Compensation Cafe

3 Goblins of Employee Recognition

On this day of ghouls, goblins and other frightening beasties, let’s look at three of the most common goblins of employee recognition I hope never grace your organization’s doorstep.

1) Fake Praise Goblin

This goblin looks good at first, enticing you with superficial pretty words and phrases. But when you dig a little deeper, you discover nothing but poor intentions. Fake praise takes many forms, including the compliment sandwich that often sounds something like: “Great job on the MacGuffin project, but you could have done better with the primary deliverable. You do good work, so I’m confident you’ll do better next time.” Such fake praise only confuses the recipient, who is left wondering if they did a good job or not.

Other fake praise goblins include casual, passing “Thanks!” with no specifics around what you’re thanking the person for and praise followed by an “ask.”

Strip off the mask – Don’t let this goblin ruin your company culture and positive work environment. Make sure the praise you give is specific and detailed so the recipient understands fully why they’re being recognized and what they should do more of in the future. Keep your praise separate from requests or constructive criticism so employees can enjoy the celebration of their achievement without the cloud of more deliverables or expectations to come.

2) Limited Participation Goblin

Too often, I hear about organizations permitting recognition and reward programs for certain segments of employees (e.g., sales, corporate office only) or worse, launching a pilot program at headquarters and promising to eventually roll out the new recognition program to all employees everywhere. To those on the “inside team” this isn’t a goblin at all! They get to participate, recognizing and rewarding each other for their good work. For those on the outside, however, they are left feeling like second-class citizens. Worse yet is telling most employees you don’t trust them enough to recognize each other, and that’s a manager privilege only.

Strip off the mask – If your goal is to create a culture of recognition and appreciation across your organization, then empower all employees (regardless of location, level or group) to recognize and reward each other from day one. Tell everyone the goal is to “catch someone doing something good” and turn them loose. You’ll be surprised how quickly this goblin turns into a gem.

3) Inappropriate Rewards Goblin

I’ve written several posts on Compensation Café and elsewhere on this particular goblin, relating stories of iPods given to deaf employees, forced dancing as a reward, self-congratulations, and rewards so bad you have to tie employees down to give it to them.

Strip off the mask – Always remember, just because you think something is a great reward doesn’t mean others will see it the same way. If you’re going to offer a truly strategic employee recognition and rewards program, then let the employees choose the rewards for themselves. That way, you’ll never have to worry about giving a vegan a gift card to a steakhouse.

What other goblins of employee recognition gone wrong have you seen or experienced?

As Globoforce’s Head of Strategic Consulting, Derek Irvine is an internationally minded management professional with over 20 years of experience helping global companies set a higher ambition for global strategic employee recognition, leading workshops, strategy meetings and industry sessions around the world. His articles on fostering and managing a culture of appreciation through strategic recognition have been published in Businessweek, Workspan and HR Management. Derek splits his time between Dublin and Boston. Follow Derek on Twitter at @DerekIrvine.

Balancing Comp 101 with the Workplace

I once supervised a Compensation Analyst who had learned her craft through professional seminars and workshops.  One result of that education was her favored response when faced with a challenge at work; “the greatest minds in Compensation say that . . . “.   It took patience to educate this budding practitioner in the difference between classroom / textbook answers and workplace reality.

A while ago I came across an HR blog where the author instructed readers in how to create a merit performance matrix.  Very good stuff, I thought, admiring the technical step-by-step directions, except I knew from long experience that the procedure being described would never work in the real world. 

While it's critical to understand the technical foundations of Compensation methodology and practice, first and foremost practitioners need to anchor themselves in the here and now, to know what will work and not work in their organizations – no matter what the finest minds in Compensation think.

Why does Compensation theory sometimes clash with workplace reality?

• Business realities:  Management will know more about a particular business situation than you do.  What you provide to the decision-making process as a Compensation professional is often limited to your subject area, while management possesses the larger picture – the perspective of multiple viewpoints.  Your advice may not fit their business reality, no matter how logical your argument.

