Transport Services Management & Property Administration

Head
Job by Moti Engineering Plc

 (Job Id: 301164 | 76 Views) Posted 06 May

Category:
 
Business and Administration, Management
 
Location:
 
Addis Ababa 
 
Career Level:
 
Senior Level (5+ years experience)
 
Employment Type:
 
Full time
 
Salary:
 

View Jobs by this company

Job Description
Report to:  HR & Admin DPT.  Director
Employment type: permanent
Benefits: attractive work related allowances and benefit packages (11% pension by company, 24:00 Life insurance,  
Medical coverage… etc.)
Job description and specification
GENERAL ASSIGNMENT:
Property & Transport service Administration / head/ is administer the “COMPANY MOTOR VEHICLES &
TRANSPORTATION SERVICES ADMINISTRATION POLICY” that governs all Motor vehicles engaged on company
operation. Ensures the right implementation of the Motor Vehicles Administration policy and operational
manual procedural rules and requirements. Supervise and approves all transportation, logistic and related services that
supports MOTI Engineering PLC main function’s to highest performance achievements in efficient ways. Responsible to
organize direct and control the Motor vehicles acquisition, Transportation & fuel Mgt, Facilitate Materials logistic works,
Vehicle’s repair & maintenance and other related service’s unit management, in-compliance of a set of standards to meet
and the needs of employee and the organization.
Major Duties and Responsibilities
 Perform the Planning, acquisition, directing and controlling function of company’s Motor vehicles Administration
and Transportation services provision for successful performance of company objectives, in efficient and effective ways.
Manage Motor Vehicles & Transportation division to provide satisfactory passengers and material transportation service of
company. 
 Monitor / guide and supervise the Administration of all Motor Vehicles including Motor bikes, of the company
and different sources (owned by others) which engaged on MOTI Engineering Company business, as in Motor Vehicle Mgt.
policy & procedural manual Operational guideline.
 Make continuous Follow-ups and ensures the Motor vehicles property administration, movements and services
provisions are incompliances of MOTI Engineering Policy regulations, and general Principles of Local & Federal Govt. offices
of the country.

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 Organize and perform new Vehicle Acquisition preparing the precondition and required type of documents by
their steps at Eth. Road Authority offices and authorities for issuance of Owner certificate, Annual technical inspection and
others.  Accessories and safety materials, and insurance coverage as in policy manual; when it is approved by MOTI higher
body. steps of New Company’s
 On MD &/ or Admin Director advice assign cars, and approves car hand-over Conditions sheet;
 Oversees the proper handling and maintenances of Permanently Assigned Managerial & non managerial cars
usage & Administration, takes corrective action on deviations, report incidents without delay to the corresponding higher
company’s officials necessary actions.
 Request and Initiate the employment, and participate on Division’s staffs & drivers Selection, on orientation and
their introduction.
 Initiate and plan on provision of trainings of his /her team members and drivers (new entrant & existing) on
company culture, Transport Mgt. policy & operational procedures, on their specific works, and on what expected from each
employee.
 Supervise and administer the performance of Fleet Management unit- member and leading staffs under his /her
supervision; viz. Vehicle drivers, Motorbike operators, car coordinators and Assistances.
 Implement the cross-checking systems of control, that Ensures company employed drivers’ being incompliance of
rules and regulation, and takes disciplinary measures in consultation of HRM division.
 Make close supervision & gets updated information on proper function of all Motor Vehicle’s Gauge , Sensors and
Installed GPS’s healthy function, and individual cars Daily Travel / Movement / sheet being in accordance to odometer /trip-
meter/ gauge.
 Overview Company Motor Vehicle’s distances (Km) coverage, on time maintenance services and their damage’s
repair work; approves the repair & maintenance work orders on request.
 Works to ensure the efficient and effective utilization of motor vehicle resources assigned under pool system and
for Managerial privilege and operational purposes; fuel utilization and night halt conditions being incompliance of the policy
and procedural manuals need.
 Makes periodic summery and Analyze the user’s (Divisions, section & unit’s) staffs demand and works condition
with the pool system capacity of service’s and works pressure; makes necessary adjustments on number of vehicles in
consultation with HR & Admin DPT head.
 Administer car supplier’s contract, ensures the company MOTI’s optimal utilization of suppliers service as per
signed contract between two parties. Check and approves car suppliers each vehicle’s services summery, from daily bases to
monthly one, and the proper handling, payment conditions and timely performance. 
 When it is approved, Put an order for car Supplier Company, for additional or new rent car supply specifying the
type and Model of car, with starting date; and also terminate suppliers’ car when it is found necessary.  
 Facilitate and Manage materials movement / Logistic services throughout District across Regional state in
boundary of Ethiopia, by using rented & company owned van / truck cars on consent /approved proposal of material
movements.
 Responsibly supervise the Pool System’s Transportation Service’s healthy operation, inline of objectives of
common-pond optimum utilization of Motor resources, towards smooth performances of overall company functions. In city
(AA. City) movements.
 Ensures the healthy fuel supply service as standards, and confirm its consumption being in conformity with rules.
Ensures the prompt replenishment of coupons and ensures the continuous fuel supply of Motor vehicles engaged on company
operation.
 Overview and ensures the healthy and prompt courier transactions and mail services;
 Responsibly Manage the Post man (Motorists), and check the Motorbikes (Motorcycle) movement and services;
Facilitate necessary sustainable service of Motorist movements. 
 Lead the schedule and ensures the acquisition of certifications of Company Motor Vehicles of annual technical
examination (Bolo), 3rd party Insurance coverage and others on due time period. 
 Prepare and Maintain Company’s property Assets- Durable (fixed & Movable) Registration Books.
 Approves the payment requests of small & routine expenses related to Motor Vehicles Management, and checked
the payment requests for higher-body approval as given delegation.
 Prepare Periodic Reports, present and submit to HR & admin DPT head.  
 And performs the related and other duties assigned to him/ her by the immediate supervisors.              

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 Job Requirements
Competencies / Knowledge, Ability and Skill  
 Excellent Communication skill, in person speaking  and in writing in both English and Amharic languages;
 Strong analytical & problem solving skills, Attention to Detail, Deadline-Oriented, Confidentiality is very
important.
 Ability to lead & manage teams; Decision-making skill; Resource optimization, Cost awareness are from required 
skill / experience of the candidates;
 Organization, time management, prioritizing and the ability to handle a complex, varied works at once;
 Basic computer operation (Miss-Office package) skill, knowledge of IT, and different software uses, including
Amharic software applications related to the job is must.
Job Requirements qualification
 College Diploma in related field of study and 8 (eight) years of experience out of which 2 years must
be on supervisory (managerial) position.
 BA or BSC Degree in related field of studies and minimum of 5 or 4 (four) years of work experience on directly
related works out of which 1 (one) year must be on supervisory position.
 Only reputable & referable companies experience is acceptable, with demonstrative experiences;  
 Having Driving License with more than 2 years’ driving experience is preferable / advantageous;
 Training certificate on fleet / transport Management is made advantageous,
 Attention to detail but also the ability to see the implications for the bigger picture

How to Apply
Only qualified & interested candidates are encouraged to apply for this vacancy position:
 Please Download the link and complete it properly;
 On line Applicant: Please attaché and send: the completed Job applicants summery, with your CV &
credentials copy only; - stating the position (Transport Services Management) on the subject line; to email address to
“ recruitment@motiengineering.com ” making CC to  ‘ Vacancy@motiengineering.com ’

Branch Manager for Shone Branch

Job by VisionFund Micro-Finance Institution S.C.

 (Job Id: 301169 | 50 Views)Posted 06 May

Category:
 
Accounting and Finance, Banking and Insurance, Business and Administration
 
Location:
 
Shone, SNNPR 
 
Career Level:
 
Managerial Level (Manager, Supervisor, Director)
 
Employment Type:
 
Full time
 
Salary:

3
 
As per the Institution salary scale

Job Description
IMMEDIATE INTERNAL/EXTERNAL
    VACANCY ANNOUNCEMENT

Position: Branch Manager for Shone Branch 

Place of Work: Shone Branch
Terms of Employment: Permanent
Opening Date: May 6, 2021
Closing date: May 12, 2021

       About the Organization:

VisionFund Micro Finance Institution (S.C) is an Institution established according to proclamation No.
40/96 to provide financial services to the productive poor in the rural and urban areas of Ethiopia.
VisionFund is currently operating in four of the Regional States of the country.
VisionFund MFI is currently looking candidates for Branch Manager role. The successful candidates
will have skills and experience that meet the following requirements:

Major Duties and Responsibilities:

• Ensures verification of existence of clients and credit worthiness of their business;

• Chairs the Branch Credit Committee (BCC) and participates in evaluating, approving, or rejecting
loans according to the level of discretion;
• Ensure saving deposit and withdrawals in accordance to the policies;
• Coordinates on growth areas and projections for disbursements;
• Plans and controls the liquidity of the branch; repayment of loans;
• Ensures the installment and operation of financial accounting system, production of financial analysis
and reports, follows up cash flows and handling;
• Ensures that the targets agreed with the management are reached;
• Coordinate and supervise the operation of the branch;
• Plans personnel capacity, selecting new staff, undertakes fair & equitable HRM and evaluating
existing staff in accordance with management decisions; 
• Supervises economical use of material resources (Generator, Motorcycles & Vehicles) ensures same
are serviced on time & as scheduled;
• Ensures that the branch staff maintain very high morale, identifies capacity building needs and
ensures adequate and updated training is provided;
• Undertakes annual performance appraisals and staff development plans;
• Develops the branch business plan and annual work plans and seeks approval from the SMT on the
projected targets and required resources;
• Adjusts the plan as and when needed;
• Implements policies, procedures and internal controls at the branch offices;
• Decides on all operational & financial issues within the framework of existing regulations and
management decisions;
• Performs independent balancing of all records;
• Works with other management members of the MFI;  

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• Attends quarterly branch managers meetings, engages in team problem solving, works together on
overlapping tasks;
• Provides back-up support to the other branches and head office as needed;
• Ensures efficient flow of information inquiries required by different Department from Head Office &
Area Operation Office;
• Communicates with staff on organizational changes;
• Prepares and submits periodic overall performance and financial reports to the Area Office Manager,
the Head Office and the Partners ( ADP, Local authorities etc) as specifically  determined;
• Promotes loans, saving and any other services provided by the Branch;
• Plans and initiates promotional measures within the target markets of the branch; 
• networks with local authorities other MFIs and communities;
• “Champions” the deposit mobilization efforts within the branch’s area of coverage;
• Implements a customer driven branch approach.

