HRM AND EMPLOYEE REMUNERATION POLICY
Humans are an organization’s greatest assets; without them, everyday business functions such as managing cash flow, making business transactions, communicating through all forms of media, and dealing with customers could not be completed. Humans and the potential they possess drive an organization. Today’s organizations are continuously changing. Organizational change impacts not only the business but also its employees. In order to maximize organizational effectiveness, human potential-individuals’ capabilities, time, and talents-must be managed. Human resource management works to ensure that employees are able to meet the organization’s goals.
HRM can be defined through the following points:
The Process of analyzing and managing organizations human resources needs to ensure satisfaction of its strategic objectives.
The policies and practices involved in carrying out the ‘people’ or human resources aspects of a management position, including recruiting, screening, training and appraising.
A model of personnel management that focuses on the individual rather than taking a collective approach. Responsibility for human resource management is often devolved to line management. It is characterized by an emphasis on strategic integration, employee commitment, workforce flexibility, and quality of goods and services.
All methods and functions concerning the mobilization and development of personnel as human resources, with the objective of efficiency and greater productivity in a company, government administration, or other organization.
If you know how to motivate employees, your company’s overall status and profits will improve as a result. Employees are the lifeblood of the company. It’s therefore vital to use effective employee motivation techniques so they can stay happy and inspired with their work. This, in turn, will also make them more productive.
Here are 3 employee motivation techniques you can use to arouse their enthusiasm:
1) Be interested in them.
Know their personal background, where they went to school, any job experiences they had, their hobbies, their future plans… even the minor things like what movies or books they prefer.
This shows that you’re willing to take the time to know more about them. People like to talk about themselves, so what you’re doing is satisfying their ego. In the process, they will get to like you.
2) Give them exciting opportunities and reward them for their accomplishments.
As much as possible, give them job assignments that they’re either good at, are interested in, or can have fun with.
Give them every opportunity to prove how good they are. And once they’ve proven their worth or even exceed your expectations, acknowledge them. Praise them in public; let them and other employees know what exactly made them outstanding.
This employee motivation technique will inspire others to do their best because they want to attain the same recognition!
Aside from thanking them, you can give gifts or awards that they can treasure and show to others. Awards such as certificates, medals or trophies would be a better choice as these items illustrate their achievement.
3) Be trustworthy and respectable.
If you said you’re going to do something for them, fulfil it at all cost. Nothing can ruin their trust and respect for you more than broken promises and empty words.
Show them that you’re someone who will listen to their concerns, and someone who is trustworthy enough to keep private matters confidential.
Be someone who they can look up to. This means you have to be a good example for them. Strictly follow the company’s rules and perform your job in the most ethical manner possible.
Ice-breakers and warm-ups for motivation:
When a group or team of people assemble for a conference, or training course, there is always a feeling of uncertainty and discomfort. Even if people know each other, they feel uncomfortable in the new strange situation, because it is different. Mankind has evolved partly because of this awareness to potential threats and fear of the unknown. Games and team building activities relax people, so that they can fully concentrate on the main purpose of the day, whatever it is, rather than spending the morning still wondering what everyone else is thinking.
Building confidence for motivation:
Learning something new and completely different liberates the mind. Facing a challenge, meeting it and mastering it helps build confidence.
Motivational team building
When you break down barriers, misunderstandings, prejudices, insecurities, divisions, territories and hierarchies – you begin to build teams. Get a group of people in a room having fun with juggling balls or spinning plates and barriers are immediately removed. Teams unite and work together when they identify a common purpose – whether the aim is the tallest tower made out of newspapers, or a game of rounder’s on the park. Competition in teams or groups creates teams and ignites team effort.
Motivation and creativity
Creativity and initiative are crucial capabilities for modern organizational effectiveness. Juggling and other games activities dispel the notion that actions must be according to convention and that response can only be to stimulus. Successful organizations have staff that initiate, create, innovate, and find new ways to do things better, without being told. Using mind and body together in a completely new way encourages pro-active thought and lateral thinking, which opens people’s minds, and develops creative and initiative capabilities.
“We cannot solve our problems with the same level of thinking that created them.” (Albert Einstein)
“It is amazing what you can accomplish if you do not care who gets the credit.” (President Harry S Truman)
“In the midst of winter, I finally learned that within me there lay an invincible summer.” (Albert Camus).
All the above famous quotes can help motivate your entire workforce.
Remuneration means payment for a service: all financial and other benefits such as a company car that people receive in return for doing their jobs.
Appropriate employee remuneration has become a complex problem for businesses of all sizes. This problem is being compounded as employee remuneration is less defined by industry or union guidelines and more determined by workplace agreements or individual negotiation. Employers need mechanisms for reviewing employee performance against contractual benchmarks and providing equitable remuneration in a repeatable and transparent process that is applied consistently throughout the organisation.