• Bias of decision-makers:  Management may feel that they intuitively know the right strategy (they’ve done it before, if-it’s-not-broke-don’t-fit-it mentality, a friend / relation / old college chum suggested an approach, etc.).  Perhaps they read an intriguing article and are now insistent to follow the advice of an author who lacks an understanding of their particular business.  Years ago I worked for a company whose CEO forced HR to implement a particular benefit plan solely because he had read a magazine article.

• Problem avoidance: A favored management solution is to do nothing (you’ve exaggerated it, the solution costs too much, there’s still time, etc.).  These senior managers avoid major decisions until the issue bites them in the leg.  In such a situation it can be dangerous to your career if you try to force a decision.

• Business culture or model: Some initiatives don’t “fit” the organization.  For example, Managers with a laid back organization style will not be interested in recommendations to document uniform policies and procedures and have standardized forms for every action.  Picture your head banging against the wall.

Sometimes those experts who teach Compensation techniques fail to ground their instructions with a caution: check this process out in the reality of your workplace before you take a classroom technique and wave it in management’s face.

Another example:

When designing a pay-for-performance merit increase matrix the standard rule is to place the average increase percentage in the cell block most populated by employees (average performance and average position-in-range).   The sound reasoning for this technique is to better manage the costs associated with that year’s annual increase process.

A lot of years ago I followed that approach in my first compensation leadership role.  I still have a little bump where my head hit the wall.

Here’s the rub; such a technique requires that the matrix change every year, as the analysis demands you study where the average population falls each year.  But management will likely have none of that. They want the same matrix every year, for ease of administration and communication.

Another area that separates the compensation technician from the professional is the ability to deal with what I call the “softer” side of compensation.  Survey statistics, charts and formulae are very good analytic tools, but management will want to know what it all means and what to do about it.  So the answer isn’t simply reporting competitive data, but taking that next step to help management understand and strategize future action.

The contribution you can make to your organization is in blending technical knowledge (the how-to) with seasoning and experience to understand what will work for your organization, considering culture and management bias.  Technical knowledge will give you the same answer every time, but knowing how to use that knowledge like a craftsman’s tool to aid in achieving business objectives – that's the key to success as a Compensation professional.

Chuck Csizmar CCP is founder and Principal of CMC Compensation Group, providing global compensation consulting services to a wide variety of industries and non-profit organizations.  He is also associated with several HR Consulting firms as a contributing consultant.  Chuck is a broad based subject matter expert with a specialty in international and expatriate compensation.  He lives in Central Florida (near The Mouse) and enjoys growing fruit and managing (?) a brood of cats.

Creative Commons image courtesy of Richard Step

Put Pay in its Place

Pay is the foundation upon which you build a solid and inspirational total rewards structure.  It is the first stage of the booster rocket that creates sufficient force to reach escape velocity.  Like oxygen, a steady income flow allows people to survive as they pursue meaningful lives.  Having enough money is essential.

Money is not everything.  For example, it has been well known throughout history that cash prizes cannot inspire creativity and everyone knows that poorly designed or morally hazardous incentive systems can distract workers from proper performance:  but solid pay is a vital first step.  Although all rewards don’t jingle, compensation has to be right up front in the sequence of total rewards elements.  Without that vital first step, you get nowhere.

Just as a high-rise building or magnificent cathedral cannot be built on quicksand, a solid compensation foundation is required before those higher level employee value propositions can be activated and met. The space shot launched with a weak first stage will never reach the stars.  The diver will drown without oxygen.

Pay is necessary but insufficient by itself.  Adequate compensation is the precondition for effective application of higher level aspiration goals.  A starving person cannot be effectively motivated by status, recognition or intrinsic rewards. Only after adequate compensation has been received will the performer respond to non-economic inducements. 

When employees are paid poorly (loosely defined as below their grade midpoint or Market Reference Point), their attention becomes focused on cash.  The better their pay, the less they worry about money and the more they become open to other motivational factors.  While a low income leads people to obsess about earnings, salary's "power" to influence behavior drops off once one is well paid.