Job Requirements
• University degree/diploma in economics/accounting/business
administration/management/banking/marketing/ cooperative/agricultural economics/agriculture or
related social sciences and business fields.
• Related work experience of 4 years for degree and 6 years for diploma.
• Determined personality with initiative, perseverance and the ability to motivate and manage a team.
• Capability and willingness to take responsibility and highly developed sense of rectitude.
• Ready to comply and live up to and in accordance with the organization Ideals and Core Values.
• Be proficient in Microsoft office applications.
• Able to plan and manage finances, including a basic understanding of accounting.
• Be a good trainer, facilitator, mentor, and coach.
• Very good communication and marketing skills.

CHAPTER TWO
Human Resource Planning

Chapter objectives
Up on the completion of this chapter, students are expected to know:
 The nature and characteristics of human resource planning
 Importance of human resource planning
 Problems of human resource planning
 Factors and components of human resource planning
 Human resource planning processes

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2.1 Nature of Human Resource Planning
Before you depart on a journey, it is necessary to know your destination. The steps you take before
beginning any trip may simply include determining where you are; determining where you want to
go; and finally suggesting a route that can take you from where you are to where you want to be. In
an elementary form, this is what planning is all about- knowing where you are going and how you
are going to get there. Planning is the primary and fundamental function of management. Any
management should initially plan for the activities and resources required before taking any action.
If an organization is to achieve its goals, it needs inputs (resources) like financial resources, physical
resources and people (human resources). These resources are scarce in their nature, thus requires
proper allocation and planning. Especially, it is very important to understand the significance of
people to the success of organizations. Organizations are composed of people, and these people
represent one of the organizations most valuable assets.

Thus, human resource planning is important for precisely the same reason that planning in general is
significant. Human resource planning is one of the most important elements in a successful human
resource management program. The efficient utilization of organizational resources (human, Capital
and technological) does not just happen with out the continual estimation of future human resource
requirements. HRP deals with projection of demand for and supply of human resource and
development of strategies to fill the gap so that the goals of organization can be attained. The long
rang success of any organization ultimately depends on having the right people in the right job at the
right time. Organizational goals have meaning only when people with the appropriate talent, skill and
desires are available to execute the tasks needed to realize goals.

2.2 Meanings and basic concepts

 Human resource planning is the process by which an organization ensures that it has the right
number and kinds of people, at the right places, at the right time, Capable of efficiently and
effectively completing those tasks that will help the organization achieve its over all objectives
( Decenzo & Robbins)
 Human resource planning can be defined as "a process by which an organization should move
from its current man power position to its desired man power position"(E.W. Petter). Through
planning management strives to have the right number and right kind of people, at the right
places, at the right time, doing things, which result in both the organization and the individual
receiving maximum long-term benefits.

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 According to Leon C. Meggision, human resource planning is "an integrated approach to perform
the planning aspects of the personnel function in order to have a sufficient supply of adequately
developed and motivated people to perform the duties and tasks required to meet organizational
objectives and satisfy the individual needs and goals of organizational members.
In this definition, human resource planning is valued as foreseeing the human resource
requirements of an organization and the future supply of human resources and, Making necessary
adjustments between these two and organizational plans; and foreseeing the possibility of
developing the supply of human resources in order to match it with requirements by introduction
of necessary changes in the functions of human resources management.
In this definition, human resource means skill, knowledge, values, ability, commitment,
motivation etc., in addition to the number of employees.

In general, HRP translates the organizations objectives and plans in to the number and type of
workers needed to meet those objectives. With out clear-Cut planning, estimation of
organization's human resource need is reduced to mere guesswork. After the short-term and
long-term objectives are determined, organizations engage in human resource planning to ensure
that people are available to provide the continued smooth development of an organization.

2.3 Objectives of HRP

The objectives of HRP are mainly to:
a) Ensure optimum utilization of human resources currently employed
b) Assess or forecast future requirements
c) Cope up with the changing scenario
d) Attaching with business plans of organization
e) Anticipate redundancies
f) Provide basis for human resource development
g) Assists in productivity bargaining
___________________________________________________________________________
? Check point!
Dear learner, try the following questions
 Explain the concept of human resource planning as discussed by Decenzo & Robbins
 Discuss the objectives of human resource planning

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  Discuss how human resource planning help managers to have basis for human resource
development
___________________________________________________________________________

2.4 Importance of HRP

HRP is important for a nation, organization and employees.
National importance of HRP
At the national level it helps the government to forecast the demand and supply of human resource
for the country and to take steps to adjust the demand by altering its economic, industrial and
agricultural policies and adjust the supply through its population policy, family planning, and
educational policy. It also serves the government to plan for occupational distribution, sect oral and
regional allocation of human resources.

Organizational importance
HRP anticipates not only the required kind and number of employees but also determines the action
plan for all functions of HRM. These action plans serve the organization in different ways. The
major payoffs of HRP are:
 It checks the corporate plan of the organization. The corporate plan of the organization
regarding expansion, diversification, technological change, etc., should be packed up by the
availability of human resources. If it is anticipated that the required manpower will not be
available, then the HRP suggests the need for modification of corporate plans.
 It offsets uncertainty and change. HRP offsets uncertainties and changes to the maximum
extent possible and enables the organization to have right men at the right time and the right
place. Without the HRP, everything regarding requirement, availability, and internal
movements of human resources would be in a liquid state and all managers will be in a
dilemma about securing suitable manpower.
 It helps in anticipating the cost of salary, benefits, and all other human resource functions and
this in turn facilitates the formulation of budget on an organization.
 It tries to foresee the need for redundancy and plan to solve it or to provide for alternative
employment in consultation with trade unions, other organizations, and government through
remodeling organizational, industrial and economic plans. This helps maintain good industrial
relation.

8
  Avoidance of disruption in production. Through well-developed recruitment and training
policy, HRP estimates the future human resources needs that production or other activities
of organization will not be interrupted.
 Promotes equal employment opportunity. HRP helps organizations to cope with different
labor laws and respond satisfactorily to the information demands of different legal
institutions.
 It gives an idea of the type of tests, interviews, and other techniques of selection based on the
level of skills, qualifications, intelligences etc., of future human resource.
 Serve as a guide for coordination of different personnel programs such as recruitment,
selection, training and development of employees
 It facilitates the control of all the functions, operations, contribution and cost of human
resource.

Employee importance
 Creates more satisfied and better-developed employees: HRP provides scope for
advancement and development for employees through training, development and succession
planning. Thus employees are likely to feel their talents are important to the employer, and
they have better chance to utilize their talents. This situation often leads to greater employee
satisfaction and its consequences like lower absenteeism, lower turn over, fewer accidents,
higher quality of work etc.
 It helps to satisfy the individual needs of the employees for promotions, transfers, salary
enhancement, better benefits etc.
-----------------------------------------------------------------------------------------------------------------
? Check point!
 Hi dear! Have you go through the contents of the above topic? Good! So please discuss the
national, organizational, and individual importance of human resource planning.
-----------------------------------------------------------------------------------------------------------------
2.5 Problems of HRP
Though HRP is beneficial to the organization, employees and labor unions, some problems may crop
up in the process of HRP. Some of these are:
1. Uncertainties due to changes. Human resource planning suffers problem of preparing long range
forecasts accurately due to uncertainties in future turnover, recruitment etc, and changes in

9
 economic, technological, marketing, legal and labor conditions. These changing conditions make
long-term forecasting unreliable.
2. Inadequacies of information system. HRP requires a well-developed Human Resource
Information System (HRIS). However, this has not yet fully developed in most organizations (in
developing countries) due to the level of technology, low status given to HR department, and less
importance attached to HRP. Further, the reliable data and information about the economy, other
industries, and labor market etc is not available.
3. Resistance by employers. Many employers resist HRP as they think that it increases the cost of
manpower as trade unions demand for employees based on the plan, more facilities and benefits
including training and development. Further, in a situation when there is high unemployment,
managers feel that HRP is not necessary as candidates are available when required.
4. Resistance by trade unions and employees. Trade unions and employees also resist HRP as they
view that it increases the workload of employees and prepares programs for securing the human
resources mostly from outside. The other reason for their resistance is that HRP aims at
controlling employees through improved performance, productivity maximization etc.

In addition to the above problems, HRP may suffer from the following specific problems:
- Lack of top managements support. Sometimes, HRP activities don't enjoy top management
support and thus human resource specialist find it difficult to obtain information on various vital
inputs and get frustrated.
- Difficulty to coordinate HRP and other human resource activities.
- Impediments to strike harmonious balance between quantitative and qualitative aspects of HRP.
Greater emphasis on the quantitative aspect may force the organization to discount the more
important qualitative aspect.
- Skepticism and growing mistrust from the side of operating managers. HRP requires active
participation and coordinated efforts of operating managers.
- Human resource specialists' has lack of proper understanding of the HRP. Human resource
planners may not fully understand the HRP, and suffers from identity crises and they fail to
develop a strong sense of purpose.

2.6 Organizing HRP

HRP is not the sole responsibility of one department rather every line manager, the top management
and human resource department participate in the process.

10
 - The top management is responsible for preparation of organizational strategic plan in
consultation with other managers
- Every line manager is then responsible for planning manpower of his respective department
based on the overall objectives of the organization.
- The personnel department supplies different information and data to all the line managers and
help them regarding interdepartmental transfers, promotions, demotions etc.
- The personnel departments help the organization in forecasting manpower using different
techniques
- The department also forecasts surplus or deficit of human resources for the organization and
prepares action plans regarding redeployment, redundancy, employment, development and
internal mobility and submits the plans to top management.
- The top management then reviews departmental plans and the overall plans (either by
him/herself or by appointing committee) and makes necessary adjustments and modification
on the plans.
- Personnel department in its turn prepares modified plans for the departments based on the
finalized overall plan and communicates them to respective heads of department.
- Finally, personnel department may coordinate the control activity of HRP and sends report to
top management for actual review, control, and monitor the human resource system.
The top management then appoints a committee consisting of different individuals (like heads so
departments, and external experts or specialists) to suggest the management regarding identification
of deviations, reasons for deviations, and steps to be taken to correct the deviations.
-----------------------------------------------------------------------------------------------------------------
? Check point!
 Dear learner I urge you to stop here and discuss the following points!
 Importance of Human Resource Information System for sound HR.
 Common problems of human resource planning
 Responsibilities of different management levels and departments for sound HRP.
-----------------------------------------------------------------------------------------------------------------
2.7 Factors and components in HRP

Human resource planning process can be affected by different factors. The process of estimating
demands and supplies of manpower as well as the action programs to be implemented are influence
by various factors. These factor can be broadly categorized as External and internal.

11
2.7.1 External Factors
External factors are forces outside the organization, which directly or indirectly affect the HRP
process of an organization. Some of these external forces include.