Align employee behaviour with business objectives:
Motivating your entire workforce to really strive towards corporate goals requires the right incentive plans.Â Remunerator’sÂ built in incentive plan facilities enable the implementation of the incentive plans you need in order to achieve your desired outcomes.
Provide Equitable Remuneration:
Remunerator’sÂ comprehensive reporting allows you to analyse salary distribution across the organisation and identify any inconsistencies between employee groups by region, gender or ethnic group.
RemunerateÂ allows all employees in the organisation to be reviewed in a single cycle as it supports multiple currencies and interfaces with multiple HR / payroll systems.
Repeatable and Transparent Process:
RemunerateÂ allows you to define the business rules that Line Managers must follow when allocating compensation budgets.
Shortens the Review Process:
RemunerateÂ is simple to use and shortens the entire review process. Automated workflow notifies participants when there involvement is required. The single source of data source of data ensures the latest information is always available.
Remunerate is cost effective:
By removing most of the manual processing involved in performing salary and incentive compensation reviews,Â RemunerateÂ can pay for itself in the first review cycle.Â RemunerateÂ lowers the cost and increases the flexibility of your salary review process.
The remuneration arrangements for contract staff continues to be structured on the basis of Total Employment Cost (TEC = salary, superannuation and motor vehicle) plus an “at risk” component (PIP) which together with the TEC represents the Total Cost (TC) potential. A more
detailed overview is provided.
REMUNERATION REVIEW PROCESS
Each position or job grade has a ‘midpoint’ TEC which represents the average payment for a comparable position within the market based on the organisation’s policy position.
A remuneration range is established which can span between 80% and 120% of the respective Midpoint. A range position usually reflects the level of expertise, competence etc of the position incumbent. The less experienced job incumbent would typically be remunerated at the lower end of the scale and similarly the more experienced would be paid around or above the midpoint of the range.
The basis for any above market adjustment relates to the organisation’s requirements regarding employee “attraction, reward and retention”.
High-level principles for Remuneration Policies
The financial institution should adopt an overall remuneration policy that is in line with its business strategy and risk tolerance, objectives, values and long-term interests. It should not encourage excessive risk-taking. The remuneration policy should cover the institution as a whole and contain specific arrangements that take into account the respective roles of senior management, risk takers and control functions. Control functions should be adequately rewarded to attract skilled individuals.
Fair and transparent:
The remuneration policy should be transparent internally and adequately disclosed externally.
The management body, in its supervisory function, should determine the remuneration of the management body in its management function. In addition the management body, in its supervisory function, should approve the principles of the overall remuneration policy of the institution and maintain oversight of their application. The implementation of the remuneration policy should be subject to central and independent review.
Where the pay award is performance related, remuneration should be based on a combination of individual and collective performance. When defining individual performance, factors apart from financial performance should be considered. The
measurement of performance, as a basis for bonus awards, should include adjustments for risks and the cost of capital.
FORM OF REMUNERATION:
There should be a proportionate ratio between base pay and bonus. Where a significant bonus is paid, the bonus should not be a pure up-front cash payment but contain a flexible, deferred component; it should consider the risk horizon of the underlying performance.
We shall now see how two different companies from two different sectors use HRM techniques for employee remuneration and motivation
Directors’ Remuneration in Respect of Service Standards 2009:
Section 42C of the Electricity Act 1989 (as amended) requires a licensed distribution Company which provides price-regulated services to disclose whether or not it links the Remuneration of the directors of the company to any levels of customer service achieved by the company, and to give details of how any such links affect that remuneration.
This statement contains the necessary disclosures in respect of EDF Energy Networks (EPN) plc, EDF Energy Networks (LPN) plc, and EDF Energy Networks (SPN) plc for the calendar year ending 31 December 2008.
During this period the directors of all three companies were:
Vincent de Rivaz
Paul Cuttill (until 10 June)
Laurent Ferrari (from 21 July)
Remuneration for the directors is established at a Remuneration Committee chaired by a nonexecutive director of EDF Energy.
The elements of remuneration are as follows:
EDF Energy annual incentive plan
EDF Energy long-term incentive plan
There are no direct links to customer service in directors’ base salary, long-term incentive plan or pension benefits.
Customer service is an integral part of the EDF Energy annual incentive plan, which the majority of EDF Energy employees, including directors, participate in.
The structure is based on specific measures and targets. During the period, for Paul Cuttill, Humphrey Cadoux-Hudson and Laurent Ferrari, the system had three levels of measures (EDF financial performance, EDF Energy financial performance and business unit performance) and a personal performance element. For Vincent de Rivaz, the system had two levels of measures Ã¢Ë†â€™ EDF performance and EDF Energy performance.
