Compensation and Benefits to Minimize Employee Turnover - Case Study Example

Introduction to the company:- The company is in to speciality retail business which sells storage solutions for home and office with presence in over 47 locations throughout the country. If we see now the stores are approximately 2500 square feet on an average and showcase more than 10000 innovative products and all this to help our customers save on space and time. The layout of the store is then divided into various lifestyle sections marked with brightly collared banners such as Closet, Kitchen, Office and Laundry. Whenever anyone peeps into the store there is always some one available to help weather it be a small storage problem or more complex organisational challenges. Our Customers not only get much better services than any other company but also fresh ideas and a very interactive shopping experience. The average growth rate of the company is 20% year on year since the start of its operations. One of the keys to the company's success is its devotion to recruiting and keeping a highly qualified workforce Its success is reflected in the fact that it has made Fortune's list of "100 Best Places to Work in America" in each of the past ten years. Total number of employees currently working for the company is close to 4000 and last years total revenue was $650 million. The Human Resources (HR) Audit Programme: - HR audit is a process of examining policies, procedures, documentation, systems, and practices with respect to an organisation’s HR functions. The purpose of the audit is to reveal the strengths and weaknesses in the non-profit’s human resources system, and any issues needing resolution. When the focus is on improving the overall HR process of the organisation it is at that time that the HR audit provides best results. The HR audit is more like a diagnostic tool, not like a prescriptive instrument. The HR Audit function helps us to recognize what is that we are missing or may be what we need to improve, but in no sense it can tell us what we need to do to deal with these issues. The most suitable exercise of the HR audit is only when an organisation is prepared to take action on the findings, and to develop its HR function to a level where it’s full potential to carry the organisation’s mission and objectives can be realised Werther and Davis, 1996. Meaning and purpose of HRA:- The process of examining documentation, policies, procedures, systems, and practices with respect to an organisation’s HR functions is called the Human Resources (HR) audit. The most important principle behind the HR audit is to expose both the strengths and weaknesses in the organisation’s HR system, and any other issues that might be needing decision. The HR audit is considered to be working at its best only when the focus is on analyzing and improving the HR function in the organisation Aswathappa, 2006. HR audit recommended for the company:- Compensation and Benefits: - One of the most complex HR systems is the employee benefit programmes which also includes compensation and benefits. The system of recognition and reward is supposed to help and support the organisation's strategic mission it should also work towards motivating employees and reward performance. The company’s compensation systems should be both externally competitive and provide internal equity. A very important area of risk for U.K. organisations is to very fairly complying with the Fair Labour Standards Act (FLSA) regarding overtime pay. The companies have to sort every position as non-exempt which is subject to overtime pay or exempt which is not subject to overtime pay. Also they must correctly calculate overtime pay for non-exempt employees. The payroll function should be reviewed to ensure that new hires, personnel actions, work hours, and differential pay are efficiently processed so that pay checks are accurate and processed timely. The verification of controls should be done by the auditors so as to make sure that there is a strict maintenance of the confidentiality of personnel data, any more additions to basic compensation are aptly calculated and certified, the compliance with tax and deductions is made fully, the employees that are terminating their payrolls are processed appropriately, and costs of the payroll are in accordance with the objectives of budgeting. While we also see that the other part of the benefits program includes leave and vacation policy, medical insurance, life insurance, and some variety of the retirement or savings plan which is sponsored by the organisation. Other Factors that must be considered auditing benefit plans are external competitiveness, cost effectiveness, management goals, employee needs, and compliance with state and federal laws. Poorly designed benefit plans are not only a burden on the firm’s budgets but they also may not support the organisation's strategies Bandyopadhyay, 2005. Objectives of doing Compensation and Benefits HRA:- The audit in itself is an investigative tool, not a regulatory instrument. It helps us to identify certain areas of compensation and benefits where we need improvement it may also provide the way to tackle that problem. The best use of the audit is only when the company is ready to realise and then implement the findings of the report, and to bring out the Compensation and Benefits function to a place where its full possible support towards the organisation’s mission and objectives can be realised Matani, 2006. Benefits of this Audit:- The benefits of applying Compensation and Benefits Audit for the company are :- Cost-benefit analysis for the HR audit program:- The total benefit of the whole Compensation and Benefits audit = 25 million The total cost of the programme = 10 million So total benefit = 15 million It helps to find out the proper contribution of the HR department towards the organisation, or more precisely the audit programme that we are doing for the company, Development of the professional image of the HR department of the organisation, Reduce the HR cost, Motivation