This reminder is important because the increased current emphasis on non-economic reinforcements can lead to neglect of the foundation element.  As long as pay does not fall below the individual minimum threshold hygiene level of satisfaction, one can experiment at will with other methods.  Non-monetary factors like intrinsic motivators, recognition elements, status symbols, growth potential, creative opportunities and freedom to act are just a few of the potential drivers of behavior among the well-fed.  But the moment an employee perceives their compensation as literally inadequate, most of those non-economic total reward elements will lose their engagement power. 

People behave differently according to how they are paid.  As discussed elsewhere, one employer discovered that moving folks up to their midpoints cut turnover by 9% while paying folks more who are already over their MRP has no benefit at all. Simply smartly reallocating your payroll increase dollars can save a lot of money by cutting attrition and improving morale without any increase in the spend.

Pay has its place and that place is first.  When the pay is right, other compensation and total reward elements can be added to improve and perfect the employee value proposition. 

E. James (Jim) Brennan is Senior Associate of ERI Economic Research Institute, the premier publisher of interactive pay and living-cost surveys. Semi-retired after over 40 years in HR corporate and consulting roles throughout the U.S. and Canada, he’s pretty much been there done that (articles, books, speeches, seminars, radio/TV, advisory posts, in-trial expert witness stuff, etc.), and will express his opinion on almost anything.

Creative Commons image "They Call Him 'Little Joe'" by JD Hancock

Faith, Trust and Your Pay Program

I've had the chance to work with many organizations that have decent, even quite good, compensation programs and practices in place, but where employees are simply not buying it. They resist "corporate" messages about the pay plans and they invent and spread all manner of rumors about them.

In circumstances where trust issues are focused primarily on compensation (rather than being part and parcel of a larger issue of faith in leadership) and after taking the necessary steps to ensure that the pay program itself isn't necessarily at fault, I find that information - clear, detailed, credible and truthful - can be the compensation or HR professional's best weapon. 

There is often a common thread running through situations like this.  In my experience, communication about the compensation program in these organizations tends to be broad and relatively flavorless.  Buzzwords and platitudes abound; descriptive specifics not so much.  Compensation communication comes off like a sales pitch, and that is the way employees perceive it.  Messages are completely lacking in any of the descriptive detail that might make them believable.

And by descriptive detail, I am not suggesting things like "Jack Brown just got a 10% salary increase, raising his base to $95,000, despite the fact that he was only 'meets' at his last appraisal."

What I am suggesting is that:

Instead of just saying the program is "competitive", tell employees about the market strategy you use in benchmarking, show them the list of surveys you use and explain why each is a good fit, then walk them through how market data is gathered for a sample job.  (This is also a good opportunity to explain to them why you don't use free stuff from the internet.)

Instead of just saying jobs are assigned to salary ranges based on "market and internal equity considerations", walk them through an example of how the market pricing and/or job evaluation process works for a particular job.  Perhaps use this as an opportunity to explain the purpose and use of salary ranges (and hopefully your practice matches the intent here.)

Instead of just saying that every job has a "bonus opportunity", remind them of the objectives of the bonus plan, how it was designed and why, and the purpose of the different mechanics.  Make sure the calculations are clear by going through a couple of "what if" scenarios.

You get the picture.  Specifics.  Truth.  Clarity.

Death by detail?  Perhaps.  Not every employee group wants, needs or will even sit still for this level of detail -- I'll grant you that.  But I have found that spending an hour, or even more, doing this kind of information sharing and straight talking in front of employees who have lost their faith in the program can make a real impact.

That's my experience.  What has yours taught you?

Ann Bares is the Founder and Editor of the Compensation Café,  Author of Compensation Force and Managing Partner of Altura Consulting Group LLC, where she provides compensation consulting services to a wide range of client organizations.  She earned her M.B.A. at Northwestern University’s Kellogg School and is a bookhound and aspiring cook in her spare time.  Follow her on Twitter at @annbares.

