Dissecting Compensation & Benefits: Benefits

05 May 2019: With reference to my previous article on "Dissecting Compensation & Benefits: Compensation" (dated 2 May 2019), now let us dissect Benefits. Do bear in mind that this article is written from a Singapore benefits context (especially the example given by me, the author).

Definition:

• Benefits are perks offered to employees in addition to salary. Some of the common benefits are medical, disability, and life insurance; retirement benefits; paid leave; flexible work arrangement; and fringe benefits.
• Employee Benefits are programs an employer uses to supplement the cash compensation an employee received.

Benefits can be divided into 3 areas: -

1. Mandatory Benefits
2. Voluntary Benefits
3. Benefits Administration 

Mandatory Benefits
As a Benefits Specialist, the person need to have a good understanding of what are the mandatory benefits which are compulsory for an employer to provide for their employee. A good source for Singapore employment mandatory benefits can be found at the following government agency website https://www.mom.gov.sg/

Another great source of information is to purchase Mercer WBEG (Worldwide Benefits & Employment Guideline) Report. You can either buy it based on the region e.g., Asia Pacific or by individual country e.g., Singapore, Malaysia, etc. Just a disclaimer, I am not being paid by Mercer for this article. Click the hyperlink to visit mercer website Mercer WBEG


Voluntary Benefits
When it comes to voluntary benefits, most organization will focus on 4 main areas which are: -

1. Healthcare
2. Wellness
3. Retirement
4. Life Management (aka Group Insurance policies, which may include Group Term Life, Group Personal Accident, Group Hospitalization & Surgical, etc.)

To support this task, a typical organization based in Singapore may purchase "country benefits report" from Mercer, Hays Companies, Aon, or SNEF (Singapore National Employers Federation) to benchmark their benefits practice.


Benefits Administration
When it comes to benefits administration, the focus will be on the following:

• Managing Cost: some of the approach that help organization in managing the cost can include employees' contribution (co-payment), waiting period (in Singapore, an employee is eligible to benefits after 3 months of continuous employment with an organization), high deductible plans and wellness focus.

• Flexible Benefits: Giving employees the ownership and choice in benefits, some or all of which may be tax-advantages (do bear in mind that in Singapore, only related medical reimbursement has tax-advantages e.g., dental, immediate family medical cost, traditional Chinese medication (TCM), health screening, etc.). Flexi-benefits involving holiday tour and some insurance reimbursement are taxable. 

In summary, a benefits specialist / expert will need to have a good understanding of the country mandatory benefits and taxation related to the voluntary benefits they want to implement.

Source:

• Gregg Learning, 2019
• https://www.mbaskool.com/business-concepts/human-resources-hr-terms
• https://www.onetonline.org

++The End++

Dissecting Compensation & Benefits: Compensation

2 May 2019: When you talk about "Compensation & Benefits", it is actually 2 separate functions and area of expertise. I always find it very difficult to employ a C&B specialist with a well balance of compensation and benefits skill set. Now, let us dissect "Compensation" ...

Compensation is defined as pay / salary provided by an employer to an employee in return for work done.

Compensation comprised of two (2) core elements: -

1. Fixed base pay (e.g., basic salary) that does not vary;
2. Variable pay (e.g., variable bonus scheme, sales commission, etc.), which changes with performance results.

Usually, a basic compensation plan comprise of three (3) parts: -

1. Internal Alignment (IA)
2. External Competitiveness (EC)
3. Compensation Management (CM)

Internal Alignment: Makes pay comparison among jobs or skills level inside a single organization.

Step # 1: Job Analysis (JA)
It is the systematic process of collecting information that identifies similarities and differences in work. The outcome of JA is job documentation (e.g., Job Description).

Techniques of conducting JA: 

1. Observation
2. Interview
3. Questionnaire
4. Online (e.g., O Net)

Step # 2: Job Evaluation (JE)

It is the systematic process of determining the relatives worth of jobs. The outcome of JE is the development of an internal structure or hierarchical ranking of the job.

Note: Under Mercer methodology, I will be applying Mercer's e-IPE to determine the "Position Class" (aka PC) of the Job ... similar to job leveling.

Step # 3: Pay Policy

Deciding a pay policy is the process of determining whether the organization want to lead, lag or meet the market in compensation.

(source: Gregg Learning, 2018)

External Competitiveness (EC): Pay comparisons with competitors - other organization that hire people with same of similar knowledge, skills, and abilities.

Step # 4: Market Analysis

It is the process of analyzing compensation data gathered from other employers in a survey of the relevant labor market.

Note: Under Mercer methodology, I will be participating in Mercer's TRS (Total Remunerations Survey) to obtain the market data.

(source: Gregg Learning, 2018)

Step # 5: Base Pay Structure
A base pay structure is developed through job evaluation is merged with the external market pay rates in a single regression to develop a market pay line from which pay grades and ranges are develop.

A trained C&B Expert / Specialist will be able to "regress" the data into similar graph shown below.   

(source: Gregg Learning, 2018)

Compensation Management (CM): Implementing variable pay and ensuring employees understand their compensation.

Step # 6: Pay for Performance
Deciding the use of pay that varies with some measure of individual or organization performance such as merit, incentives, and variable pay.

