit Plans
Although there is no such thing as a typical flexible benefit plans, there are certain benefits that appear in most. Many plans differentiate between core benefits, some parts of which are financed by the employer, and voluntary benefits, which are paid for by the employee. The core benefits are those that a best-practice employer might be expected to provide and which, though the employee might adjust them, may not be entirely removed from the package.
Core Benefits In A Typical Plan
The contents of any plan depend on local circumstances, but core benefits that appear on many plans are:
- holidays
- life assurance
- private medical insurance
- critical illness insurance/long-term disability insurance
- personal accident insurance
Other benefits may be included but the number (and type) of benefits in a plan is a compromise between offering employees a wide choice and keeping the administration manageable.
Communication and Education
The most important elements in ensuring the success of a flexible benefit plans are effective communication and education. If employees are made aware of the reasons for, and benefits of, introducing flexible benefits they are less likely to dismiss the plan as simply a means of reducing costs. In general new plans are more likely to succeed if they are introduced on a cost-neutral basis (e.g. no overall gain to either side).
Before setting up a new plan it is advisable to consult employees over what type of benefits they would like to be offered. All suggestions should be given fair consideration, but care should be taken not to encourage undue expectations that it will be impossible to meet. By incorporating the views of employees, the plan is more likely to receive a positive welcome. Once the plan is in place, good communication is still essential so that employees are able to understand fully the benefits offered, and make appropriate choices. For instance, pharmaceutical firm Astra Zeneca adopted a phased approach when it brought in its flexible benefit plans. They began with 'awareness' for six months, followed by 'engagement' for a further three months, and then 'enrolment' for another three months, with the full embedding of the policy by the end of a year.
Examples of Communication Methods
As many means as possible should be used to communicate the details of the new plan. Possible methods include:
- road shows and open days
- intranet, including bulletin boards
- videos, CD-ROMs
- newsletters
- meetings, Q&A sessions, focus groups
- demonstrations with computer modeling
- telephone and e-mail help-lines
- one-to-one consultations
Summary
Flexible benefits are a hot topic, fitting in well with the wider total reward debate and talk of the mass customization of reward. As a practice, flexible benefits are set to increase as new software becomes available and the cost of implementation decreases allowing more organizations to set it up. Flexible benefits are seen as an ideal way of addressing diversity in benefits, as reinforcement of cultural change, harmonization of reward practices, especially during merger and acquisition, and an effective means of cost management. But they are not a 'magic' solution and need to be managed as part of an integrated reward strategy with clear goals and excellent support processes.
In conclusion, the usage of flexible benefit plans is a growing trend in view of changes in complexity of the modern society such as lifestyle, work complexity, single parenthood, and the society at large.
Subscribe to:
Posts (Atom)