Image courtesy of economicnoise.com

Perfect Timing! Fast Plans, Smart Talk About 2012 Merit Increases

Merit increase communications? This time of year, everyone needs great ideas, fast. So here are a few from past blog articles that should be right on the money for 4Q 2012.

A strategy that fits your budget and culture just right. Don't let yourself get frustrated about low or no budgets for communications. Read "Boost your chances of having a happy, healthy attitude towards communications" for a decision-making chart. It will help you tell the truth (to leadership and your HR colleagues) about how much you can invest and what the real payoffs will be.

Answers that employees pine for. Think employees simply want to know "What's in it for me?" Think again -- it's far more straightforward than that.  "How to make your compensation communications great this year!" will prepare you to be heard.

A powerful role for your CEO. Don't kid yourself. Your employees need to hear from your CEO about the company's future and their role in it. Check out the article, "Can your CEO reignite the passion in your relationship?" CEO communications. It's where engagement starts and it's the logical context for compensation and performance management communications.

Time tested tools. "10 tools for communicating a teeny, tiny merit increase budget" is one of a series that has remained popular for three years. I wrote it at the brink of the recession along with, "10 ways to slice a teeny, tiny merit increase budget" and "10 things your managers must tell employees about a teeny, tiny merit increase budget." The articles have even reunited me with a high school friend who's running a nonprofit and called for advice. Odds are, you'll find something useful there, too. (And in my recent blog, "Tips to help you decide how to talk about this year's merit budget" which has also gotten a lot of readership.)

Good answers to a tough question. You will get questions about Cost of Living. Rely on it. So check out "Talking with employees about Cost of Living" for both communications and technical advice.

Margaret O'Hanlon is founder and Principal of re:Think Consulting. She joined Ann Bares and Dan Walter of the Compensation Cafe to speak the unspoken -- "Everything You Do (in Compensation) Is Communication" -- at the WorldatWork 2012 Conference. Margaret brings deep expertise in total rewards communications and change management to the dialog at the Café. Before founding re:Think Communications Consulting, she was a Principal in Total Rewards Communications and Change Management with Towers Watson. Margaret is Deputy Director of the International Association of Business Communicators (IABC) Pacific Plains Region. She earned her M.S. and Ed.S. in Instructional Technology at Indiana University, Bloomington. Creative writing is one of her outside passions, along with Masters Swimming.

We Are Not Rats and Compensation is Not Cheese

Pay for Performance (P4P) is currently the biggest trend in compensation. I am a huge proponent of this effort, but I also fear its failure. Too often I see companies believe that just the existence of such a program will improve performance. Let me dispel this myth.

We have all read the studies (or seen the cartoons) about a rat making its way through a maze because there is cheese at the other end. While these results are compelling, we must remember that our employees are not rats. We must also remember that compensation is not cheese. Simply putting some money at the end of a year, or multi-year project is not enough to ensure that employees will find their way to success.

Secondarily, rats do not understand us when we speak to them (or email, tweet or talk to them.) Therefore our only method of dealing with rats is to let them figure things out on their own. It is important to remember that we can communicate with our staff members. We can provide direction along the way. We can help, cajole, motivate and drive people.  We can even teach them how to do these things for themselves.

So let’s talk about incentives and people.

In academic experiments, it has been proven that incentives and rewards are effective in getting people to perform tasks or accomplish goals. The sums provided are usually quite small (usually less than a few dollars) and the timeframes are generally in minutes, hour or days. While these studies give us insight into the workings between behavior and economics, they are often poor analogs for the long-term, high value incentives that are currently all the rage in the world of compensation.

We must understand that most people like strong leaders.  They like to be given a destination and want to be told they are doing a great job at getting there. Most people are not strongly self-driven and most will not find, without ongoing interaction, that your corporate goals inspire or drive them in any passionate long-term manner.

We must stop treating our employee like rats, our goals like mazes and our pay programs like cheese. We need to understand that incentives work, but communication and leadership are requirements for long-term efficacy. If we move beyond the idea of “pay manages peoples actions” we will find a more holistic solution that is truly effective.