of the HR personnel, Find out the problems and solve them smoothly, Provides timely legal requirement, Sound Performance Appraisal Systems, Systematic job analysis, Smooth adoption of the changing mindset. Recommendations for implementing the HR audit program:- The cost benefit analysis shows that the HR audit for compensation and benefit results in about 15 million in savings but this should be done in a timely and planned manner. The questionnaire in Appendix section should be filled and analysed to perform the audit function this will help in identifying any of the problem areas that are present and then we can find out the solutions to these problems there by reducing the cost for the company. An auditor reviewing workforce-planning efforts should focus on whether HR audit is performing adequate analyses and developing action plans to ensure the organisation is not left with a shortage of qualified workers. Auditors should assess whether appraisals are done fairly and in a timely manner, these are based on job specific criterion, and do not document any information that is considered discriminatory in nature all this should be assessed while managing the Employee performance management system. Auditors when working on compensation area may then want to consult an expert in this field for better results. The auditor should make sure that during an audit: a reimbursement policy has been documented that elaborates on how the company may want to compensate its people with respect to its position in the labour market; there are new and updated job descriptions for each and every position; a through market analysis has been conducted; an exhaustive salary structure has been planed to help manage pay, and an suitable job assessment system is being used to fit the jobs into the salary structure. Follow-up procedure:- Improving the HR system takes some time. A plan of work with a timeline, accountability, and deliverables — should be created after the team reviews the completed audit and identifies areas where improvement is needed in compensation and benefit part. Review and Follow up should be a regular management function, performed on an ongoing basis. This is a fast and low cost approach for handling the compensation area (due to the questionnaire which limits the time for diagnosis), this is a very in depth report and will hence help us in making right decisions for the company, this approach is very creative and involves both questionnaire and group thinking so as to have the best of both the worlds. Conclusion:- The main functions of compensation and benefit audit under human resources audit are to take specific actions that will help minimize employee turnover orientation, working conditions, remuneration and benefits and opportunities for advancement. Therefore, quality of turnover is more important than the quantity of people leaving and joining the industry. Human resources management should create a work environment to make employee realize that it makes a sense to work in the factory rather than staying at home and waste their time Vito, 2008. References:- 1. Werther William.B. and Davis,Keith Human Resource Management and Personnel Management, 5th edition, McGraw-hill, 1996. 2. Aswathappa, K.Human Resource Management and Personnel Management, 4th edition, McGraw-hill, 2006. 3. Bandyopadhyay, Dr. Parimalendu Human Resource Audit, http://www.indianmba.com/Faculty_Column/FC550/fc550.html 4. Matani, A.G. Human Resource Audit in Industries, Science Tech Entrepreneur, 2006 5. Vito, Kelli W. The human resources audit: adding HR to the regular audit cycle can help ensure major risks aren't overlooked, April 2008, http://findarticles.com/p/articles/mi_m4153/is_2_65/ai_n25449312/pg_3/?tag=content;col1 Appendix:- Audit questionnaire of compensation and benefits 1. How is the compensation plan and the package being told to employees? 2. What are the other cultural issues or otherwise beliefs that are associated or linked to compensation in your organization? 3. In your company what is the eligibility for the vacations? 4. Is there a limit to the number of days of vacation that can accrued over a period of time? 5. Is there a provision to substitute sick leave with a vacation? 6. In what way the unused or the accrued vacation treated? 7. Is there a way in which other employees can give their sick leaves to the employees in need? 8. In what manner is the compensation and benefit plan communicated to the employees? 9. How is the health insurance plan for the employees? 10. What about the coverage of the dependents in the insurance plan are they covered in part or ful? 11. Is the domestic partner also covered in the policy? 12. Are their any eligibility requirements for health insurance and other benefits? 13. requirements for coverage? • Dental • Vision • Disability • Employee Assistance Program • Life Insurance • Other wellness benefits • Flex benefit plan • Other benefits 14. Are there any pension or retirement plan? Can you explain them? 15. What is the period for vesting? 16. Can employees also contribute? 17. Is there a provision of putting pretax dollars to be put into some form of deferment plan? 18. What kind of holidays are paid and which employees are eligible for them? 19. What is the organisation’s schedule for vacation, and how is it earned? 20. Is there a formal compensation program? 21. How are the wages of employees set? 22. Are there any salary ranges set formally? 23. If so then, are they made public to employees? 24. How are different jobs rated? 25. What is the frequency of jobs being re-evaluated or updated? 26. Are there any kind of salary surveys being used to come to the salary figures? 27. Are pay ranges revised as a result of these surveys? How frequently? 28. Who in your organization administers the compensation program and what is his position? 29. Are there any merit increases that are given to the employees? If so, are they integrated with performance evaluation? 30. Is there any bonus system followed in the organisation, and if so how is it structured? Read More