Why Total Rewards?


Total Rewards can be defined as “All of the tools available to the employer that may be used to attract, motivate and retain employees. Total rewards include everything the employee perceives to be of value resulting from the employment relationship”.

There are five elements of total rewards, each of which includes programs, practices, elements and dimensions that collectively define an organization’s strategy to attract, motivate and retain employees. These elements are:

  • Compensation
  • Benefits
  • Work-Life
  • Performance and Recognition
  • Development and Career Opportunities

Total RewardsThe elements represent the “tool kit” from which an organization chooses to offer and align a value for both the organization and the employee. The elements are not mutually exclusive. Total rewards strategy involves the art of combining the five key elements into tailored packages designed to achieve optimal engagement. An effective total rewards strategy results in satisfied, engaged and productive employees, who create desired business performance and results.

In a globalize world where local laws and regulations change constantly the impact of C&B becomes more important, so the corporate strategies and remuneration systems need to be adapted to different industries and countries in order to provide the best social and fiscal optimization possible for both the company and the employees.

What do you do in a Total Rewards role?

  • Never stop learning.
  • Never do exactly the same thing twice (no, not even for your annual processes such as salary reviews or bonus pay-outs).
  • Creativity to design and implement solutions that will truly support your company and its employees
  • Negotiate with providers to get the best conditions and prices possible for Social Benefits (Health & Life Insurance…) to all employees of the organization.
  • Learn and know about Tax & Regulations in each country in order to apply the benefits in the best way for the company and employees.
  • Get involved in many aspects of running the business, and through it, get real exposure to the organization, with Finance, Sales and Marketing obviously, but also with the business… and the rest of HR.
  • Simulations and multiple scenarios analyses, and the legal, cost and fiscal implications of your decisions.
  • At the forefront of the organization, in good times (distributing bonuses and introducing new rewards and recognition practices) and in bad times too (figuring out cost control mechanisms and redundancy plans).
  • Interact with people at all levels of the organization, from the junior staff through to line managers, to top Executives and the Board members.

Borja Burguillos

Changing the HR Game: How Gamification is disrupting Human Resources


Following my previous posts “Why Digital is radically disrupting HR?” and “Digital Will Give Power to the People” about how digital is changing the human relations today I would like to write about how gamification will change labor relations as we know until now.gamification_HR StrategySince the first Nintendo sets arrived in homes in the mid-1980s, the workforce has become increasingly populated with employees who have grown up with computer games. For many people entering the workforce now, such games are more than just an occasional pastime. Games form the very backdrop of their lives. These individuals do much of their socializing through computer games and use the vocabulary of gaming even in conversations that have nothing to do with games.

What is Gamification?

HR StrategyWith gaming concepts and terminology gaining prominence among young employees, it’s probably not surprising that companies eager to attract, engage, incentivize and retain members of this generation have been taking games seriously. Gaming concepts have begun working their way into key HR processes in two distinct forms, often called serious games and gamification. Whereas serious games are actual games used in the workplace whose purpose is beyond merely providing entertainment, gamification is the weaving of game mechanics such as virtual currency, leaderboards (boards that display leaders in a competition), badges, or leveling up (progression to the next level in a game) into existing work activities or processes without the development of a full-fledged actual game.

You can find more information in the report Trends Reshaping the Future of HR: Digital Radically Disrupts HR by Accenture Digital.

Why now?

The idea that gaming elements can be useful in the workplace is not new. For example, sales groups have long used leaderboards and other gamification-like mechanisms to foster friendly competition. And organizations as serious as the military have used war games and their civilian equivalents to train soldiers and leaders. What is new is that more and more workers are familiar with and enjoy gaming.

In addition, the commercial platforms that have industrialized the development of games and gamification are more widely available to organizations. These factors have made it much more affordable for enterprises to create serious games and to incorporate gamification into business processes. For example, some serious games leverage general which provide graphics, game editors and artificial intelligence functions to achieve high levels of sophistication and create simulated characters.

