Fundamentals of Compensation and the Regulatory Environment

Compensation Scenario

Scenario Background -- Jack Parks is the benefit manager for a division of USA Motors. He is concerned about the level of absenteeism and the "paid absence" agreement negotiated a decade ago. The theory was that by giving workers a full week of paid absence against which they could charge personal absence, they would be encouraged to plan ahead and let supervisors know when they might be gone so that staffing could remain consistent. In reality, workers discovered that by not charging off any paid absence days they could receive a full week's pay in June when the company paid unused benefit hours. Workers had, in fact, come to think of it as a bonus that coincided with summer vacations when USA shut down for inventory in the summer. Parks believes that he can control this abuse of a benefit by a series of percentile deductions on future pay for chronic absenteeism once vacation, holiday and sick pay was used up. Parks sent his idea to the corporate negotiators who, after looking at the potential corporate benefits, placed it as a high-priority bargaining topic for the upcoming union contract negotiations.

Paid Absence as a Strategy -- In a larger work organization, absenteeism is the single largest cost in terms of lost labor time. It can be viewed as an indicator of poor performance, but because human beings are individuals, with individual and unique needs and issues, must be part of any contract between worker and employee. There is a difference between someone who takes off work to get a serious dental procedure, someone who has stayed up too late and imbibed the night before, and even an employee with fever and flu symptoms who insists on coming to work anyway. One model indicates that when people are dissatisfied with their jobs, they are absent more frequently -- they are withdrawing from the workplace. In some ways, using a paid benefit as a way to make money but become absent, is also indicative of this type of behavior (McClenney, 1992). By the same token, it is almost impossible to never be ill, need time off for family issues, or other emergencies that are unplanned. For this reason, it is vital that an employer have a sick leave/absenteeism plan. The issue, though, centers around the legitimate use of such a plan rather than finding ways to abuse the situation and, in the case of thousands of workers, essentially penalizing the company (Treble and Barmby, 2011).

Part 1 -- Will incentive plan work? There are some clear benefits to the company regarding Parks' new Absenteeism Plan; however, there are also some union/worker issues that will be problematical, at best, in gaining its acceptance. Psychologically, it is extremely difficult to have a benefit one day, and then have that benefit taken away or changed dramatically the next. Human nature being what it is, it will appear to many of the workers that they are being punished rather than being rewarded for better attendance. For instance, if Parks' incentive plan were to be implemented without union negotiation, it would look like this:

Standard

Effect

Stays under standard

No effect on salary

None

Exceeds allowable standard, vacation, holiday and sickness/accident plan

Absentee benefits cut 10% for six months

Loss of 10% benefits, variable effect based on actual benefits

Continues to exceed above

Absentee benefits cut actual percentage of absent days incurred

Additional loss of benefit

In essence, this is an incentive plan to come to work -- and would likely be effective for some employees who are chronic in their absenteeism for non-serious reasons. However, in the case of emergencies, this does punish people for unplanned or unmitigated occurrences. There would need to be a series of options (short-term or long-term leave, etc. For situations out of the employee's control).

Part 2 -- How much absenteeism is under an employee's control? In any person's life there are uncontrollable, especially when dealing with children. Sickness, injury, family death, weather, etc. are all parts of absenteeism, termed "innocent absenteeism" that are both legitimate and unplanned, or at least have to be scheduled (dentist or tests that have to be done during job time). More and more, healthcare services understand that they also need to be flexible, and some are even open evenings and weekends. An employee can control absenteeism if they can make the conscious effort to be at work. They cannot control their children, but can find family or someone to assist -- or take turns with their spouse; they cannot control their own illness, but can take steps to remain healthy. In fact, the Centers for Disease Control and many local public health services believe employees should stay home when they are communicable with the flu, strep throat, etc. -- that they often do more damage to other employees by being at work and making others sick. However, culpable absenteeism is being gone from work for reasons that are either fabricated or under the employee's control -- calling in sick when not sick, making up excuses, etc. The issues is really multi-tiered, the work environment must be robust and actualizing, communications between employee and supervisor honest and forthright, and there must be an incentive to be at work -- this is far more effective than a punishment for missing work. Hiring the right employee with the right attitude will contribute to lower rates of absenteeism (Absenteeism Control Programs, 2005).

Part 3 -- Why didn't the paid absence plan work? The easiest, most direct way to answer this is to say "human nature." The original plan counted on employees using the paid absence week as a buffer to communicate with supervisors early on their needed time off. Instead, they would use up all their other benefit time and then take the unused balance of the paid time. The company essentially added and week's benefits to the contract for most of the employees. The intent and the actual plan did not match up, and once one employee found a loophole, then the suggestions likely made in the lunchroom, etc. would be how to maximize the benefit. While not politically correct, one can also view a more "union mentality" at work -- not so much of the attitude of finding the best solution that will be win-win for the entire company, but ways to do the job as contracted without a larger view of the success of the entire organization (Kole, 2010).