1. Government: a major element that affects labor demand and supply is the government. Today
managers are confronted with an expanding and often bewildering array of government rules as
regulations of HR activities has steadily increased. As a result, HR planning must be done by
individuals who understand the legal requirements of various government regulations.

Some of these laws may include:

 Trade policies and restrictions such as closed-import and open -import policies
 Taxation policies
 Wage and work hours laws
 Pension provisions and social security legislation.
 Employee health and safety laws
E.g. America workers compensation (WC) Act which demands benefits to employees that suffered a
work related illness or injury.

2. Economic Conditions: Economic conditions like business cycle, interest rate, inflation, economic
growth rate, per capita income etc, determines the plans and objectives of the organization and
consequently the requirements and availability of workers. Decision on wages, hiring, training and
development, lay-off workers all hinge on economic condition.
Example, in good economic conditions organizations can pay better salaries and able to attract
qualified individual.

As the economy changes from expansion to contraction during a course of a business cycle,
organizations must modify their plans. These changes in the business cycle demand that human
resource planners assist their organizations in meeting their new plans. When the economy expands,
new employees and training program are needed; voluntary departures by employees, employee's
benefits, and improved work conditions also grow. When the business cycle turns-down,
overstaffing, excess benefits, higher wages become serious problems.

12
Recession in business results in reducing labor costs, reduce working hours, lay-off workers and so
on. These in turn affects the HRP process.

3. Social Conditions: - The society is the sources of manpower. Thus the diversity of the workforce
is the result of social conditions. The major social factors are the culture and the demography.
 Societal culture: refers to the belief and customs of a society that affect the attitude, the
behavior and ethics of a workforce. The changing attitudes, beliefs and viewpoints have
confronted personnel departments in the form of requests for longer vacations, more holydays
and non-traditional work schedules. In addition, attitude about honesty, commitment to work,
believe on teamwork, attitudes toward HIV / AIDS victims are the results of societal culture and
attitude. It is impossible to identify every changing value in society that may affect HRM in
general & HRP in particular. Nonetheless, as society becomes more diverse in its attitude, culture
and other dimensions, HR planners must try to anticipate the impact of these changes on HR
demand and supply.
 Demography: defines composition of workforce in terms of educational level, ethnicity, age,
sex, population number, birth rate, death rate, percentage of population participating in the
workforce and other characteristics. Changes in workforce demographics usually occur slowly
but it can relatively be measured and anticipated by demographers.

4. Technological challenges: - Technology impacts HRM by changing the product, production

technique, or the skills required.
The innovation of computer and robotics are some of the results of technological changes. The
introduction of computers changed employment needs. Before the invention of computers,
organizations recruited large number of unskilled and semi-skilled clerks to perform routine works
like payroll filing etc. The introduction of computer however, reduced the number of unskilled labor,
and introduced the need for highly skilled programmers and system analysts. Thus, this changed the
techniques of recruitment, training and compensation programs. Technology in general complicates
human resource planning because of the tendency to reduce employment in one department like
filing while increases employment in other departments like computer operation.

5. Competition for labor: The existence of other employers in the area can greatly expand or
diminish the labor supply. The Opening of a new business in the area may decrease the supply of

13
potential employees in a labor market. Sometimes, however, other competing business can be a
source for especially contingent employees. As a result, failure to consider the competitive labor
market and to offer pay scales and benefits which is competitive with those organizations in the same
general industry and geographic location may cost a company clearly in the long-run. Underpaying
or under competing may result in a much lower quality workforce.

In addition to local competition, international competition is also part of external environment. A

global competition for labor shifts jobs and workers around the world. Without effective human
resource planning and subsequent attention to employee recruitment, selection, placement,
development, and career planning, the growing competition for international professionals may lead
to expensive and strategically disruptive turnover and loss of important individuals.
-----------------------------------------------------------------------------------------------------------------
? Check Point!
 Please discuss the external factors that affect the normal operation of a given companies
human resource planning function
 Explain how government affects the human resource functions of planning
 Technology impacts HRP by changing the product, production technique, or the skills
required. Discuss these challenges using related examples
-----------------------------------------------------------------------------------------------------------------

1.7.2 Internal Factors

These are factors that emanate from within the organization. These factors reflect the weaknesses and
strengths of an organization. Some of these factors include:
1. Organization's strategies and objectives: the long -range objectives of an organization like
growth rates, new product development, and enlargement of market coverage, diversification and so
on affect HRP. If long term objectives are to be met, personnel specialists must develop human
resource plans that accommodate the strategic plan. In the short run, planners find that strategic plans
become operational in the form of budgets.
e.g. If a retail company faces a sharp decline in sales volume due to recession, the management will
be forced to freeze new hiring and reduce the existing employees.
In addition, expansion and entering new venture through acquisition or merger cause an immediate
revision of human resource demand

14
2. Organizational size and structure: the size of the organization (whether it is large or small)
determines the manpower needs of an organization. Jobs are the basic units of organizational
structure. Thus, the characteristics, the number and relationships among jobs affects number and type
of employees required. Re-organization after a merger or acquisition can radically alter human
resource needs. Likewise, the redesign of jobs changes the skill level required of the workers e.g. Job
enrichment. At a time when companies are constantly merging, spinning off divisions, entering new
businesses, and getting out of old ones, management should consider its HR. The type of structure,
organizational hierarchy, level of centralization and decentralization all affects HRP.
3. Organization culture and management philosophy: an organizational culture is a predominant
system of beliefs and values held in an organization by its members .It is a pattern of basic
assumptions which has been considered valid and taught to new members as the correct way to
perceive, think, and behave in relation to some problems.
E.g. it may be the culture of the organization to promote employees based on seniority.
Further, management philosophy (mgt assumption about human behavior) and Consequent
leadership they follow affects manpower plan.
E.g. Democratic leaders can produce better and productive workforce than autocratic leaders.
4. Work force factors: the demand for human resources is modified by such employee actions as
retirements, terminations, death, leaves of absence, lateness and so on. The rate of maternity leave,
sick leave, workers' death due to spread of epidemic & HVI/AIDS will significantly affect more and
more organizations and their human resource plans.
5. Labor union: labor union is a group of employees acting collectively to promote their common
interest. In a unionized company, the employer and the labor union sign a collective agreement that
specifies recruitment issues, compensation, hours of work, the working condition, promotion,
transfer etc. Thus, this agreement affects HRP.
6. Organizations financial ability: the financial strength of an organization to pay compensation to
the existing workers and to attract additional workers affects its HRP.
7. Organization of HRP activities: This shows to whom HRP responsibilities are assigned and how
it is carried out. HRP can be carried out and line departments may be given an authority to prepare
their manpower plan. In general, HRP may take top down or button- up approach, or preferably the
combination of the two. The possible conflict between the two approaches is that top management try
to squeeze the number of future employees where as line managers try to provide them selves with
extra manpower. Therefore, negotiation and compromise are necessary.

15
If the top-down view is tough (prevails), it may result in understaffing of many works, inadequate
time to prepare and delay in staffing where as the dominance of bottom-up approach results in
overstaffing and unnecessary cost
8. The nature of the jobs & tasks: - the simplicity/ complexity of the tasks in the job and other
aspects affect HRP.
-----------------------------------------------------------------------------------------------------------------
? Check Point!
 Dear distance learner, as you read from the above paragraphs, the mentioned factors are
called “internal”, please explain the why they we call these factors internal
 Discuss how organizational structure and size affect the human resource functions of a given
organization
-----------------------------------------------------------------------------------------------------------------

2.8 HRP Process

The process of HRP broadly involves the following process stages.
1. Estimating the demand for human resource
2. Estimating the supply of human resource
3. Estimating the net HR requirement
4. Developing and implementing action plan to fill the gap between demand and supply.

2.8.1. Human Resource Demand Forecasting

Organizational Plans and HRP:
Estimation of future demand for human resources is the core of any organizations human resource
planning process. Most organizations predict their future employee needs, at least informally, even
if they do not estimate their sources of supply. Demand forecasting is the basis on which manpower
planning is built. Almost all HRP begins by determining future human requirements.
HR demand forecasting is the process of estimating as closely as possible, how many and what
type of employees the organization will need in each job category by the end of the planning period
to do the work that will have to be done.
The logical place to begin this process is with an organization's business plans. Some organizational
plans to be considered include: Sales and production volume, financial levels, expansion programs,
market coverage and other strategies.

16
The basic fact to be remembered is that the estimation at this stage is a rough projection as HR in an
organization constantly changes in terms of quantity and quality. Therefore, the net requirement (the
real shortage or surplus) may be found out after matching adjustments to changes in manpower due
to increase or decrease in internal mobility, losses due to separation, and changes in qualities and
attitude of the existing employees during the planning period.
Preliminary issues to HR demand forecasting
Employers should not simply rush in to HRP with out thinking through some important issues in
advance. Since demand forecasting is usually the beginning in HRP, planners should consider the
following preconditions before estimating requirements.
These issues may include:
1. Comprehensiveness of planning
2. Planning Horizon /time frame
3. Coverage of the plan
4. Role of line managers and staff specialists in HRP process

Comprehensiveness of planning: HRP should be considered as an integral part of an organization's

annual business plans. HRP, which is integrated with the strategic plans of an organization and
prepared based on this, is referred to as plan-based HRP. Thus, it is always a good idea to have a
close linkage between business plans and human resource plans. In addition to plan -based HRP,
HRP can be prepared to a single employee group (population)which is referred to as population-
based HRP or HRP for a particular project (specific activity) of a business unit which is called
project-based HRP. An organization that have adopted all the three approaches (plan-based HRP,
population-based HRP and project-based HRP) are said to have a comprehensive approach to HRP.

Planning horizon: A planning horizon refers to the time of the HRP. It is the length of time for
which the plan is made.
- For a plan-based HRP, the planning horizon is usually the same as that of the relevant business
plan. In most organizations, this can be above three years for what is usually called ''strategic
planning '' and from one to three years for middle term planning and below one year for short-
term planning.
- The time horizon for population-based planning depends on the importance of the personnel
for which HRP is made and the availability of these individuals.

17
 - The planning horizon for project-based also depends on the nature and the duration of the
project.

Coverage of HRP: the coverage of HRP refers to the scope of the plan for which organizational
units /employee groups prepared.
In a project and population -based HRP, the manpower plan is made for select units /projects of the
business and population based HRP is made for certain employee groups like top executives , sales
person etc. where as for plan-based HRP, the plans cover the entire organization.
Commonly, HRP is made for managerial and professional employees on the grounds that they are the
most difficult and expensive to attract and retain and that they require long-lead time to develop.
When HRP involves large number of employees, like HRP for the entire organization /all units, it is
better to segment the employees in to different categories and subcategories based on function,
occupation, skills and so on.
Example of functional classification can be engineering, manufacturing, sales, purchasing, finance,
personnel etc.
With in an engineering classification, there can be another subcategory as electrical engineering,
mechanical engineering, civil engineering etc.