(source: Gregg Learning, 2018)

Step # 7: Communicate the Plan
Communicate your compensation plan ensure employee understand their compensation and how a clear line of sight between organization mission, culture, and their compensation.

(source: Gregg Learning, 2018)

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Basic KPI / Statistic for Recruitment / Workforce Planning

29 Apr 2019: When managing your recruitment / workforce planning function, upper management will always request for a key performance indicator (KPI) to measure the effectiveness of your recruitment / workforce planning.

The most common KPIs / Statistic are: -

• Speed of Recruitment (number of days / lead time to close a position) - this method can be the easier if you have an Application Tracking System aka "ATS" to support the tracking e.g., (i) Operators recruitment is targeted at 60 days and computation start when the manpower requisition (MR) is approved until the candidate report for work; (ii) Manager is 120 days from MR is approved until the letter offer / appointment is signed.

• Cost Per Hiring. The formula ... adding together all the cost (listed below) and divided by the number of position recruited to get the average cost.
• Job advertisement cost 
• Recruitment technology e.g., ATS, online recruitment tool like "LinkedIn" and "Jobstreets"
• Employee referral rewards
• Travelling (e.g., taxi / flight ticket reimbursement to potential candidates; recruiter travelling & accommodation cost)
• Background / reference checks
• Relocation cost
• Recruiter "employment cost"

Note: The cost-per-hiring is also affected by the hiring methods adopted by the organization. Cost-per-hiring can also determine the organization decision to outsource the recruitment function, and assessing employee turnover impact on the recruitment cost.

(Source: Modified from HR360, 2018) 

++The End++

Workforce Planning Guideline / Steps

28 Apr 2019: Generic steps in Workforce Planning ... 

Definition of workforce planning: 
(i) Anticipating the organization workforce needs
(ii) Identify a processes / steps to build ideal workforce

Step #1: Gather Market Data

• Local employee rate
• Local community / potential workforce demographics
• Who is the competitors
• Global / national social, technological and economic trends
• Global / national political and legislative trends 

Reliable sources for market data and information: News; Industry Publication and Website; Networking Group; Government Agencies (e.g., Singapore Ministry of Manpower, Statistic Department, etc.)

Step #2: Analyzing The Organization

• Report on number of employee by job type / position
• Strategic important / value of each job / position
• Employees' skills inventory, knowledge, ability and experiences
• Teamwork and Leadership
• What are the specialized skill, expertise or qualification required by the organization
• Potential for Flexible Work Arrangement (FWA), e.g., telecommuting, compress workweek, part-timer, shorter work days / hours, stagger time report for work, etc.) 

Step #3: Supply and Demands

• Employees planning or going to retirement
• Employee turnover rate
• Potential for internal career opportunity (e.g., fill a position from within the organization)
• Input from upper management on staff / vacancies to meet short and long term business goals
• Position which cannot be filled internally (long term can be addressed by succession planning program)
• Potential employee who can be promoted
• Availability of potential candidates

Step #4: Develop Your Implementation Plan

• Timeline for filling open and anticipated position
• Job market trends
• Time to finalized job description and recruitment advertising

Step #5: Periodical Review of The Workforce Plan (e.g., Annual or Bi-annually)

• Take note and seek clarification when there are changes in ...

1. Staff ... turnover or newly created position
2. Management team
3. Economic
4. Physical location
5. New products and services

(Source: Modified from HR360, 2018)

++The End++

  

Harmonizing Benefits from a Post Merger and Acquisition Perspective

27 Apr 2019: I received a Whatsapp message from my ex-staff about what concept or model should he be applying if there is a need to harmonized benefits for 2 organizations in a post merger and acquisition situation. I shared with him that I don't have any concept or model but I have a checklist based on my last 2 working experiences (e.g., a french having a JV with a local Malaysian conglomerate; Swiss organization acquiring a UK organization).

Listed below are my checklist / key-points to consider: -

1. Understand the Post Merger and Acquisition agreement, check if the agreement cover the employ of existing employees or just buying the business only (this would mean the employee's employment will be terminated) and the new owner will have an options to offer re-employment to the former employees with a new employment terms and conditions.
2. Is the workforce unionism or none unionism?
3. Compare and identify both organization employment benefits.
4. Understand the country / local employment benefits that are governed by the local regulations. e.g., Employee in Indonesia is entitled to "long service holiday / leave" entitlement (it can be taken or buy-off) while Singapore and Malaysia does not have such regulated benefits.
5. Identify the employees' population of the newly merged / acquired workforce are under the scope of the union / under local employment act (EA) and those above the EA.
6. Identify special benefits approved by former employer or Personal-To-Holder (PTH) benefits.
7. Identify if the benefits are subjected to personal income tax, e.g., in Singapore Per Diem within IRAS (Inland Revenue Authority of Singapore) is tax exempted which in Malaysia, Per Diem is taxable under the JHDN (Jabatan Hasil Dalam Negeri).
8. Identify which employment benefits the new employer willing to "buy-off".
9. Obtain a reliable source (e.g., Mercer WBEG Report, Mercer Employment Benefits, etc.) on the local employment benefits.

The above checklist are just some of the key-points to consider. 

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