Dan Walter is the President and CEO of Performensation an independent compensation consultant focused on the needs of small and mid-sized public and private companies. Dan’s unique perspective and expertise includes equity compensation, executive compensation, performance-based pay and talent management issues. Dan is a co-author of “The Decision Makers Guide to Equity Compensation”,  “If I’d Only Know That”, “GEOnomics 2011” and “Equity Alternatives.” Dan is on the board of the National Center for Employee Ownership, a partner in the ShareComp virtual conferences and the founder of Equity Compensation Experts, a free networking group. Dan is frequently requested as a dynamic and humorous speaker covering compensation and motivation topics. Connect with him on LinkedIn or follow him on Twitter at @Performensation and @SayOnPay

Can a Netflixian Approach Work For Compensation?

Hello, username, we have recommendations for you!

You've seen the recommendations. Books, movies, clothing, dining options, and even friends - everything has a recommendation for you. Predictive modeling helps us weed through the hundreds of choices of books / movies / restaurants / friends and find what we want. Or, rather, what the algorithms think we want.

Companies like Netflix and Amazon have gotten pretty good at this. You can thank Big Data and predictive modeling. From books and movies, clothing and accessories, household furnishings and even food items, Big Data is bellowing at us and predictive modeling is the Oz behind the curtain. But what role - if any - does predictive modeling have in compensation?

My Cafe colleague Laura Schroeder talked about the issue last week in the context of employee retention. Develop a predictive model, and identify how much impact individual levers such as compensation have on retention to inform decision-making.

I agree with Laura that predictive modeling can - and should - be used to inform decision-making. But the key word is inform, not replace. Predictive models place emphasis on the statistical context. They cannot incorporate personal judgment and experience.

Some think that this is a good thing. Michael Schrage says you should ignore your gut - using personal judgment and experience will only lead to making the same mistakes over and over again.

Personally, I think a healthy mix of empirical information and judgment is the way to go. Relying solely on "gut feelings" and hunches makes it difficult to demonstrate the business justification. As Laura stated, "you need more precise data to get more money from the people whose job it is not to give you more money."On the other hand, emailing output from a predictive model with the note "model says Bob needs more money or he will leave" is also not likely to get more money from the people whose job it is not to give you more money. 

Human judgment comes into play in interpreting results. The predictive model says Bob and Sam are going to leave if they don't get more money. It would be foolish to simply obey the algorithm and give Bob and Sam more money without first asking, "do we care if Bob and Sam leave?" Sam may be essential to the completion of a mission-critical project; the wise choice would be to give him what he needs to stay put. Bob may be important, but the cost of retaining him may be too high vis-a-vis recruiting and training his replacement. 

Theoretically, we could build a predictive model complex enough to consider all available information so that these cost/benefit decisions could be made by the model. But if you were able to do that, you wouldn't be in the business you're in now - you'd be in the business of building predictive models.

From my perspective, the bottom line is that predictive modeling can be very useful in informing the decision-making process. I don't think that, at least right now, predictive modeling can be relied upon to actually make the decisions. 

But that may change in the future...

Stephanie R. Thomas is an economic and statistical consultant specializing in EEO issues and employment litigation risk management. Since 1999, she's been working with businesses and government agencies providing expert quantitative analysis. Stephanie's articles on examining compensation systems for internal equity have appeared in professional journals and she has appeared on NPR to discuss the gender wage gap. Stephanie is the founder of Thomas Econometrics Inc., the host of The Proactive Employer radio show, and author of the upcoming book Compensating Your Employees Fairly: A Guide to Internal Pay Equity. Follow her on Twitter at proactivemployr.

9 Lessons from 3 Industries on the Secret to Employee Recognition and Reward

What’s the fastest way to turn a company culture from negative to positive? From competitive to cooperative? From fault-based to praise-based?

Easy – employee recognition and reward, done right. Bill Taylor, in a follow up article on Harvard Business Review, explains why quite well:

"How do we as leaders encourage, spread, and make more "ordinary" ways of behaving that today seem extraordinary? Are there clever ways for leaders to help their organizations become more kind?

