Ensuring a Competitive Compensation Structure
In this lesson, you’re expected to learn about:
– the final stage of the employment cycle
– the different types of remuneration
The final stage in the employment cycle is the ‘termination stage’, in which workers leave the workplace on a voluntary or involuntary basis.
This stage needs to be handled carefully and sensitively by the human resource manager.
Due to increased international competition, many organizations — large, medium and small — have been forced to restructure. As a result, there has been a marked increase in the number of voluntary and involuntary redundancies* being offered.
Termination of employment is when an employee leaves a particular workplace, ending the employment relationship. Termination is usually managed by the human resource manager who must ensure that the employee is treated both fairly and within the law.
There are many reasons why employees leave an organization. However, it is possible to classify the different types of separation into two broad categories – voluntary and involuntary.
Most employers find dismissal of an employee to be a difficult process regardless of the reasons for the dismissal.
However, when a dismissal is necessary, it is important for the employer to:
• Be informed about and comply with legislation.
• Treat the employee fairly and act in good faith.
• Handle the termination process in a professional way that preserves the employee’s dignity.
• Be careful about how much information is communicated to others about the facts and reasons for the termination.
Retirement occurs when an employee voluntarily decides to give up full-time or part-time work and no longer be part of the labor force.
Until the mid-1980s, it was common for men to retire once they reached 65 years of age and women when they reached 60 years of age.
Since changes to legislation in the 1990s, there is no ‘official’ retirement age. People now can choose when they would like to retire.
Today, many organizations provide advice and assistance to employees to help them prepare for retirement.
• the offer of a promotion with another business
• to start their own business
• boredom with their present job
• a change of lifestyle
Whenever an organization wants to downsize — that is, decrease the size of its operation — it will not fill vacancies that have come about due to retirements and resignations.
Redundancy occurs when the job a person does is no longer necessary, usually due to technological changes, restructuring or a merger or acquisition. Unless the existing employee can be retrained for another job, he or she will be made redundant.
Redundancy can be either voluntary or involuntary.
Employees are informed of the situation and given the opportunity to nominate themselves for voluntary redundancy.
In this case, the employee is not at fault in any way; the decision to make the employee redundant is purely based on the ongoing needs of the organization.
Retrenchment is employee termination due to lack of sufficient work to keep the employee fully occupied. Retrenchment is a cyclical phenomenon tied closely to the level of economic activity. The end result of both retrenchment and redundancy is that the employee is out of a job.
The HR manager must be aware of the rights of an employee in relation to redundancy and retrenchment, and must follow the correct procedures.
These procedures might include providing necessary information to the employee being made redundant or retrenched, a consultation process, time off leading up to the final day when the employee leaves, and organizing redundancy pay (sometimes referred to as severance pay).
The amount of redundancy pay will usually depend on how long the employee has been continuously employed in that workplace. Other entitlements, such as payment for accrued annual leave or long-service leave, may also be owed to the employee when they leave the organization.
There will be occasions when the behavior of an employee is unacceptable and it then becomes necessary for an organization to terminate the employment contract of that employee. This is known as dismissal.
The most serious form of dismissal is summary dismissal — when an employee commits a serious breach of their employment contract. For example, an employee who is drunk at work or is found to have engaged in criminal activity may be summarily dismissed. If an employee is given a summary dismissal, no notice is required.
The amount of notice (or payment given in lieu of notice) will vary depending on a number of factors, such as whether the employee is governed by a particular award or contract, the age of the employee and how long they have worked for the employer on a continuous basis.
Unfair dismissal occurs when an employer dismisses an employee for discriminatory reasons. This is an issue that both employers and HR managers need to be aware of. Some examples of discrimination under workplace laws include dismissal because of:
• absence from work due to illness or injury
• either belonging or not belonging to a trade union
• race, color, sex, sexual preference, age, disability, marital status, pregnancy, religion or nationality