Roles of line managers and staff planners: it is wrong to think HRP is the exclusive responsibility
of HR /personnel department or line managers. HRP is a participative exercise by staff specialists
and line mangers.
The staff specialists, in consultation with line managers, take a lead in proposing which types of HRP
will be undertaken, which forecasting techniques to be used, give suggestions regarding planning
horizons and coverage. Once the process is started, the staff specialists assist the line managers in
collecting, processing and presenting the required data/ information and in designing appropriate
action plans.
Where as, the role of line managers (top level and bottom level) depend on the HRP approach i.e.
top-down; bottom-up or the combination (mixed) approach .
Linkage between Organizational plans and HRP
HRP is part and parcel of organizations over all plans. One cannot isolate manpower planning from
corporate planning. Manpower plan must be thought of as input to and output from an organizational
plan.

18
HRP is the process of translating organizations objectives and strategies in to the number of
employees needed to meet the objectives. A business plan must be achievable. Thus, it should
incorporate a series of planned actions, tactics and strategies which will ensure that all of the key
objectives will be achieved within the defined time frames. A business plan is incomplete unless the
means of implementation are clear; most importantly regarding the people required to carry out it.
On the other hands, estimation of HR needs with out a clear cut organizational planning is reduced to
a mere guesswork.
Hence, HRP must be derived from the corporate objectives like:
- A decision on where the company should concentrate its efforts
- An assessment of the size of the overall market and company's possible share
- Advance production and sales plans
- Estimates of resources needed by the firm
- Types and levels of technology to be used
- Plan to develop new product and diversify the existing ones
- Detail plans for management at different levels
In general, HRP is linked to the strategic planning process of organization.

-----------------------------------------------------------------------------------------------------------------
? Check Point!
Hi distance learners! Just stop your reading here and try the following questions.
 As most agreed, estimation of future demand for human resources is the core of any
organizations human resource planning process. Discuss the reason why it becomes core
 Describe the preliminary issues for human resource planning
-----------------------------------------------------------------------------------------------------------------

1.8.2 Techniques of HR demand forecasting

There are various types of demand forecasting techniques which rage from informal to sophisticated
methods. However, all of these methods, even the most sophisticated ones are not perfectly accurate;
instead they are best viewed as approximations. Generally managers can consider the following two
categories of HR demand forecasting techniques.
 Judgmental techniques and;
 Statistical /mathematical techniques

19
These two methods are usually supplementary. Even when statistical methods are used, human
judgments are also needed to confirm the conclusion of the mathematical models.

I. Judgmental techniques
Judgmental techniques are usually used in small scale and unorganized industries. Since they cannot
have systematic data banks for manpower information, these organizations usually resort to
judgmental techniques.
The judgmental approach in turn can be categorized as: -
a. Management estimation and
b. Expert forecasting

Management’s Estimation.
Under this method the managers or supervisors who are well acquainted with human resource
planning estimate their future human resource needs based on expected workloads and capabilities
required. This estimation can be either top-down or bottom-up approach.
In a top-down approach, the top managers of the organization simply rely on their knowledge of
business and organizational plans to make their best guesses about what future human resource needs
will be and dictate down to those at the lower level.
Under a bottom-up approach, which is used commonly, lower level managers like supervisors make
initial estimates for their units and send the proposed manpower needs to the top officials. The
management at the top, then compares the proposals with the organizational plans, makes the
necessary adjustments and finalizes the plans.
However, the best approach is a participative approach /the combination of the above two
approaches, where both the management at the top and supervisors at the bottom meet and decide on
the human resource needs based on the experiences of supervisors and the plans formulated by the
top management.

Expert forecasts
In judgmental techniques, in addition to managers ' estimation, information about HR needs and
future conditions that affect requirements can be gathered from experts who are knowledgeable in
HRP and the environmental changes and their implication on HR needs.

20
In this case the planner gathers information from experts (may be group of managers and other
experts) through different techniques like
1. Brainstorming
2. Nominal group technique (NGT)
3. Delphi technique

Brainstorming
Under this technique, the experts are given certain problem statements like “What will cause
organizations staffing needs to change over the next year?" Then the group members are allowed to
generate different creative solutions without limiting their ideas and without evaluating their merits.
After each group member proposed any ideas that come to his /her mind, the group considers the
positive and negative aspects of each proposal. Through a process of continual refinement, the best
possible solution (idea) for the problem emerges.

Nominal group technique

The NGT presents a group of five to fifteen managers /experts with a problem statement about HR
needs. Then each participant writes down answers /solutions he/she can imagine. Each member then
orally present and clarify his/her ideas to other members. After all members present their ideas, the
entire group discusses the ideas to clarify, evaluate and rank them. Finally, a secret ballot is used to
allow members to vote independently for the first three to five most important solutions/ideas.
Finally the idea receiving the most votes is adopted and implemented as a solution to the problem.

Delphi technique
This technique is used when NGT is impossible because the experts cannot meet due to geographic
separation or lack of time. In this technique, questionnaires on specific problems are prepared and
send to experts, the questionnaires results (responses) are shared among group members, and
continue re-circulating the questionnaire results so that individuals refine their responses until
consensus regarding the problem is reached.

Steps in Delphi techniques

1st. A problem is identified
nd
2 Experts are asked to offer solutions to the problem by providing anonymous responses to a
carefully designed questionnaire.

21
 3rd. The Responses of all group members are compiled and sent out to all group members
again
4th. Individual group members are asked to generate new innovative solutions to the Problem
after they have studied the compiled responses of all other members of the expert groups.
5th. Steps 3 and 4 are repeated until a consensus regarding the solution of the problem is
reached.
-----------------------------------------------------------------------------------------------------------------
? Check Point!
Please I advise you to stop your reading here and try the following questions.
 Discuss the concept of judgmental forecasting techniques, and when and where they are
appropriate
 In the expert method, planner are expected to gathers information from experts (may be
group of managers and other experts) through different techniques like, discuss this
techniques one by one
-----------------------------------------------------------------------------------------------------------------
II. Statistical techniques
Statistical techniques involve mathematical models/formula to forecast manpower requirements.
Even though they are useful, statistical techniques have certain limitations.
First, since all these techniques are designed simply to project the past forward, they have limited
applicability in organizations whose immediate past and/or forecasted future are characterized by
significant alterations in products or services, technologies, or organizational structures.
Second, statistical techniques are predicted on the discovery of a systematic relationship between the
so called leading indicator (like sales volumes) and human resource head counts; in real cases,
however; such relationship can exist rarely. Thus, statistical estimation should be backed by human
judgments.

Some statistical techniques used to forecast human resource requirements include:

1. Trend projection forecasting
Trend projection technique involves projecting of past manpower trends in to the future. The two
simplest methods of trend projection forecasting techniques are

A. Extrapolation: extrapolation involves direct extending of past rates of changes of manpower

request in to the future. For example, if an average of 50 production workers were hired quarterly for

22
the past two years, extrapolating that trend in to the future would forecast that 200 workers will be
added during the up coming year.

B. Indexation: indexation is a method of estimating future manpower needs by measuring

employment growth against a particular index like ratio employees to increase in production level.
For example, planners may discover that for each hundred unit increase in production, the production
department requires ten new technical workers.
Extrapolation and indexation are crude approximation in the short run because they assume that the
causes of demand (like external, organizational and work force factors) will remain constant, which
is seldom the case. These methods are very inaccurate for long-term human resource projections.

2. Ratio- trend analysis

Unlike trend projection techniques, ratio trend analysis makes allowances for underlying causes of
changes in demand. Under this method:
First, Past ratio of leading indicators to no of manpower are calculated based on the past data
relating to number of employees in each category and production level, sales volume or activity
level.
Second, determine estimated future production based on organizational plan
Third, estimate future employee requirement based on past ratio (without giving any provision for
changes)
Fourth, assess future changes and adjust the ratio (set future ratio) of production to number of
employees.
Fifth, estimate future HR requirements based on the adjusted (future) ratio.

The following example shows process of ratio trend analysis to estimate manpower need for year
2008 based on data in year 2006.
 Level of production (1-1-2006) =10,000 units
 No of employees (1-1-2006) = 100
 Ratio (100:10,000) =1:100
 Estimated future production (1-1-2008) =30,000 units
 No of employees required (1-1-2008) = 300
(Based on past ratio)

23
 Future changes include:
- Improvements in technology
- Improvements in employee Skills
 Estimated future ratio =1:150
(After considering improvements due to changes)
 No of employees required (1-1-2008) = 200
(Based on future ratios)
III.Work study techniques
Work-study techniques are more suitable where the volume of work is easily measurable. Under this
method:
1st. Future planned operations (works level, or production level) are determine
2nd. Standard man-hour needed to perform each unit is estimated
3rd. Planned total man-hour needed to accomplish the whole operation is estimated.
4th. Work ability per employee in the total planned man-hours is estimated.
5th. Number of employees required for the future planned operation is determined.
The following example indicates process of forecasting manpower requirements for an organization
in year 2008 based on work-study techniques:
I. Planned operation (in 2008) -------------------------160,000 units
II. Standard man-hours needed
a. to perform each unit (in 2008) -------------0.25 hour
III. Total planned man hours needed -------------------40, 000 hours
IV. Work ability per employees
a. in man-hours(in the year 2008) ------------2,000 hours
V. Number of employees required
VI. In 2008(40,000÷2,000)--------------------------------20 employees

Forecasting supply of human resource

Once future demand for manpower is projected, the next major concern is how to fill projected
openings.
There are two major sources of supply of manpower for an organization. These are:

24
I. Internal source of supply- includes present employees who can be promoted, transferred, or
demoted to fill external openings
II. External source of supply - consist of people who do not work for the organization currently like
employees of other organization and the unemployed group of the society.
Requirements for human resource supply forecasting
To begin planning how to satisfy manpower the planner should have:
 A clear picture of forward manpower requirements in each category ( may be based on
function, level of position, skill level, age etc)
 A clear picture of current manpower inventory in each category, using the same basis
 Data on manpower flows through the structure, loss rates, additions and other factors result
in change in current inventory
 Data on availability of various skills and experience required to be recruited from external
sources (external supply analysis)

___________________________________________________________________________
? Check point!
 Explain the basic nature of statistical techniques
 Work-study techniques are more suitable where the volume of work is easily measurable,
discuss the steps that should be in employing this method
 Describe the requirements for human resource supply forecasting
___________________________________________________________________________

2.7.2 Human Resource (HR) Audit

A human resource audit evaluates the HR activities in an organization with the intent of improving
those activities. The audit may include one division or entire company. Ti provides feedback about
the HR function to operating managers and HR specialist. It also provides feedback on how well
managers are meeting their HR duties. In short audit is an overall quality control check on HR
activities in a division or company supports the organization strategy. Auditing is an evaluation of
the system in order to enable management to take decision regarding the efficient running of an
enterprise.
One of the important aspects of internal supply analysis is the assessment of the make-up of the
current inventory and changes in the current inventory. The purpose of manpower inventory is to

25
estimate the numbers and types of employees that will be available in various job categories at the
beginning of the planning period, changes during the planning periods and the number at the end of
the planning period.