Likewise, vendors such as Bunchball and Badgeville have created cloud-based gamification engines, which deliver key gamification functions as web services. This greatly reduces the cost and complexity of incorporating gamification into enterprise web applications. These developments have given rise to a varied set of applications that have transformed various HR processes.

badgeville-dashboard-100051744-origWhat is next? The road ahead

Gamification of HR is still in its early days. Still, games and gamification have begun to alter the way HR professionals and employees experience various HR processes. Some of the changes are incremental. Others could prove disruptive, such as use of gamification to replace occasional, private top-down feedback with real-time, public 360-degree feedback.We’re just beginning to understand which game-related transformations are most beneficial to organizations and how to estimate the degree to which workers may embrace these changes. As games and gamification—along with insights into how they can help organizations generate valuable business outcomes—continue to improve, this trend will likely become more important.gamification

We may never get to the point where the experience of going to work is as exciting and engaging as a great game. But high-performance enterprises will likely push the boundaries to see just how close they can get.

Borja Burguillos

The future of retirement benefits in a Global world


The retirement topic is undoubtedly one of the biggest challenge that Human Resources has ahead for the XXI century. What to do for retirement? How to manage it with local regulations in a global context?

Multinationals are working through the biggest change in benefits strategy that we’ve seen. Over the past decade, costs of defined benefits (DB) employee retirement plan have mushroomed. People are living longer, investment market conditions are difficult, the cost of healthcare is increasing, regulation is tightening and state pension is in decline. And in spite of the best efforts of sponsoring employers, deficits have remained stubbornly on corporate balance sheets.

At the same time, the nature of the workforce is changing dramatically with far more diversity and less predictability in individual career paths, family and financial circumstances, demographics and the form and timing of “retirement”.

In line with this I would like to highlight the study done by pwc global-pension-survey”. It’s an excellence global survey (of 114 major multinationals from across the world) and analysis to understand where we are now and what are the main trends for the next follow years.

Competition has never been so fierce in the marketplace, so employers need to be at the very top of their game at a time when many are tackling a DB legacy that could prove clipping. This is a delicate balances to strike and there are many challenges to address.

3 keys to get a successful global pension strategy

  • Affordable workplace benefits provision that employees value

This means anility for local entity for local entity management to provide appropriate retirement savings flexibly to their workforce, but within clearly understood affordability and risk constrains. The amounts spent must be justifiable in terms of the dividend they provide to the employer and their suitability for an increasingly diverse workforce. Flexibility and innovation are required to address local regulations, culture, competitive environment and workforce requirements.

  • A rigorous and nimble approach to financial and risk management

Financial and risk management should continuously monitor pension risk in the context of broader business risks. They must allow the company to quickly take action to pursue known and wanted risks, hedge or removed unwanted risk and to execute risk reduction measures at the right time and at the right price.

  • Appropriate governance structure

Clearly articulated governance (decision-making and decision-implementation) that sets out what matters most to the organization about retirement benefits management, and the resulting allocation of responsibilities between head office and local entity management. Processes should be appropriate and proportionate to the multinational’s own circumstances, bring control and flexibility without excessive complexity, and effectively engage the right stakeholders (including HR).

What HR needs to discuss with the board

HR is the key area to deal with retirement benefits as part of the desired overall reward and employment deal

  • Increasing workforce tensions around justifying continuing legacy DB benefits for and increasingly small proportions of the (longer-serving, older) workforce, given the huge difference in costs and risks for the employer versus what is being provided for (younger, shorter-service) employees participating in DC arrangements.
  • In the increasingly DC world, dealing with the issue of “adequacy” of retirement provision. Without education and action, many employees will retiree inadequate retirement savings.
  • Improving the knowledge, financial literacy and decision-making among employees.
  • Addressing the increasing diversity in employees’ needs and wants. Providing appropriate flexibility in the form and timing in which people can use their retirement savings.
  • Ensuring money spent by the employer on retirement savings is a good use of the reward budget relative to other options.
  • Securing the appropriate arrangements with financial services and administrations suppliers. Flexibility to have fit-for-purpose provision that takes into account the local needs of the business and its employees, including addressing the local environments, regulations, customs and competition.

Borja Burguillos

Analysis of Maternity leave around the world


The ILO –International Labour Organization- created the first global standard about maternity leave in 1919 aimed at protecting working women before and after childbirth: the Maternity Protection Convention. The standard was revised in 1952 and now calls for a minimum 12-week leave although a 14-week leave is recommended. In countries which provide cash benefits through social security, the ILO standard says that a woman should be paid at a rate of not less than two-thirds of her previous insured earnings, with full health benefits.

