Motivation grows out of the awareness that someone gave the time and effort to notice one's achievement (Klaff).
Recent strikes against continuously rising health care costs have strained all employers and labor and employee relations. Employers have been trying to reduce double-digit cost increases by modifying health-care plans, which shift the expense to employees, by raising premiums for family members to providing alternatives (Klaff 2003). Health care costs have been nightmarish to companies and led to strikes, which have left more and more Americans without health coverage at all. Although some manage to come, the system itself appears headed to a collapse before any reform can be put in place (Klaff)
In their rabid search for answers, employers revaluate the traditional way of providing health coverage, but experts think that these companies or employers must first discover where the costs are coming from (Klaff 2003). A study conducted by PricewaterhouseCoopers in 2000 to 2001 discovered that fraud and abuse accounted only for 5% of the 13.7% increase in health care costs in the previous year. Litigation and risk management accounted for 7%, heightened consumer demand and costs of implementing government orders and regulations, each at 15%. The biggest share of the increase was traced to rising provider expenses at 18%; drugs, medical devices and medical advances at 22%. An analysis of the costs published in the August 21 New England Journal of Medicine reported that 31% of all health-care expenditures were administrative in nature and represented an average of $1,059 per capita. The opinion is that it is unlikely for employers to find or form the solution by themselves: consumers must be involved in the cost-cutting effort. In the meantime, tensions are expected to continue between employer and employee over health care cost benefits. Consumers inability to pay for benefits and employers inability to provide them are the current issues to resolve (Klaff).
Rising pension contributions compound runaway health-benefit costs. These are main headaches to human resource executives of top companies like the KeySpan Corporation. KeySpan folded up in 2002 because of rising costs of employee benefits at 20-30% of its $2.86 earners per share expected for the succeeding year (Hansen 2003). In other cases, companies took in 15-20% of the increase in 2002. As a result of poor investment returns, pension contributions must also increase. Watson Wyatt Worldwide said that 30% of companies had to make cash contributions to their pension plans in 2002 and 65% of them did so in 2003. Due to the lack or little revenue to cover for the increase, human resource executives are compelled to change the composition of the workforce and local conditions in response. Objectives and strategies have to be modified. Some have taken resort to cutting benefits and decreasing salaries to offset rising costs of benefits. Others have adopted an aggressive vendor management style, which they hope will reduce costs without cuts or greater employee share in the cost. Success in cost control requires well-defined objectives, careful workforce analysis and evaluation, and an earnest, realistic and holistic view and approach to the problem (Hansen).
The human resource manager or executive must constantly keep in mind that cutting benefits without a clear objective and without the full realization of its impact on the employee can undermine performance (Hansen 2003). This is why any and all changes in benefit plans must be part of and proceed from workforce planning. This workforce planning considers the demographics for employees and their dependents, identifies the most important positions and calculates turnover and replacement expenses. It is an un-emotional analysis of the costs, risks and other realities involved. An expert suggested a combination of cutting some benefits and adding others by retaining key performers. If this not done, low performers will be left and the company and the costs saved aimed at benefits cuts will altogether be lost (Hansen).
The organization or its HR managers must communicate the need to cut benefits at critical times (Hansen 2003). The announcement must be honest. Managers may ask the employees to make their recommendations to the situation. In the meantime, most companies have taken cost-butting of benefits without sufficient or satisfactory results. Many of them do so on an ad hoc basis, which means that benefit cuts are done without previous and careful analysis, without assurance of long-term savings or the lowest possible impact on business objectives. Executives may realize some success by focusing their strategies on pushing costs as far as possible, obtain top management support and reduce cost cuts impact on employees (Hansen).
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