Current Human Resource Inventory

The beginning human resource inventory is the number and type of manpower expected to be in
various job categories at the beginning of the planning period.
The objective of manpower inventory determination is not only to count the number of employees
but also to audit and know capabilities of the current workforce. In addition to employee numbers,
beginning inventory may also include information about each employee like name, sex, age, current
job title, educational level, length of service with the company and on current job, performance
rating, potential rating, salary, location of work, retirement status etc

Information about beginning inventory is extracted from HRIS and other relevant Sources. Human
resource audit /inventory summarize each employee's skills and abilities. This summary gives
planners a comprehensive understanding of the capacities found in the organizations workforce.
If the organization uses a computer-based system to handle its manpower inventory it will be easy to
match talent with opening and to update the skill inventory if changes in skills, knowledge, job duties
and the like are reported.

Sample of current manpower inventory summary form

Even though it varies from organization to organization, an example of manpower inventory form is
shown as follows.

ABC Company

Manpower Inventory
Date: ---------------
I. Identification and Experiences
 Name --------------------------------------------------------------------------------
 Sex-----------------------------------------------------------------------------------

26
 Age-----------------------------------------------------------------------------------
 Employee number -----------------------------------------------------------------

II. Jobs held and experiences

 Jobs held
 Current Job Title------------------------------------------------------------=------
 Job grade----------------------------------------------------------------------------
 Job code-----------------------------------------------------------------------------
 Current duties and responsibilities -----------------------------------------------
 Experiences
 Total services------------years
 In the organization:
- Current job: Title ----------------------------------From ----------to---------
- Other jobs held: Title ----------------------------------From ----------to----------
-Title --- ------------------------------From -----------to---------
 Outside the organization
-Title----------------------------------From -------------to---------
-Title----------------------------------From --------------to--------
III. Education and training background
 Educational level --------------------------------------------------------------------------
 Trainings------------------------------------------------------------------------------------
 Skills ----------------------------------------------------------------------------------------
 Language skills ------------------------------------------------------------------
 Machines and tools--------------------------------------------------------------
 Others -----------------------------------------------------------------------------
IV: Performance and readiness for promotion
 Overall Evaluation of performance--------------------------------------------------
 Overall readiness for promotion ----------------------------------------------------
 To what job ------------------------------------------------------------------------
 Comments (if any)-----------------------------------------------------------------
 Current deficiencies -------------------------------------------------------------------
V: By whom and when the inventory report is prepared

27
 Prepared by --------------------------------------------------------------------------
 Signature ------------------------------------------------------------------------------
 Date of preparation ------------------------------------------------------------------

In addition to a summarized manpower inventory, a complete assessment of organization's

manpower resources needs to take a detail stock of manpower under different main headings. The
principal dimensions or main headings based on which human resource inventory is prepared are:
a. Head count inventory (organization inventory) - number of employees with in the organization.
It is the total number of employees with in the organization (Aggregate inventory)
Company-wide figures have limited values. It is necessary to get inside them to see the pictures for
the separate parts of the organization. Analysis needs to go down to department level and even small
units. Then the planner must know the makeup of the number by dividing between fulltime or part
time, male and female etc.

b. Job-family inventory/job type inventory: Job families are group of jobs with certain common
characteristics like jobs requiring similar training, experience and skills. The following can be
considered as an example; personnel, marketing, production, engineering, clerical, secretarial and so
on. Each major job family can also be broken down in to series of subgroups (sub families). Example
and Administrative science (AS) job family can be sub divided in to different grades as As-7, AS -8
etc.

c. Education and training inventory: based on educational levels, qualifications, completion of

certain courses and trainings
Example:
 Diploma specifically:
 First degree. - Diploma in Accounting
 Masters - First Degree in Economics
 PH.D etc

d. Experience inventory based on years of services.

Example:
 Employees below 1 year of service

28
 From 1 to 3 years of service
 From 3 to 5 years
 Above 5 years
Even though inventory of the experience available in an organization is valuable, it is difficult to
assemble a meaning-full summary of experience due to the vast range of possible job experience and
duration of experience with in each area.

e. Inventory of salary grades /pay-wise inventory: in this case the inventory is taken based on the
salary level of employees.
f. Age -wise inventory
h. Sex- wise inventory
i . Language wise inventory
j. Inventory of past performance and future potentialities
k. Local and non-local wise inventory
L. Inventory based on combination of factors
E.g. Age distribution by grade/ salary level.
___________________________________________________________________________
? Check point!
 What is the purpose of human resource audit?
 In addition to a summarized manpower inventory, a complete assessment of organization's
manpower resources needs to take a detail stock of manpower under different main
headings. Discuss each principal dimensions or main headings based on which human
resource inventory is prepared
___________________________________________________________________________

2.7.3 Determining Net HR Requirements

After estimating the demand and supply of human resources, management should determine the net
human resource requirements in terms of number, functions, skills and so on. Once data regarding
future human resource requirements and availabilities as well as external environmental conditions
are acquired, they must be brought together to identify potential gaps and the reasons for them, and
to decide on appropriate action plans to be taken.
Net HR requirement can be determined as follows:
 Net HR Requirement = Estimated HR demand - Net future HR supply

29
  Net HR supply, on the other hand, is estimated as
o Net supply of HR current inventory + changes in current inventory
 Net supply of HR =HR current inventory + Potential additions - potential lasses
Identifying shortage or surplus in manpower
At this stage the HR planner brings to gather the forecast of future demand and future supply in order
to pinpoint shortage or surpluses in manpower.
Thus, the possible outcomes of this stage can be.

a. Future supplies more or less matches future demand: In this case, the result of net human
resource equals zero. However, such situation really exists in reality, unless the organization is small,
stagnant, the workforces and the environment is stable.
b. Future supply exceeds future demand for human resource: In this case the result of net human
resource requirements will be negative, which indicates that there is surplus / excess manpower in an
organization.
This situation is more likely if there are downsizing and contraction of a business may be due to bad
economic situation, competition or legal restrictions.
c. Future supply falls short of /less than future demand for manpower: This indicates shortage in
manpower. Shortage in manpower is likely to occur in large and expanding organization, where there
is high turnover, and stiff competition for labor.

Options to address shortages

Short -term options
 Increase overtime or part time
 Increase contact works
 Increase productivity through training
 Buy back vacations and holydays
 Temporary assignments
 Transfer work -out temporarily
Long-term options
 Recall form leaves
 New hires
 Permanent transfer in worker

30
 Training and development
 Transfer work -out permanently
7.4 Options to address surplus
Short -term options
 Freeze hires
 Reduce part-time or part-time
 Transfer work -in tempera rely
 Reduce work weeks
 Temporary shutdown or layoff
 Excuse absenteeism
 Temporary assignment to other units
 Retrain or train
Long-term options
 Freeze hires
 Encourage attrition
 Permanent transfer -out of worker
 Retrenchment
 Provide incentive for early retirement
 Transfer work-in
___________________________________________________________________________
? Check point!
 After estimating the demand and supply of human resources, management should determine
the net human resource requirements in terms of different factors. What are these factors
 Discuss the possible relationships that are helpful for determining the net requirements of
human resource
 Discuss the long and short term option to cope up with surplus
___________________________________________________________________________

2.7.4 Action Plans

This is the stage at which the planners decide how to solve the problems of surplus and shortages. It
deals with determining alternative courses of actions to be taken in case of surplus or shortage. Action
planning is a choice process involving decision making on various issues.

31
The action planning process commonly consisting of three interrelated steps:
1. Generating alternative courses of action that might be pursued to deal with anticipated surplus and
shortage.
2. Assessing alternative activities: a preferred activity is with the highest likelihood to address the
problem within the time limit established and at the least possible cost. Thus, each alternative
generated must be assessed interims of various criteria relating to its probability of success and its
relative benefits and costs.
3. Choosing among alternatives: once assessment is made thorough, the planner select alternatives
which are considered feasible in terms of the budget, people likely available to implement them, time
limits and so on.
Once formulated, the HR strategies must be implemented and HRM should design objectives and
means to implement them. All efforts involved in HRM will be futile unless management takes actions
vary. Management actions depending on whether a surplus or a shortage of workers has been
forecasted.

Plans to manage surplus

When the internal supply of workers exceeds the firms demand, a human resource surplus exists. Thus
management should take an action that an organization will face due to over staffing some of the
actions include:
1. Redeployment: employment of existing manpower on alternative work may be without any training
or usually by providing some form of training to prepare the employee for the new job. These can be in
the form of transfer -out promotion out, demotion -out etc. However, redeployment can be possible
when a different part of an organization has an immediate need for exactly the skills which are
becoming available.

2. Redundancy: redundancy is a plan to reduce surplus manpower. Managers should examine

seriously the possibility of retraining and redeployment and only consider redundancy as an expensive
last resort, though sometimes unavoidable.
If redundancy is inevitable, a clear strategy is essential to give as much choice to those affected as
possible.
 First, involve all of the people in review of the situation and the possible options to convince them
of the logic and inevitability of redundancy.
 Encourage old people to take early retirement by providing them retirement incentives.

32
 Consider enforced redundancies like retrenchment, layoffs etc.
In this situation an organization should make an attempt to compensate the terminated employees and
to provide them out placement services, which help them find new jobs with other organizations.

Plans to manage shortage

Recruitment and selection
Once the required number and kind of human resources are determined, the management has to find
places where the required human resources will be available and find the means of attracting them
toward the organization. This process is known as recruitment. On the other hand, selection is the
process of finding out the most suitable candidate to the job out of the candidates recruited.

Some of the important activities in planning for recruitment are:

 Estimating the number of applicants necessary to fill the open jobs. This estimation can be made
based on managers judgment or statistically (using yield -ratio and selection ratio)
 Determining the types of people to be contacted. This requires determination of job requirements
through job analysis
 . Determining appropriate sources and methods of recruitment. Decide whether to use internal or
external sources.
 Deciding when to recruit. This depends on the time when the vacancies will occur. It involves
determining the total time required to fill the job (Lead -time) as well as the time elapses between
major decisions points in the recruitment process
 Deciding on the message and the media to be used.
 Finally, criteria for selection, the process to be followed, the predictors to be used and the
evaluation techniques will be determined.