"Those are huge questions, of course, but my basic answer is for leaders to think and act in ways that are designed to bring out the best in whomever they encounter. That is, to spend less time scoring, critiquing, and correcting colleagues who make mistakes, and to spend more time identifying and rewarding colleagues who behave the way we wish everyone would behave. Leaders who engage in relentless fault-finding can't help but lead to a culture of bloodless execution. Leaders who celebrate small acts of kindness, who reward moments of connection, give everyone permission to look for opportunities to have a genuine human impact."

The question I’m often asked is: “Yes, that’s all well and good in theory, Derek, but how do you actually put that into practice? And haven’t you found this to be easier in some industries than in others?”

My answer to the latter question is always, “No, it’s the same for all industries, as long as leadership in the company is willing to put in the effort and change their own ways to make a positive, strong culture of recognition a reality.”

As to the former question, Mr. Taylor himself offers two excellent examples from the very different industries of retail banking and police enforcement. For a third example (I like things in threes), I turn to the hospitality industry in an example related in Forbes by Kevin Kruse, author of Employee Engagement 2.0.

How Commerce Bank (now TD Bank) Did It

Mr. Taylor goes on to tell the story of TD Bank and its unique culture, especially in the traditional world of retail banking. Through the story are 3 clear lessons in employee recognition and reward to create a kinder culture:

1. Define the work of leaders as reinforcing positive behavior rather than correcting behavior that falls short
2. Make small acts of kindness an everyday reality.
3. Leaders proactively seek to “catch somebody in the act of doing it right.”

How the Royal Canadian Mounted Police Force (Richmond, BC) Did It

In this example, Mr. Taylor describes how the RCMP inspired youth in their community to trust the police and work with them, not against them:

1. Change your focus from negative behaviors to positive ones
2. Go out of your way to find reasons to praise and reward those at-risk who are still doing the right thing
3. Police proactively seek out kids “doing something right.”

How the Taj Hotels Resorts Did It

The Taj Hotels Resorts and Palaces have 109 luxury hotels employing 13,000 people committed to creating an outstanding guest experience. Many in the West, however, only know Taj Hotels from the tragic bombing of the Taj Mumbai in 2008. What you may not know is the deeper story of how those committed employees responded in the face of fear, confusion and death due to the positive culture created through strong employee recognition and rewards. (You can read that full story in another HBR article.)

For the purposes of today’s post, I’m sharing observations Mr. Kruse made in the Forbes article on how Taj built this powerful culture:

1. Immediate recognition is far more effective than delayed praise (and often more important than an actual reward itself).
2. Customers can share in recognizing and acknowledging outstanding employee effort.
3. Supervisors are committed giving expressions of gratitude

Do you see the theme forming here? Above all else, proactively seek to catch people doing well. Praise them, recognize them, honor them and reward them.

The one addition I would make is to expand that opportunity to “catch them doing something right” to all employees, not just those in leadership roles.

What would you add to these lessons on how to do employee recognition right?

As Globoforce’s Head of Strategic Consulting, Derek Irvine is an internationally minded management professional with over 20 years of experience helping global companies set a higher ambition for global strategic employee recognition, leading workshops, strategy meetings and industry sessions around the world. His articles on fostering and managing a culture of appreciation through strategic recognition have been published in Businessweek, Workspan and HR Management. Derek splits his time between Dublin and Boston. Follow Derek on Twitter at @DerekIrvine.

The State of Play in Employee Pay

There are many factors influencing thoughts, plans and practices in employee pay today.  Economic turbulence, the breathtaking pace of organizational change, a zigzagging talent market and the continued pressure to do more with less are just a few that come to mind.

Are the fundamentals of compensation changing in response to these influences - or are we tending to hold tight to the "tried and true"?  To help us get our heads around these questions, WorldatWork recently published an updated study of Compensation Practices and Programs reflecting the input of about 1,000 compensation professionals gathered this past June and July.  (Previous efforts in 2003 and 2010 provide some historical perspective.)