More than 120 countries around the world provide paid maternity leave and health benefits by law, including most industrialized nations except United States.

“In all parts of the world, working women who become pregnant are faced with the threat of job loss, suspended earnings and increased health risks due to inadequate safeguards for their employment,” says F. J. Dy-Hammar, Chief, ILO Conditions of Work Branch, who oversaw the report, Maternity Protection at Work.

The countries that provide the most paid maternity leave by law include: the Czech Republic – 28 weeks; Hungary – 24 weeks; Italy – 5 months; Canada – 17 weeks; Spain and Romania – 16 weeks each. Denmark, Norway, and Sweden all provide extensive paid leave which may be taken by either parent, although a portion is reserved for the mother.

Global Maternity Leave Map

HR Strategy_Global Maternity leave map
HR Strategy_Global Maternity leave map

Currently, 119 countries meet the ILO standard of 12 weeks with 62 of those countries providing for 14 weeks or more. Just 31 countries mandate a maternity leave of less than 12 weeks. More than 120 countries around the world provide paid maternity leave and health benefits by law, including most industrialized nations except United States.

A minimum length of service with the same employer is the most common condition of maternity leave. Some examples include a minimum of three months of employment in Switzerland; six months in Libya, Syria (in agriculture) and Somalia; six months during the year preceding the birth in Egypt and the Philippines; one year in Australia, Bahamas, Jamaica, Mauritius, Namibia, New Zealand and United Arab Emirates, and two years in Gambia and Zambia.

Employment Protection: The ILO says that an essential element in maternity protection is a legal guarantee to pregnant women and young mothers that they will not lose their jobs as a result of pregnancy, absence on maternity leave or the birth of a child.

The guarantee is an essential means of preventing maternity from becoming a source of discrimination against women in employment. Loss of continuity in employment is a major handicap for women’s career advancement and is costly in terms of lost seniority and reduced pensions, paid annual leave and other employment-related benefits.

Summarizing, we can say that there is a long way to run in relation with the maternity leave in order to standarize this benefit as a global level. Even in some industrialized countries as United States is not still a benefit required by law.

In addition, I would to add another point to consider how is the paternity leave fro men. Where and How is the paternity leave around the globe? Don’t you think it could help to get the work equality of opportunities for women?

Anxious to hear your views.

Note: Information provided by ILO & Wikipedia.

Borja Burguillos & Maria Lopez

Global pension: analysis and next challenge for labour world


The Melbourne Mercer Global Pension Index compares retirement income systems in 20 countries representing more than 55% of the world’s population. The Index rates these systems based on their adequacy (accounts for 40% of the overall score), sustainability (35%), and integrity (25%). This comes at a time when pension systems worldwide are under increasing pressure due to rising life expectancy, increased governmental debt, uncertain economic conditions, and a global shift to defined contribution plans.

David Knox, a Mercer Senior Partner and author of the study says “Worldwide, many of the challenges relating to aging populations are similar, irrespective of each country’s social, political, historical, or economic influences,” he notes. “Many of the desirable policy reforms are also similar and relate to pension ages, retirement level funding, work longevity, and benefit design issues to reduce benefits leakage before retirement.”

Global pension

In addition you can find a study done by Towers Watson Global-Pensions-Asset-Study-2013-Towers-Watson where you will fin a deeper analysis for 13 major pension markets around the world, which total USD 29,754 bn in pension assets and account for 78,3% of the GDF of these economies.

Thinking about… Why not a Global Pension?

In a globalized and hyper-connected world it doesn´t make sense to speak about local pension markets. The workforce is moving now more than ever in the history crossing borders without any problem.

Then, When will start to talk about a Global PensionThis is not the future, this is the present.

Analysis of annual leave around the world


The interest in the issue work/life balance continues to grow. From the employee’s and company’s perspective, health creates wealth. Companies recognize that a healthy, happy workforce is a productive one and this feeds directly into the bottom line. How companies interpret holiday regulations provision is a major factor. With pay rises muted and often below the rate of inflation, companies are searching for other ways to motivate their staff. Flexible working and a good employee work/life balance helps improve employee engagement when the usual financial tools are unavailable.

Holiday entitlement is often more complex since actual holiday provisions often depends on company contracts and the number and treatment of public holidays.