Training and Development

Regardless of the efforts made to hire employees carefully from internal and /or external sources, it is
impossible to ensure 100 percent employee's success on the new jobs and to create a forever perfect
match between job requirements and individual’s abilities. As a result, this situation calls for the need
of employee training and development.
Employee training and development is a planned process through which employee improve their
skills, knowledge and behavior so as to enhance their contribution to organizational goals

33
Some of the objectives of training and development are:-
 To orient new employees to the organization and their job
 To improve employees' performance level on their present jobs.
 To enable employees to maintain performance levels as their present job changes
(to prevent obsolescence).
 To Prepare employees for new jobs (in case of succession planning) Phonation, transfer,
deployment, out placement etc.)

Training and development process

The major Phases in training and development process are: -
1. Identify employee needs for training and development.
Some of the issues at this phase are;
 Identifying performance discrepancy
 Identifying whether the discrepancy is due to lack of ability or other reasons.
 Check whether training and developmen is a potential or preferred solution to the discrepancy.
2. Formulating the training and development plan. These include;
 Selection of trainees and trainees
 Designing training program (objectives, Program content, training techniques)
 Time frame
 Determining person/ units responsible
 Determining resources and facilities required.
3. Implementing training and development Program
4. Evaluating Employee training and development program-its effectiveness, efficiency and legality
(Compliance with EEO and AA lows)

Succession planning
Succession planning helps identify back up candidates who are, or soon will be qualified to replace
current executives or upper-level managers. "These greatly help replace losses due to retirements,
terminations, promotions, and transfers within and across organizational units. Succession plans also
show, which managers are in need of further development to become ready to fill jobs for which they
are considered as replacements.
By identifying successors to key jobs and high-potential employees, organizations assure a steady flow
of internal talent to fill important openings. Succession planning does not only encourage hiring from

34
within but also create an environment in which employees get an opportunity to develop their career.
The candidates can be prepared to accept the greater responsibilities of future job openings through
special assignments, job rotation, training, and other forms of human resource development.

To depict the results of succession planning human resource department may develop replacement
charts. Replacement charts are a visual representation of who will replace whom in the event of job
openings. Even if varies from organization to organization, the chart consisting of different
information. Replacement chart, much like an organizational chart, depicts the various jobs in the
organization and shows the status of likely candidates.
Replacement status commonly consists of:
 Candidates name, age and experience
 Present performance
 Promotability
Present performance is determined largely from supervisors' evaluation, peers, subordinates and
opinions of other managers. Future promoability is determined based on present performance and
estimates of future success in a new job. The estimates can be made through the use of
psychological tests, interviews, and other methods of assessments. Replacement chart also shows
the candidates' ages to prohibit age discrimination.
Human resource planners find that replacement charts provide quick reference. However, their
short coming is that they contain very limited information - the name of the candidates, their age,
current performance promoability rate.
To supplement the chart, personnel specialists develop replacement summaries. Replacement
summaries list the possible replacements for each job and indicate their relative strengths and
weaknesses.
Replacement summary provides considerably more data than a replacement chart:
Some of the information on replacement summary includes.
 The title of the position for which replacement is made, name of person currently
holding the position, age, experience, job grade & salary.
 Candidates who are expected to replace the person, age, current position, experience,
current performance, promote ability, training needs etc

Recruiting

35
Recruitment is the process of finding and engaging the people that the organization needs. It is the
process of generating a pool of qualified applicants for organizational jobs through a series of
activities .if the number of available applicants only equals the number of people to be hired, there is
no selection, the choice has already been made .
Strategic Approach to Recruiting
A Strategic Approach to Recruiting has become more important as competitive pressures have shifted
in many industries .it is important that recruiting is a key HR activity, be viewed strategically .also
recruiting efforts should reflect the organizational culture. Regardless of organizational size, the
following decisions about recruiting must be made;
* How many people does the organization need?
* What labor markets will be tapped?
* should the organization have its own staff or use other sources such as flexible staffing?
* To what extent should recruiting be focused internally Vs externally?
* What special skills and experience are really necessary?
* What legal considerations affect recruiting?
* How can diversity and affirmative action concerns be addressed when recruiting?
* How will the organization spread its message of openings?
* How effective are the recruiting efforts?
HR planning and recruiting
An HR plan helps answer the first question by determining the current and projected needs for people
in various job categories and any diversity goals the organization may have set .then the recruiting and
selection process operationalize the HR plan. Thus, recruiting efforts translate human resource plans
into action.

Recruiting and labor markets

Employers compete in a variety of labor markets for employees’ .labor markets are the external
sources from which organizations attract employees. There are many ways to identify labor markets,
including by geographical area, type of skill and educational level. Recruiting locally for a job market
that is really national will result in disappointing applicant rate. Changes in a labor market may force
changes in recruiting efforts. To understand the components of labor markets in which recruiting
takes place, three different categorizations must be considered. Those three groups are labor force

36
population, applicant population and applicant pool. The labor force population includes all individuals
who are available for selection if all possible recruitment strategies are used. The applicant population
is a subset of the labor force population that is available for selection using a particular recruiting
approach.
At least four recruiting decisions affect the nature of the applicant population.
1. Recruiting method (advertising medium chosen and use of employment agencies)
2. Recruiting message (what is said about the job and how it is said).
3. Applicant qualifications required (educational level and amount of experience necessary).
4. Administrative procedures (time of year recruiting is done; follow ups with applicants, and use of
previous applicant files).
The applicant pool consists of all persons who are actually evaluated for selection.
Recruiting Vs flexible staffing
Increasingly, organizations are examining whether to recruit ‘employees” or to utilize other staffing
arrangements .a growing numbers of employers have found that the cost of keeping a full-time regular
workforce has become excessive and is getting worse because of government -mandated costs.
Flexible staffing makes use of recruiting sources and workers who are not employees. These
arrangements use independent contractors, temporary workers and employee leasing. Independent
contractors: some firms employ independent contractors to perform specific services on a contract
basis. Temporary workers: employers who wish to use temporary employees can hire their own
temporary staff or use a temporary worker agency. The use of temporary workers may make sense for
an organization if its work is subject to seasonal or other fluctuations. Temporary workers can and
often do accept regular staff positions .Employee leasing is a concept that has grown rapidly in recent
years. Employee leasing process is simple: an employer signs an agreement with an employee leasing
company, after which the existing staff is hired by the leasing firm and leased back to the company.

Internal Vs external recruiting.

Both pros and cons are associated with promoting from within (internal sources for recruitment) and
hiring from outside the organization (external recruitment) to fill openings. Promotion from within
generally is thought to be a positive force in rewarding good work, and some organizations use it well
indeed. Most organizations combine the use of internal and external methods.
Advantages and disadvantages of internal sources for recruiting
Advantages Disadvantages

37
Morale of promote Inbreeding

Better assessment of abilities Possible morale problems of those not promoted

Lower cost for some jobs Political infighting for promotions
Motivator for good performance Need for management –development program
Causes a succession of promotions
Have to hire only at entry level

Advantages and disadvantages of external sources for recruiting

Advantages disadvantages
New blood bringing new perspectives May not select someone who will fit the
job or organization
Cheaper and faster than training May cause morale problems for internal
professionals candidates not selected
No group of political supporters in Longer adjustment or orientation
organization already
May bring industry insight

The recruiting process

Internal sources of available recruits through transfers, promotions, and job posting usually are
checked first .then external sources are contacted as required, and all applicants are screened through
the selection process. Finally, follow –up is necessary to evaluate the effectiveness of the recruiting
efforts and to tie those efforts back into the human resource plan and ongoing recruiting activities.
Recruitment as a key employment –related activity is subject to a variety of legal considerations.
The growing difficulty that many employers have had in attracting and retaining workers has led
them to tap a wide variety of sources. Three specific groups that have been attracted in to the work
force effectively by some employers are individuals over 55 years of age, persons with disabilities and,
persons who are members of racial/ethnic minorities.

38
Recruiting older workers:-when discussing the recruitment of older workers, the first task is to
identify what individuals are included in this group. Senior experienced individuals may include the
following:
1. Midlife career changers: those who are burned out in their jobs and career fields and leave
voluntarily to try new fields.
2. Displaced workers underage62: those who have worked but have been displaced, often voluntarily,
through job reductions or plant closings.
3. Retirees: those who took early retirement buyouts or retired at age 62 or later. These are duet
increasing their life experience.
Recruiting individuals with disabilities: - there are two keys to recruiting individuals with
disabilities .first jobs must be examined to ensure that accommodations could be made so that
individuals with certain disabilities can perform the jobs. Second key is to contact associations that
specialize in representing individuals with disabilities.
Internal recruiting sources.
Among internal recruiting sources are present employees, friends of present employees, former
employees and previous applicants .promotions, demotions and transfers also can provide additional
people for an organizational unit, if not for the entire organization.
Job posting and bidding: a system in which the employer provides notices of job openings within the
organization and employees respond by applying for specific openings
Promotion and transfers: many organizations choose to fill vacancies through promotions or
transfers from within whenever possible.
Current employee referrals: A reliable sources of people to fill vacancies is composed of friends
and / family members of current employees .these are external applicants coming from an internal
information sources.
Recruiting former employees and applicants: former employees and former applicants are also
good internal sources for the recruitment .in both cases, there is a time –saving advantage, because
something is already known about the potential employee. Former employees are considered an
internal source in the sense that they have ties to the company.
Internal recruiting database: computerized internal talent banks or applicant tracking systems are
used to furnish a list of knowledge, skills and abilities available for organizations. The advantage of
these computerized databases is that they allow recruiters to identify potential candidates more
quickly than they could by manually sorting numerous stacks and files of resumes .

39
 External recruiting sources
If internal sources don’t produce an acceptable candidate, many external sources are available .these
source include schools, colleges and universities, employment agencies, temporary –help firms labor
unions, media sources and trade and competitive sources .
School recruiting: high schools or vocational / technical schools may be a great source of new
employees for many organizations.
College recruiting: at the college or university level the recruitment of graduating students is a large-
scale operation for many organizations. Most colleges and universities maintain placement offices in
which employers and applicants can meet.
Labor unions: a labor pool is generally available through a union and workers can be dispatched to
particular jobs to meet the needs of the employers.
Media sources: such as newspapers, magazines, television, radio and billboards are widely used.
Trade and competitive sources: other sources for recruiting are professional and trade associations,
trade publications and competitors’ .many professional societies and trade associations publish a
newsletter or magazine containing job ads and other external sources can also be used.