The survey report touches on a wide range of practices.  Here are a few select findings that caught my eye, along with the musings they provoked.

An unwritten compensation philosophy generates little value.  I can't help but smile when somebody tells me that their company does indeed have a compensation philosophy, but it isn't written down anywhere.  Typically this means that leaders have not had a serious conversation about how they intend to pay people, much less any thoughtful dialogue about how compensation dollars should be spent given the organization's talent priorities.  At best, it usually means that there is some level of implied agreement about paying people at market median.  Study findings suggest that we may be finally wising up to this fact: 67% of respondents say that their company does have a written compensation philosophy, up from 61% in 2010.  And, not surprisingly, the study confirms that an unwritten philosophy tends not to be understood by employees; 89% of those with a written philosophy believe that most or all employees understand it, while only 11% with an unwritten philosophy think this is true.

But are companies walking the philosophical talk?  Survey findings show that some companies are falling short of their pay intent.  While 86% of those responding say their organization targets market median for base salaries, only 67% are actually there in practice.  A few of these (about 4%) indicate that they have overshot the mark; however, most of those who say that they are "off" (about 13%) are actually delivering salaries below the target level.  My sense, as I am seeing this phenomenon not infrequently in my consulting work, is that this is at least partly a result of the no-to-low salary increase budgets of the past few years, causing some companies to fall behind market practices, particularly for more in-demand talent.  Note that the same pattern seems to hold for total cash compensation, where 71% are targeting market median but only 54% are making that happen (and only about 2% of these are erring on the plus side).

Performance ratings and merit increases are not going away yet.  The percent of respondents whose performance appraisal process culminates in a rating or score that is tied to salary increases has increased to 71% in 2012 from 65% in 2010.  Ratingless performance systems appear to have dropped slightly in prevalence, to 11% in 2012 from 14% in 2010.

But making merit pay matter is proving no small challenge.  A lot has been written about putting more muscle (differentiation) behind merit increases but, if anything, survey responses suggest little movement forward and even a bit of slippage.  The percent of survey participants claiming either considerable or extreme variation (meaning increases for top performers are 2 or at least 3 times the average, respectively) has dropped from 32% in 2003 to 27% in 2010 to 25% in 2012. 

The matrix is still the king of merit increase tools.  Although no historic information is available, survey results show that 74% of respondents use a merit matrix.  Interestingly, the vast majority of those employing this tool (69%) indicate that the matrix is used as a guide, and that managers have the discretion to deviate when appropriate. 

Dynamic markets demand annual benchmarking.  As the labor market becomes more and more uneven in its movement, companies are finding that market pricing (whether all jobs or only a set of benchmarks) must be an annual event.  Survey responses show more organizations are moving to annual benchmarking (59% in 2012, up from 55% in 2010) and fewer are going with an "every other year" process (11% in 2012, down from 13% in 2010).

What are you seeing in the state of play of employee pay?

Ann Bares is the Founder and Editor of the Compensation Café,  Author of Compensation Force and Managing Partner of Altura Consulting Group LLC, where she provides compensation consulting services to a wide range of client organizations.  She earned her M.B.A. at Northwestern University’s Kellogg School and is a bookhound and aspiring cook in her spare time.  Follow her on Twitter at @annbares.

Image courtesy of preparednesspro.com

“Vacation” Rules Around the World

The first thing to do is to explain the various words used when talking about "vacation".   In the U.S.the word is clear to all Americans.   It is the time that employees take off from work for relaxation.   In most other countries "vacation" is called "annual leave".

The UK uses the word “holidays” to mean "vacation".   But using the word “holidays” can be very confusing.  It has nothing to do with “public holidays”.    “Public holidays” or “national holidays” refer to a country’s day(s) off to celebrate significant historical or national events.   In dealing with the UK you need to be very clear what people (including you) mean when using the word "holidays".

Let’s look at some of the legal requirements for “annual leave” in various countries.   Note, that these days are the bare minimum.   In order to be competitive in a specific country, a company also needs to keep market data in mind when forming its policy.