Workers in Western European countries, on average, have access to the greatest amount of statutory paid holiday in the world. In contrast, employees in Asia Pacific have the lowest levels of statutory paid holiday. Workers in the UK have, on the face of it, one of the most generous statutory holiday entitlements (28 days) while workers in the United States of America have the least with no statutory holiday entitlement.

Employees with the potential for most holiday time is Austria with 25 days statutory holiday entitlement and 13 days public holidays and Malta with 24 days statutory holiday entitlement and 14 days public holiday. In both countries employees have the potential for 38 days holiday a year. The Philippines and Canada have the lowest possible entitlements with 20 and 19 days, respectively. Employees in Columbia have the greatest number of public holidays (18 days) while those in Mexico (7) have the least.

HR Strategy_Annual leave around the worldWhat are the main differences among regions?

Western Europe
UK employees receive the most generous statutory holiday entitlements in Western Europe (28 days) followed closely by Greece, Austria, France, Sweden, Luxembourg, Finland and Denmark (all 25 days). Employees are slightly worse off in Malta (24), Spain and Portugal (both 22) and Norway (21). In Italy, Belgium, Germany, Cyprus, Ireland, Switzerland and the Netherlands employees are entitled to 20 days statutory holidays. Cyprus offers the highest number of public holidays (15) followed by Malta and Spain (both 14) and Austria and Portugal (both 13). The UK and the Netherlands have the lowest number of public holidays in Europe (8).

Central and Eastern Europe
Poland (26 days) offers employees the most generous holiday entitlements in Eastern Europe, followed by Hungary (23). Latvia, Russia, Slovenia, Serbia, Slovakia, Lithuania, Croatia, the Czech Republic and Romania all offer 20 days statutory holiday. The Ukraine offers 18 days and Turkey has the region’s lowest entitlements at 17 days. Across the region there are more public holidays on offer compared to Western European countries. Slovakia offers the highest number of public holidays (15) with Serbia offering the least (8).

Middle East and Africa
The United Arab Emirates (UAE) with 22 days make provision for the greatest amount of statutory holidays in the region, followed by Morocco (18), Lebanon (15) and South Africa (15). The Lebanon offers the highest number of public holidays (16) followed by Morocco (14), South Africa (12) and the UAE (9).

North and Latin America
The two North American states, Canada and the United States are amongst the least generous nations when it comes to statutory holidays. US Federal law does not mandate pay for time not worked and holiday policies vary widely. Many organisations in the US provide three weeks of vacation after five to ten years of service and unionised employees generally have vacation time specified under collective agreements. In Canada, mandatory vacation entitlements vary between provinces and companies typically supplement statutory requirements and some organisations provide up to six weeks’ vacation after 20 or 25 years of service.  The story is markedly different in Latin America. Employees in Venezuela receive 24 days holiday followed by Brazil and Peru (both 22), Argentina (20) and Mexico (16) with Colombia and Chile both offering employees the region’s least generous entitlement of 15 days. However, employees in Colombia also receive the regions most generous public holiday allowance of 18 days a year, followed by Chile (14), Argentina (12), Peru (12) and Venezuela (12). Canada and Ecuador have amongst the continent’s least generous public holiday allowance (9), with Mexico coming at the bottom with 7 days.

Asia-Pacific
Employees in Asia fare poorly when their statutory holiday entitlements are compared with the rest of the world. Japan, Australia and New Zealand offer employees the region’s highest levels of statutory holiday entitlement (20 days) equal to many countries in Western Europe. These are followed by South Korea (19), Malaysia (16) and Taiwan (15). Hong Kong, Singapore, Vietnam and Pakistan all provide 14 days followed by India and Indonesia (both 12) and China (10). Thailand (6) and the Philippines (5) offer the region’s lowest holiday entitlement.

After read all of this I only can make question, Why are there these differences among countries? even if they are relatively close each other? This is a good point to analyze

Note: Information provided by HRSDC, Mercer & Wikipedia.

Borja Burguillos & Maria Lopez

Pension Plans in Europe 2013: looking for the stability


There remain powerful incentives for pension plans to reduce equity-related volatility, in particular the regulatory environment and a desire on the part of corporate sponsors to mitigate the impact of pension plan volatility on their balance sheets. In addition, rising equity markets over the course of 2012 and early 2013 will have generally lifted funding levels, providing some of those plans on a path to a lower risk position with an opportunity to reduce equity allocations.

