compensating flexible workforce

Dr. G C Mohanta, BE(Mech), MSc(Engg), MBA, PhD(Mgt)

Professor

Compensating Flexible Workforce: Compensating Flexible Workforce: Contingent Employees and Flexible Contingent Employees and Flexible

Work SchedulesWork Schedules

Flexible Workforce/Contingent Employees

Part-time employees

Temporary & on-call workers

Leased employees

Independent contractors

Freelancers

Consultants

Contingent Workers

Engage in tentative employment 50% male/female 12.5 million employed in 2001 29 million worked on flexible schedule 26.1% of all civilian workers

Employed Contingent Workers in 2001

TYPE NUMBERIndependents 8,858,000Part-Time 2,245,000On-Call 2,089,000Temporary 1,169,000

Leased 633,000

Benefits CostsBenefit Full-time Part-timePaid leave $1.89 $0.37Supplement pay 0.81 0.17Insurance 2.07 0.50Retirement 1.09 0.19Other 0.05 <0.01 Legally-required 2.27

1.44 Total $8.19 $2.68

Job Sharing 2 or more part-timers perform 1 job Reduces costs Increases flexibility Maintains productivity levels May increase morale & loyalty

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

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

Rise In Use Of Contingent Worker Economic recessions

International competition

From manufacturing to service

More females in workforce

Service Divisions Transportation

Communication

Public utilities

Wholesale trade

Retail trade Government

Federal Compensation Guidelines ERISA (Employee Retirement Income Security Act) NLRA (National Labour Relations Act) ADA (Americans with Disabilities Act) ADEA (Age Discrimination in Employment Act) Title VII of 1964 Civil Rights Act - outlawed major forms of

discrimination against blacks & women including racial segregation

FLSA (Fair Labour Standards Act ) - established minimum wage, guaranteed ’time and a half’ for overtime, prohibited employment of minors

COBRA (Consolidated Omnibus Budget Reconciliation Act ) - workers and their families can choose to continue group health benefits during voluntary or involuntary job loss/reduction in hours worked/transition between jobs/ death/divorce

FMLA (Family and Medical Leave Act) – employees can take unpaid, job-protected leave for specified family & medical reasons with continuation of group health insurance coverage

Wage Comparisons in 2004Group F-T P-T

Management & Professional $30.38 $23.79

Production 14.62 8.92Service 10.26 7.57

Overall Average $19.05 $10.17

Benefits Offered In 2004 % of CompaniesType Offering Benefits Paid time-off 25%

Medical insurance 11%

Retirement 20%

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

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 non-highly paid

workforce

Independent Contractors

Freelancers & consultants Companies not responsible 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

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

Right To Control Test IRC test to determine workers’

independence 20 Considerations, including:

Hiring, training, supervising, firing Hours Services Compensation Equipment, materials, location

Flexible Work Schedules

Flextime

Compressed work weeks

Telecommuting

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

Compressed Workweeks Example:

40 hours in 3 - 4 days Possible benefits

Can promote recruitment and retention Can reduce commuting time Can allow more family time

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

Telecommuting Arrangements Satellite work centers Neighborhood work centers Nomadic executive office Work off-site and/or on-site Temporary or permanently

The flexible workforce Definition: Definition: A workforce that can respond A workforce that can respond

quickly in quantity and type to quickly in quantity and type to changes in demand a business may changes in demand a business may face. face.

© PhotoDisc

The flexible workforceThe organization of a flexible The organization of a flexible

workforceworkforce

© PhotoDisc

Core workers

Periphery Workers

The flexible workforceFull-time employees Full-time employees

who have specific who have specific skills and job skills and job security security

Core workers Core workers

The flexible workforcePart-time or Part-time or

temporary workers temporary workers who available who available whenever neededwhenever needed

Core workers Core workers

Periphery workers Periphery workers

The flexible workforceExamples of flexible workforce

practices:Part-time Part-time Temporary Temporary Bank time Bank time Job sharing Job sharing

© PhotoDisc

The flexible workforceMajor advantages of a flexible Major advantages of a flexible

workforceworkforce: : Employee benefiting from flexible working Employee benefiting from flexible working

hours hours More employee opportunities of training More employee opportunities of training

and being multi-skilledand being multi-skilledReducing business costs and increasing Reducing business costs and increasing

productivityproductivityReacting quickly to changes in the Reacting quickly to changes in the

workforceworkforce © PhotoDisc

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HR Issues in the New Workplace

In opening years of the 21st century, largest employer in U.S. was a temporary employment agency, Manpower, Inc.

Temporary Employees do everything from data entry to interim CEO

Contingent workers = people who work for an organization, but not on a permanent or full-time basis, including temporary placements, contracted professionals, or leased employees

Temporary Employees

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HR Issues in the New Workplace

Telecommuting and virtual teams are related trends

Telecommuting = using computers and telecommunications equipment to perform work from home or another remote location

Work anywhere - wireless Internet devices, laptops, cell phones, fax machines

Extreme telecommuting = people live nd work in countries far away from the organization’s physical location

Technology

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HR Issues in the New Workplace

Telecommuting is one way organizations help employees lead more balanced lives

Flexible scheduling important in today’s workplace – 27% of workforce/flexible hours

Broad Work-Life Balance initiatives – critical retention strategy – on-site gym & childcare, paid leaves & sabbaticals

Work-Life Balance

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HR Issues in the New Workplace

Downsizing = intentional, planned reduction in the size of a company’s workforce

Managers can smooth the downsizing process

Regularly communicating with employees

Providing them with as much information as possible

Providing assistance to workers who will lose their jobs

Using training and development for remaining employees

Downsizing

The Flexible WorkforceCore workers

Fulltime workers

Contingent workers Part time employeesContract / Outsourced

workers Temporary workersInterns

Flexible SchedulesFlexible work hoursCore timeFlextimeCompressed work weeks

Telecommuting

Case

Everyone telecommutes at your firm. All work is done in virtual teams of four. Divide up into groups of four and respond to the following questions:

How will you organize your team?Do you need a virtual leader?How will you select your virtual team?How will you hold team members

accountable?