Country	Legal Requirements
China	Seniority based.  Must pay during the year of entitlement otherwise the company must pay 3 times the amount of pay for the unused days. 1-10 YOS       =  15 days 10-19 YOS     =   25 days 20+ YOS        =   35 days <1 YOS          =   ratably reduced
Switzerland	Same number of days for all employees --- no seniority schedule. Federal law requires a minimum of 4 weeks of annual leave. If an employee is under age 20, then the minimum is 5 weeks. The majority of employers provide 10 additional days or a total of 6 weeks to all employees.  There is no pay in lieu of annual leave days taken.   Days can be carried forward into the next year.   The maximum date for claiming unused annual leave  for any one year is 5 years.   This requires a lot of recordkeeping.
UK	The law combines both "holidays" and public holidays.   The minimum is 20 days "holidays" and 8-10 days for public holidays.   The total is 28-30.   In England the total is 28 days; in Scotland it is 29 days; and in Ireland it is 30 days.  At termination, employees can claim payment for the remainder of both unused "holidays" and public holiday days.   There is no separation of the two for payout at termination. During employment there is no pay in lieu of days taken.   "Holidays" may be carried forward into the next year but public holidays may not be.
Brazil	After being employed for 1 year, employees are entitled to 30 days, 10 of which may be taken in cash.  As an "annual leave allowance", employees get 1/3 of their monthly salary at the time of annual leave.  An employer has up to 1 year to grant an employee annual leave.   If the employer exceeds 1 year, the company must pay the employee double.    Annual leave granted is 30 days and normally is taken all at one time.   However, it may be split once into 2 shorter periods of time.   It cannot be split more than once and no annual leave period can be shorter than 10 days.

Argentina

Employees must be employed for 6 months before being eligible for annual leave. 6 mos. – 5 YOS  = 14 days 5-10 YOS           = 21 days 10-20 YOS         = 28 days 20+ YOS            = 35 days Annual leave period is January 1 through December 31.   Employees should take annual leave between October and April, however, employers may grant annual leaves at different times of the year based on the pace of the company’s business.  Up to 1/3 annual leave may be carried forward.   During annual leave employees have a right to receive an "annual leave bonus”.  The calculation:  Divide the monthly salary by 25 and multiply that number by the annual leave days taken.

U.S.

No federal/legal requirement for minimum vacation.   The number of days is left up to each company and usually set based upon competitive data.   Most companies award vacation days on a seniority based schedule.   Employers usually set a maximum limit on the number of days that can be “on the books” at any one time.  There are 16 states that require accrued but unused vacation to be paid out at termination (California, Colorado, District of Columbia, Illinois, Indiana, Louisiana, Maryland, Massachusetts, Mississippi, Montana, Nebraska, New York, North Carolina, North Dakota, Rhode Island, and Wyoming).   In reality, it is common practice to pay out unused vacation in all states.

 Again, as a reminder, the information stated above is the legal or minimum requirement for each country.  While companies obviously need to be legally compliant, it is also important to understand  competitive practice.   Competitive practice indicates that most companies award more days for "annual leave" than the minimum, legal requirement.  

Important Note:  This posting is intended to provide a brief overview of  vacation rules around the world.     Please check with your local, in-country law firm to ensure this information is up-to-date with the latest legal requirements.

Jacque Vilet, President of Vilet International, has over 20 years’ experience in Global Human Resources with major multinationals such as Intel, National Semiconductor and Seagate Technology. She has managed both local/ in-country national and expatriate programs and has been an expat twice during her career.   Her true love is working with local national issues.  Jacque has the following certifications:  CCP, GPHR, HCS and SWP as well as a B.S. and M.S in Psychology and an MBA.    She belongs to SHRM, Human Capital Institute and World at Work.   Jacque has also been a speaker in the U.S., Asia and Europe, and is a regular contributor to various HR and talent management publications.  She lives in Dallas and has 2 four-legged children and one Chinese daughter and granddaughter (sort of). 

 

Image courtesy:  kateysoutlook.blogspot.com