As Nick Sykes says -European Director of Consulting in Mercer’s Investments business- the Pension schemes across Europe, but particularly in the UK, remain on a path towards a lower-risk investment strategy.

This approach in reducing risk will not simply mean increases to government bond allocations and simple swap strategies. Instead, there would be increasing interest in assets that offer a relatively stable and inflation-sensitive income stream, such as ground lease property and infrastructure. Sophisticated LDI strategies are also proving essential for providing a greater degree of flexibility and responsiveness to changing market conditions

What is LDI strategy?

Liability-driven investment policies and asset management decisions are those largely determined by the sum of current and future liabilities attached to the investor, be it a household or an institution. As it purports to associate constantly both sides of the balance sheet in the investment process, it has been called a “holistic” investment methodology.

In essence, the liability-driven investment strategy (LDI) is an investment strategy of a company or individual based on the cash flows needed to fund future liabilities. It is sometimes referred to as a “dedicated portfolio” strategy. It differs from a “benchmark-driven” strategy, which is based on achieving better returns than an external index such as the S&P 500 or a combination of indices that invest in the same types of asset classes. LDI is designed for situations where future liabilities can be predicted with some degree of accuracy. For individuals, the classic example would be the stream of withdrawals from a retirement portfolio that a retiree will make to pay living expenses from the date of retirement to the date of death. For companies, the classic example would be a pension fund that must make future payouts to pensioners over their expected lifetimes (see below).

Below you can find a nice infographic elaborated by Mercer about how is the current situation of Pension Plans in Europe and what are the expectations.

Europe pension fund-MERCER-91

Borja Burguillos

How to develop a Global Total Compensation Model


Throughout the history, employers have been challenged with attracting, motivating and retaining employees.

During the past decade, the Compensation topic has continued mature. Increasingly, it has become clear that the battle for talent involves much more than highly effective, strategically designed compensation and benefits programs.

The evolution of Rewards

The most successful companies have realized that they must take a total rewards approach, emphasizing attraction, motivation and retention.

In this article we want to show the variables to taking into account to design develop and implement a Global Total Compensation plan successfully. We consider this as the previous step before to develop the whole Total Rewards Model, including concepts as “Performance & Recognition” and “Development & Career Opportunities”.

GLOBAL TOTAL COMPENSATION MODEL

Global Compensation Model_Borja Burguillos

4 phases and steps to consider

fixed pay

FIXED PAY

Fixed or base pay, also known as base pay, is nondiscretionary compensation that does not vary according to performance or results achieved.

It’s usually determined by the organization’s philosophy and pay structure.

  • Base pay

Fixed or base pay is the compensation paid to an employee for performing specific job responsibilities:

  • The definition of base pay can vary by country.
  • Base pay levels need to take into account variations in equivalent monthly salaries vary by country.
  • The bottom line to fixed pay practices need to be based on a competitive strategy for each country.
  • Types of Base pay

Once pay structures are built, the organization must determine how employees will be paid:

  • Salary: paid on a weekly, biweekly or monthly basis rather than by the hour, generally to higher level positions.
  • Nonexempt / hourly rates: paid by the hour for a job being performed. An individual’s annual pay is dependent on the number of hours worked during the course of the year.
  • Piece rate: payment is based on an individual’s rates production. A payment is received for each piece or unit work produced.

variable pay

VARIABLE PAY

Incentive or Variable pay, also known as pay at risk, is compensation that is contingent on discretion, performance or results achieved.

Much of the innovation in compensation is occurring in the variable pay element. Companies are making greater use of variable pay programs by expanding them to a significantly broader portion of the workforce that they have in the past.

These schemes are adopted by many corporations in order to improve the employee morale and increase the motivation to work for the employees. Based on performance measures and metrics defined by the human resources of the specific organization incentive plans are devised and the specific mode of incentive is decided.

  • Bonus or Incentives

Bonuses or Incentives are delivered through plans that predetermine a performance and reward schedule. The incentive can be paid in an accounting period (month, quarter, year, multi-year) or upon an event (reaching an objective, completing a project, etc)

Organizations that seek to create a closer link between employee compensation and the risks of doing business have increased the prevalence of group/team incentives.