Reference
1. Robert L.Mathis and John H.Jackson, human resource management, 8th edition.
2. John M.Ivancevich, foundations of personnel, human resource management 5th edition
3. Internet sources
___________________________________________________________________________
? Check point!
 The action planning process commonly consisting of three interrelated steps. What are these
steps?
 Discuss the actions that managers shall consider in the time overstaffing
 Explain what succession plan mean
 Explain what replacement chart mean
___________________________________________________________________________
The following Figure shows sample of replacement chart
Organization Unit: _________
Date: __________

40
Position
Age ______
Incumbent
Exp. ______
Promoteable to When _____
Replacement Age ______
No 1 ________ Exp ______
Promoteable
Present Position
in ____Yrs
Replacement Age _____
No 2 Exp. _____
Promoteable
Present Position
in ____Yrs

Position
Age _____
Incumbent Exp. _____
Promoteable to When ____
Replacement Age _____
No 1: ________ Exp. _____
Promo table
Present Position
in ____Yrs
Replacement Age _____
No 2: ________ Exp. _____
Promotable
Present Position
in ____Yrs

Replacement Summary Form

I. Replacement Summary for the position: __________________________________

Present office holder: _____________________ Age: ___________________
Probable opening time: ____________________ Person: ________________

41
 Job grade / Salary: ________________________ Experience______________

II. Candidate 1 (Name): ________________________ Age: ___________________

Current position: _________________________ Experience: _____________
Current Performance: ______________________ Explanation (if any)______
- Promotability rate: _____________ Explanation____________________
- Training needs: _____________________________________________

III. Candidate 1: ___________________________ Age: _____________________

Current Position _______________________Experience________________
Current performance: ___________________Explanation_______________
Promoability rate: _____________________ Explanation________________
Training Needs: _________________________________________________

Replacement chart and summary information is usually kept confidential to guard the privacy of
employees and more importantly to prevent dissatisfaction among those who are not immediately
promo table.

Summary
Human resource planning is the process by which an organization ensures that it has the right number
and kinds of people, at the right places, at the right time, Capable of efficiently and effectively
completing those tasks that will help the organization achieve its over all objectives. At the motional
level it helps the government to forecast the demand for and supply of human resource for the
country and to take steps to adjust the demand by altering its economic, industrial and agricultural
policies and adjust the supply through its population policy, family planning, educational policy.
Though HRP is beneficial to the organization, employees and labor unions, some problems may crop
up in the process of HRP. HRP is not the sole responsibility of one department rather every line
manager, the top management and human resource department participate in the process. Human
resource planning process can be affected by different factors. The process of estimating demands for
and supplies of manpower as well as the action programmers to be implemented are influence by
various factors. These factor can be broadly categorized as External and internal. External factors are
forces outside the organization, which directly or indirectly affects the HRP process of an
organization. Some of these external forces include. These are factors that emanate from within

42
organization. These factors reflect the weaknesses and strengths of an organization. Some of the se
factors include: like any other management functions HRP has its own processes to accomplish the
day to day operations. The process of HRP involves the following process stages estimating the
demand for human resource, estimating the supply of human resource, estimating the net HR
requirement, and developing and implementing action plan to fill the gap between demand and
supply.
Summary questions
1. Write the major objectives of HRP
___________________________________________________________________________
___________________________________________________________________________
________________________________________________________
2. The importance of HRP can be classified based on the audience it targeted, list out these
audiences
___________________________________________________________________________
___________________________________________________________________________
________________________________________________________
3. Put down the major problems of HRP
___________________________________________________________________________
___________________________________________________________________________
________________________________________________________
4. Write the major external factors that affect the operation of HRP
___________________________________________________________________________
___________________________________________________________________________
________________________________________________________

5. Please write factors that affect HRP processes which are internal to the organization
___________________________________________________________________________
___________________________________________________________________________
________________________________________________________
6. Describe techniques of HR demand forecasting
___________________________________________________________________________
___________________________________________________________________________
________________________________________________________
7. Write the possible methods to determine net HR requirements
___________________________________________________________________________
___________________________________________________________________________
________________________________________________________
8. What options are available to tackle the problem of HR surplus in the short run

43
 ___________________________________________________________________________
___________________________________________________________________________
________________________________________________________
9. Please put down the options available to solve the problem of HR shortage
___________________________________________________________________________
___________________________________________________________________________
________________________________________________________
10. What is a succession plan and replacement chart
___________________________________________________________________________
___________________________________________________________________________
________________________________________________________

CHAPTER FOUR
Human Resource Training and Development

Chapter objectives
After studying this chapter you should be able
 To explain the difference between training and education
 To discuss what organizational policy for training and development mean
 To describe needs analysis for training and development
 To know major training and development techniques
 To know the methods to measure the effectiveness of training and development
 To decide who should deliver tanning and development programs

4.1.Introduction
Training and development should contribute to the attainment of short-term and long-term goals,
both for the company and for its individual employees. In order to be effective, a training and
development program requires the full commitment and support of senior management, and it must
reflect the overall philosophy of the organization.

44
Training and development should be established as a separate function in a company’s human
resource department, headed by a specialist in the field. A small company should make certain that
the human resource generalist in charge of its training and development has appropriate skills and
knowledge. These will be discussed later in this reference manual.
Whether you are establishing a training and development function for the first time or revising an
existing one, you should consider these factors:
 The overall role of training and development-what it should and should not be
expected to accomplish, and the respective responsibilities of all concerned
 How to analyze the organization's needs to identify specific goals and objectives
 The availability of both skills training and management training
 The components of the training and development process, and various training
techniques
 Guidelines for starting a program
 How to evaluate the program's effectiveness

The learning outcomes (objectives) of this training manual are to :

 Conduct training need assessment
 Identify knowledge/skill gaps
 Coordinate training need assessment
 Identify training methodology and facility requirements in each method
 Organize and conduct training programs.
 Use training and development procedure manuals and organizational policy in solving
training and development related problems.
 Plan when and where to use off the job and on the job training.
 Communicate and relate with people
___________________________________________________________________________
? Check point!
 What is the possible options for small business mangers to organize their

training and development functions

 Whether you are establishing a training and development function for the first time or
revising an existing one, you should consider different factors. What are these factors
_________________________________________________________________

45
4.2 Human resource training and development
Concepts of Training and development
What is Training?
Training is defined as any attempt to improve employee performance on a currently held job or one
related to it. This usually means changes in specific knowledge, skills, attitudes, or behaviors. From
childhood we learn to cope with living is this training or education these terms are often using as if
they were synonymous. They are not, and un understanding of the difference between them is
important to an understanding of the training process in business organizations. Both are processes
which help people to learn, but they differ in orientation and objectives. It is probably simplest to
define training as oriented towards the needs of the organization while education is oriented to the
needs of the individual. These differences can be summarized as shown in the table below.

Differences between education and training

Characteristics Education Training
of the learning
process
Objectives More abstract objectives Specific behavior objectives to
geared to the needs of the make workers more effective in
individual and to society their jobs
generally
Timescale Generally in long term Can be very short-term especially
process when concerned with the
acquisition of specific skills.
Content Widely drawn content Often fairly narrow content specific
to the employee’s work situation.

Training consists of planned programs designed to improve performance at the individual, group,
and/ or organizational levels. Improved performance, in turn implies that there have been
measurable changes in knowledge, skills, attitudes, and/or social behavior. When we examine the
training enterprise as a whole it is clear that training issues can be addressed from at least two
perspectives. At the structural level we can examine issues such as the following, among others: the
aggregates and level of expenditures by the various providers of training (e.g. federal, state and local
governments, educational institutions, private sector businesses), the degree of cooperation among

46
the providers, incentives (for lack of incentives) for providing training, who gets training and the
economic impact of training. These are macro level concerns.
At the micro level, we may choose to examine issues such as the following: what types of training
seem to yield positive outcomes for organizations and trainees (i.e., what works): how to identify if
training is needed and, if so, what type of training best fits the needs that have been identified; how
to structure the delivery of training programs; and how to evaluate the outcomes of training efforts.
The term training is often confused with the term development.
Development refers to learning opportunities designed to help employees grow. Such opportunities
do not have to be limited to improving employee’s performance on their current jobs. The focus of
‘development’ is on the long term to help employees prepare for future work demands, while
‘training’ often focuses on the immediate period to help fix any current deficits in employee’s skills.
The most effective companies look at training and career development as an integral part of a
“human resource development” (HRD) program carefully aligned with corporate business strategies.

___________________________________________________________________________
? Check point!
 Explain the difference between education and training

 What is development? have you observe any difference between training an

development
_________________________________________________________________
4.3 Organizational policies for training and development program
To ensure that the organization’s work process effective, the training functions must be acquainted
with or, preferably, involved in the strategic planning process. Training policies must be supportive
of corporate policies and goals.

Ethiopian Federal Labor proclamation article 48-52 no. 377/2003 states the following contract of
apprenticeship:
There shall be a contract of apprenticeship when an employer agrees to give a person complete and
systematic training in a given occupation related to the functions of his/her understanding in
accordance with the skills of the trades and the person in return agrees to obey the instruction given
to carry out the training and the workers related to there to. The contract of apprenticeship shall be
concluded with the person whose age is not less than 14 years. The contract of apprenticeship and

47
its modifications shall be valid only where it is made in witting and attested by the ministry. The
employer shall, upon the termination of the contact of apprenticeship give to the apprentice a
certificate which indicates occupation he/she has been trained in, the duration of the trainee and
other similar particulars.

Ethiopian Federal civil servant proclamation article 57-58 no. 515/2007 states the following
On training of civil servant/responsibility to train:
A civil servant shall be trained to improve his/ her capacity and attain better performance or to
prepare him/her for higher responsibility based on career development. A government institution
shall have a duty to identify the training needs of the institution and the civil servants and prepare
plans and budgets for training and thereby ensure that civil servants receive the necessary training
and furnish information thereon to the agency. The agency shall, with a view to make the training of
the civil servants effective, prepare a policy with regards to conditions of training locally and abroad
and submit the same to the council of ministers and supervise its implementation upon approval.

4.4 Training needs analysis and reporting

Training need analysis is a search for solutions to performance problems. Needs analysis not only
identifies areas were training is needed in your company but, also helps you determine exactly how
training should be applied. Training must also be targeted at their values. They must be trained to
understand and accept the new technology. It determines not only which problems are most pressing,
but which can be most economically solved through training.

