Prentice Hall, Inc. © A Human Resource Management Approach STRATEGIC COMPENSATION Prepared by David Oakes Chapter 14 Compensating the Flexible Workforce: Contingent Employees and Flexible Work Schedules

Prentice Hall, Inc. © Contingent Workers  Engage in tentative employment  50% male/female  12.5 million employed in 2001  29 million worked a flexible schedule  26.1% of all civilian workers

Prentice Hall, Inc. © Types Of Contingent Workers  Part-time employees  Temporary & on-call workers  Leased employees  Independent contractors, freelancers consultants

Prentice Hall, Inc. © Employed Contingent Workers in 2001 TYPE NUMBER Independents 8,858,000 Part-Time 2,245,000 On-Call 2,089,000 Temporary 1,169,000 Leased 633,000

Prentice Hall, Inc. © Benefits Costs Benefit Full-time Part-time Paid leave $1.89 $0.37 Supplement pay Insurance Retirement Other 0.05 <0.01 Legally-required Total $8.19 $2.68

Prentice Hall, Inc. © Job Sharing  2 or more part-timers perform 1 job  Reduces costs  Increases flexibility  Maintains productivity levels  May increase morale & loyalty

Prentice Hall, Inc. © Temporary Workers  Fill in for core employees  Help ease high demand periods  Help determine future employment needs  May be assessed for a core position  Don’t receive company benefits

Prentice Hall, Inc. © Leased Employee Arrangements  Lease company does all HRM functions  Fees either % of payroll, or % per employee  Employees work for contract duration  Food service, security, building maintenance, administration

Prentice Hall, Inc. © Rise In Use Of Contingent Worker  Economic recessions  International competition  From manufacturing to service  More females in workforce

Prentice Hall, Inc. © Service Divisions  Transportation  Communication  Public utilities  Wholesale trade  Retail trade  Government

Prentice Hall, Inc. © Federal Compensation Guidelines  ERISA  NLRA  ADA  ADEA  Title VII, of 1964 Civil Rights Act  FLSA  COBRA

Prentice Hall, Inc. © Wage Comparisons in 2004 Group F-T P-T Management & Professional $30.38 $23.79 Production Service Overall Average $19.05 $10.17

Prentice Hall, Inc. © Benefits Offered In 2004 % of Companies Type Offering Benefits Paid time-off 25% Medical insurance 11% Retirement 20%

Prentice Hall, Inc. © Leased Workers’ Benefits  Leasing company is legal employer  In 2001, average wage was $19.75  Leasing & hiring companies responsible for discretionary benefits  Covered by safe harbor rules

Prentice Hall, Inc. © Safe Harbor Rules  Leased employees covered by leasing company’s pension plan  Nonintegrated employer contribution rate of 10%  Full & immediate participation in vesting  Leased employees less than 20% of n on-highly paid workforce

Prentice Hall, Inc. © INDEPENDENT CONTRACTORS  Freelancers & consultants  Companies not responsibility for  Federal Taxes  FLSA Overtime or Minimum Wage  Workers’ Compensation  ERISA, FMLA, NLRA, ADA, Title VII of Civil Rights Act  Economic reality test  Right to work test

Prentice Hall, Inc. © Economic Reality Test  Extent a worker controls methods & results  The control a company has on worker’s earnings  Importance of worker’s service to the company  Initiative or skill level required  Permanency, exclusivity, or length of assignment  Worker’s investment in materials or equipment

Prentice Hall, Inc. © Right To Control Test  IRC test to determine workers’ independence  20 Considerations, including:  Hiring, training, supervising, firing  Hours  Services  Compensation  Equipment, materials, location

Prentice Hall, Inc. © Flexible Work Schedules  Flextime  Compressed work weeks  Telecommuting

Prentice Hall, Inc. © Flextime  Set weekly not daily hours  May have to work core hours  Possible employer benefits  Lower tardiness & absenteeism  Higher productivity  Extended business hours  Possible employer drawbacks  Increased overhead costs  Coordination problems

Prentice Hall, Inc. © Compressed Workweeks  Example:  40 hours in days  Possible benefits  Can promote recruitment and retention  Can reduce commuting time  Can allow more family time

Prentice Hall, Inc. © Telecommuting  Employees work on-site & off-site  Constant direct contact with other employees  Possible benefits  Same as with flextime  Possible disadvantages  Less direct employee interactions  Makes performance appraisals difficult

Prentice Hall, Inc. © Telecommuting Arrangements  Satellite work centers  Neighborhood work centers  Nomadic executive office  Work off-site and/or on-site  Temporary or permanently