For Paul Cuttill, Humphrey Cadoux-Hudson and Laurent Ferrari, the three levels of measures were weighted as follows: EDF performance Ã¢Ë†â€™ 20%; EDF Energy performance Ã¢Ë†â€™ 40%; and business unit performance Ã¢Ë†â€™ 30%. The personal performance element was weighted at 10%. For Vincent de Rivaz, the two levels of measures were weighted as follows: EDF performance Ã¢Ë†â€™ 20%; and EDF Energy performance Ã¢Ë†â€™ 80%. The performance targets for EDF are set by the EDF Board in France; EDF Energy and business unit targets are set in accordance with business plans and approved by the Remuneration Committee of EDF Energy. The EDF and EDF Energy specific measures are weighted as follows:
Ã´â‚¬â€šÆ’ Financial Index
EDF Energy measure:
Ã´â‚¬â€šÆ’ Financial Index
Business unit measures:
Ã´â‚¬â€šÆ’ Safe for All
Ã´â‚¬â€šÆ’ Customers’ Choice
Ã´â‚¬â€šÆ’ Sustainable Performance
Ã´â‚¬â€šÆ’ High Performing People
As can be seen, directors’ annual incentive-related pay is dependent on safety, customer service, sustainable performance and high performing people.
The overall effect is to create a balanced scorecard of measures to incentivise improved performance across all areas of operation. This approach, with the measures identified, provides a real focus for all staff in terms of linking performance and pay. In assessing the outcome for the year, many of the targets relate to published financial accounts, published standards of performance and other statutory returns, most of which are covered by quality assurance systems and are externally audited.
The disruption in the capital markets that commenced in 2007 deepened in 2008 resulting in one of the most challenging years ever for the global financial services sector. The extent to which remuneration structures may have played a role in contributing to the financial crisis was still being debated and under scrutiny as this statement was written. As a consequence of events, the Board HR and Remuneration Committee commenced its deliberations for the 2008 performance year earlier than usual and met more times than is typical. The agenda rapidly developed into two work streams: first, the immediate decisions for 2008; and second, the long-term shape of remuneration.
Barclays delivered profit of Â£6,077m, 14% lower than 2007. The variable pay for the Group reduced 48% relative to 2007.
Accountability rests at the most senior levels and key factors relating to executive Directors include:
zero annual performance bonus for 2008
no salary increases for 2009
The total 2009 long-term awards are 64% lower than last year, with no awards for the Chief Executive and the President.
Barclays new Remuneration policy
The revised Barclays Remuneration Policy is to:
Attract and retain those people with the ability, experience and skill to deliver the strategy.
Create a direct and recognisable alignment between the rewards and risk exposure of shareholders and employees, particularly executive Directors and senior management.
Incentivise employees to deliver sustained performance consistent with strategic goals and appropriate risk management, and to reward success in this.
Deliver compensation that is affordable and appropriate in terms of value allocated to shareholders and employees.
Encourage behaviour consistent with the principles that guide Barclays business:
Doing what is right for Barclays, its teams and colleagues, to achieve collective and individual success.
Developing talented colleagues and differentiating compensation to reflect performance.
Doing what is needed to ensure a leading position in the global financial services industry.
Customer and client focus
Understanding what customers and clients want and need and then serving them brilliantly.
Driving new ideas, especially those that make Barclays profitable and improve control.
Improving operational excellence.
Adding diverse skills to stimulate new perspectives and bold steps.
Acting with the highest levels of integrity to retain the trust of customers, shareholders, other external stakeholders and colleagues.
Taking full responsibility for decisions and actions.
Reflecting the operation of independent, robust and evidence-based governance and control and complying with relevant legal and regulatory requirements.
Annual cash bonuses for a year are normally paid in the following year. ESAS and PSP awards for a year are normally awarded in the following year. Mr Hoffman received his normal monthly salary benefits and pro-rated annual cash bonus, total of Â£90,477 for the period between the cessation of his directorship and 30th September 2008, the date of the cessation of his employment. Leigh Clifford was also a member of the Asia Pacific Advisory Committee and received fees of US$60,000 per annum (2007: US$35,000). These fees are included in those shown above.
The first Â£20,000 per annum of a non-executive Director’s fee is used to purchase Barclays PLC shares which are retained until the Director retires.
As disclosed in the 2007 Report and Accounts, in March 2008 Robert E Diamond Jr received a cash payment of Â£7.425m and an award of shares deferred for one year under ESAS of Â£7.425m, from the Retained Incentive Opportunity 2005-2007 in which he participated.