  • Commissions

Commission is a sum of money that is paid to an employee upon completion of a task, usually selling a certain amount of goods or services. Commission may be paid as percentage of the sale or as a flat dollar amount based on sales volume.

Employers often use sales commissions as incentives to increase worker productivity. A commission may be paid in addition to a salary or instead of a salary.

Commissions are cash payments, based on predetermined performance and reward schedule. They are typically based on sales or profit margin on those sales. Commissions are usually for sales employees.

Sales incentive plans matched to type of responsibilities: Customer identification, customer service or customer persuasion.

  • Profit-Sharing Plans

Profit- Sharing is a form of variable pay provided to all employees based on the profits of the company. Companies usually have predetermined goals and formulas for determining the amount that will be allocated to employees.

Profit- Sharing are typically implemented to achieve employee participation and identification with the organization’s success.

  • Performance-Sharing Plans

A variable pay plan that bases rewards on the performance of a combination of quantitative and /or qualitative measures. The objective increase employee identification with the organization’s success and increase employee understanding of what is important to the organization and communicate the basis upon which success is measure.

benefits

BENEFITS

Benefits are a core element of the Total Rewards Model. Benefits include Health and Welfare plans, Retirement plans and programs providing pay for time not worked. Over time, employee benefits have evolved from basic fringe benefits of insurance coverage and a few perquisites to wide a range of benefits designed to strike a balance between an employee’s personal and professional life.

  • Healthcare

Healthcare systems are influenced by the beliefs, values, culture and perceptions in different regions regarding the role of government in providing health care to its citizens.

The employers commonly supplement the government health programs with health care plans influenced by corporate objectives, competitive practices and the limitations of government programs. Limitations government-sponsored programs may include restricted access, limits on services/facilities, payments, reimbursement and gaps in coverage.

We can find as components of Medical Plans:

  • Medical coverage for dependants.
  • Dental plan.
  • Optical plan.
  • Hearing plan
  • Welfare

The factors that influence health and retirement benefits may also affect other benefits such as life insurance, disability and time off.

Depending on the type of benefit, statutory requirements, coordination with government programs, collective bargaining agreements and other influences may shape or define the final program, limiting employer flexibility in plan design.

In addition, offer wellness programs to employees are very useful to increase the satisfaction and healthy life.

  • Retirement and Investment Plans

Qualified retirement plans include both the traditional defined benefit (DB) pension plans and defined contribution (DC) plans

    • DB; is based on a formula that considers pay and service (i.e. one percent of compensation for each year of continuing service). Provide better benefits to employees with long service.
    • DC; characterized by employee and employer contributions made to individual participant accounts
    • Hybrid plans; combine elements of defined benefits and defined contribution plans.
  • Other benefits
    • Housing Allowance
    • Transportation Allowance
    • Meal Allowance
    • Phone Allowance
    • Training Allowance

work-life

WORK-LIFE BALANCE

Work – life is composed of offerings in the Total rewards package that address the unique individual needs of the employee. These offerings are important to the employee but may be less tangible than compensation and benefits.

Categories which support work – life could be:

  • Caring for depends
  • Supporting health and wellness
  • Creating a workplace flexibility
  • Flexible Work Hours
  • Financial support programs

After we have our Global Total Compensation model successfully implemented in our company it´s time to think about “Performance & Recognition” and “Development & Career Opportunities” thus completing the corporative Total Rewards Model required to get business goals.

Borja Burguillos & María López

Global Mobility: What talent is moving around the world?


Below you can see a interesting infographic made by Mercer Think about who is taking an international assignments and why.

Global Mobility is gonna be the main important challenge for HR during the rest of the century, so I would like to highlight the words of Anne Rossier-Renaud -Principal in Mercer’s global mobility business- whom said “Many companies do not have a clear selection process that would include assessing an employee’s suitability for an international assignment, whether at initial recruitment or upon assignment opportunity. Then, when qualified candidates are found, employers need to address potential obstacles to mobility, such as dual career and family issues, which may prevent candidates from accepting an international assignment”.

We have a long way to learn.

130513-MERCER-80-INTERNATIONALASSIGNMENTS2Borja Burguillos

Total Rewards Strategy


Below you can see an elaboration own infographic with the explanation about how important is to have a defined and good Total Rewards Strategy in order to get the Business goals.

TotalReward strategy infografia

Borja Burguillos