Most often training is offered on the basis of need-to rectify skill deficiencies, to provide employees
with job-specific competencies, to prepare employees for future roles they may be given, and so on.
Sometimes, however, employees receive training and development for reasons other than need. In
some organizations, attendance at an executive training program serves as a reward for past
performance. In other organizations, participation in training programs is a ritual that signals to
newly promoted employees as well as to members of their former work groups that a change in status
has occurred (e.g., a rank-and-file employee is now a manager).
Although training and development can serve these other purposes, a formal needs assessment is a
vital part of a training system. The four components of the needs assessment process are detailed in
Exhibit 1

48
4.4.1 Organizational Needs Analysis

Organizational needs analysis begins with an assessment of the short- and long-term strategy and
strategic business objectives of the company. This step is essentially the same as organizational
assessment, except that the focus is specifically on identifying the implications of the assessment for
future training and development activities. The organizational needs analysis should result in the
development of a clear statement of the goals to be achieved by the organization's training and
development activities. In a certain bank, for example, it was the results of an employee survey that
led the company to conclude that it needed to improve its career development activities. The survey,
which was conducted following a merger, revealed that employees felt pessimistic about their future
prospects at the company. The company's Opportunity Knocks program was subsequently developed
to respond to the concerns employees had expressed.
An organizational needs analysis may also include an assessment of the organization's current
climate for training.

Exhibit 1 Four Components of Needs Assessment

A supportive training climate improves the chances that employees will successfully transfer what
they learn from training programs to the job. Some indicators of a supportive training climate are the
following:

 Incentives are offered to encourage employees to participate in T&D activities.

 Managers make it easy for their direct reports to attend T&D programs.

49
  Employees encourage each other to practice newly learned skills, and do not ridicule each
other.
 Employees who successfully use their new competencies are recognized and rewarded
with special assignments and promotions.
 There are no hidden punishments for participating in T&D (e.g., T&D activities are not
scheduled to conflict with other important events; participation doesn't limit access to
overtime pay).
 Managers and others who are effective providers of T &D are recognized and rewarded.
These conditions are most likely to be found in learning organizations.
Finally, the organizational needs analysis should identify the available resources and any constraints
that need to be considered when designing T&D programs and activities. Can employees be taken off
their jobs to participate in training? If so, for how long? Will training needs differ across locations-
for example, in different states or different countries? If computer-based technology is to be used to
deliver T&D, do employees have access to the specific technology they will need? By addressing
such questions, organizational needs analysis can help ensure that T&D activities are practical in a
specific context.

4.4.2 Job Needs Analysis

A job needs analysis identifies the specific skills, knowledge, and behavior needed in present or
future jobs. A thorough job analysis with competency modeling provides the information required for
job needs analysis. If training is to be provided for existing jobs, traditional job analysis and
competency modeling is appropriate. If training and development are intended to address future
needs, future-oriented job analysis and competency modeling should be used for the needs analysis.

4.4.3 Person Needs Analysis

After information about the job has been collected, the analysis shifts to the person. A person needs
analysis identifies gaps between a person's current capabilities and those identified as necessary or
desirable. Person needs analysis can be either broad or narrow in scope. The broader approach com-
pares actual performance with the minimum acceptable standards of performance and can be used to
determine training needs for the current job. The narrower approach compares an evaluation of
employee proficiency on each required skill dimension with the proficiency level required for each
skill. This approach is useful for identifying development needs for future jobs that will require a

50
specific skill. Whether the focus is on performance of the job as a whole or on particular skill
dimensions, several different approaches can be used to identify the training needs of individuals.
Output Measures. Performance data (e.g., productivity, accidents, and customer complaints), as well
as performance appraisal ratings, can provide evidence of performance deficiencies. Person needs
analysis can also consist of work sample and job knowledge tests that measure performance capabil-
ity and knowledge. Major advantages of such measures are that they can be selected according to
their strategic importance,
 They often are easily quantified, and
 When they show improvements, the value of training investments is readily apparent.

A major disadvantage is that such indicators reflect the past and may not be useful for
anticipating future needs.

Exhibit 2: Team member competencies for employees in a total quality manufacturing plant

Team member competencies

=
Ability to learn
+
Motivation to
. Work in participative environment
. Cooperate with management
. Seek feedback and recognition
. Exhibit high work standards
. Take on new responsibilities
. Work as a member of a team
. Solve work-related problems
+
Personal strengths
. Energy
. Physical ability and health
+
Job Skills
. Technical knowledge
. T technical proficiency
. Analysis and decision-making skills

51
 . Personal organization skill
+
Interaction Skills . Influence
. Trainer-coach
. Communication
+
Action Skills
. Initiative
. Innovation
Self-Assessed Training Needs. The self-assessment of training needs is growing in popularity. This
time, for example, in some firms top managers require the employee and his or her supervisor to
identify what the business needs are for the department and the business, as well as the skill needs
and deficiencies of the individual. Many major firms in our country allow managers to nominate
themselves to attend short-term or company-sponsored training or education programs. Self-
assessment can be as informal as posting' a list of company-sponsored courses and asking who wants
to attend, or as formal as conducting surveys regarding training needs.
Surveys and worksheets are convenient tools for self-assessment. High-potential employees are
expected to conduct a self-assessment and use it to develop a career plan. The components of this
development activity are shown in Exhibit 3.
Self-assessment is premised on the assumption that employees, more than anyone else, are aware of
their weaknesses and performance deficiencies. One drawback of self-assessment is that individuals
may not be aware of their weaknesses, especially if the organization does a poor job of providing
honest feedback during performance appraisals. Also, employees may be fearful of revealing their
weaknesses and so may not accurately report their training needs. In both cases, reliance on self-
assessment may result in individuals not receiving education that's necessary for them to remain
current in their fields.

4.4.4 Demographic Needs Analysis

The objective of a demographic needs analysis is to determine the training needs of specific
populations of workers. Demographic needs analysis can also be used to assess whether all
employees are given equal access to growth experiences and developmental challenges, which are
known to be useful on-the-job methods for promoting skill development. For example, one large
study of managers compared the developmental career experiences of men and women. In general,
men were more likely to have been assigned to jobs that presented difficult task-related challenges

52
(e.g., operation start-ups and "fix-it" assignments). Women were more likely to have been assigned
to jobs that presented challenges caused by obstacles to performance (e.g., a difficult boss or a lack
of support from top management). If a company finds demographic differences such as these, it
might conclude that an intervention is needed to assure men and women equal access to valuable
developmental challenges-and equal exposure to debilitating obstacles. These demographic
differences may also suggest the need for diversity training.
___________________________________________________________________________
? Check point!
 Explain the Ethiopian Federal Labor proclamation article 48-52 no. 377/2003 contract of
apprenticeship:
 Although training and development can serve different purposes, a formal needs assessment
is a vital part of a training system. Discuss the four components of the needs assessment
process
 Describe the objectives of demographic need analysis
_________________________________________________________________

4.5 Training and development techniques/programs

Many different techniques can be used for training and development activities. Three general
categories of techniques are on-the-job, on-site, but not on the job, and off-site. Choices about
techniques may be constrained by the type of learning that's to occur-cognitive, skill based, or
affective-as well as by cost and time considerations.

Note that the three major categories of training and development techniques do not depend on using a
specific type of technology. Before the computer, film, and communications industries began to
merge, the technology used was often what most clearly distinguished one training technique from
another. Today, however, technology makes it possible to combine many techniques and deliver
them as an integrated learning system that combines, for example, computer-based quizzes, video,
interactive simulations, and so on. When such technologies are used for training and development,
they often are referred to as e-Learning. The major advantage of e-Learning systems is their potential
for speeding up communications within large corporations.

On the Job

On-the-job training (OJT) occurs when employees learn their jobs under direct supervision. Trainees

53
learn by observing experienced employees and by working with the actual materials, personnel, or
machinery, or all three, that pertain to the job. An experienced employee trainer is expected to pro-
vide a favourable role model and to take time from regular job responsibilities to provide job-related
instruction and guidance. Assuming the trainer works in the same area, the trainee receives
immediate feedback about performance.
One advantage of OJT is that transfer of training is high. That is, because trainees learn job skills in
the environment in which they will actually work, they readily apply these skills on the job.
However, on-site training is appropriate only when a small number of individuals need to be trained
and when the consequence of error is low. Also, the quality of the training hinges on the skill of the
manager or lead employee conducting it.

Apprenticeship, Internships, and Assistantships. A method for minimizing the disadvantages of on-
the-job training is combining it with off-the-job training. Apprenticeship Training, Internships, and
Assistantships are based on combination.

? Check point!

 Many different techniques can be considered for training and development activities. discuss
the three general categories of this techniques
-----------------------------------------------------------------------------------------------------------------

Apprenticeship Training is mandatory for admission to many skilled trades such as plumbing,
electronics and carpentry. These programs are formally defined as apprenticeship and Training and
involve a written agreement "providing for not less than 4,000 hours of reasonably continuous
employment . . . and supplemented by a recommended minimum of 144 hours per year of related
classroom instruction.
Somewhat less formalized and extensive are internship and assistantship programs. Internships are
often part of an agreement between schools and colleges, and local organizations. As with
apprenticeship training, individuals in these programs earn while they learn, but at a lower rate than
that paid to full-time employees or master crafts workers. Internships are a source not only of
training but also of realistic exposure to job and organizational conditions.

Assistantships involve full-time employment and expose an individual to a wide range of jobs.

54
However, because the individual only assists other workers, the learning experience is often
vicarious. This disadvantage is eliminated by programs that combine job or position rotation with
active mentoring and career management

Job Experiences. When development is the objective, employers may put people into jobs in order
to facilitate their learning and development. Job rotation programs are used to expose employees to
and train them in a variety of jobs and decision-making situations. Usually, job rotation programs
rotate employees through jobs at a similar level of difficulty. The extent of training and long-run
benefits may be limited, however, because employees aren't in a single job long enough to learn very
much and may not be motivated to work hard because they know they will move on in the near
future:
The philosophy of having employees learn while doing also underlies the use of developmental job
assignments. However, with developmental job assignments, employees are placed in a new job that
presents significantly more difficult new challenges. The assumption is that the process of learning to
deal with the challenges will result in the employee developing new competencies. Components of a
developmental job include

- Unfamiliar responsibilities
- Responsibility for creating change (e.g., to start something new, fix a problem, deal with
problem employees)
- High levels of responsibility (e.g., high-stakes and high-visibility assignments; job involving
many stakeholders,
- products, or units)
- Boundary-spanning requirements (e.g., working with important stakeholders outside the
organization)
- Dealing with diversity (working with people from multiple cultures or demographic
backgrounds )

Supervisory Assistance and Mentoring. Often the most informal program of training and
development is supervisory assistance or mentoring. Supervisory assistance is a regular part of the
supervisor's job. It includes day-today coaching, counselling, and monitoring of workers on how to
do the job and how to get along in the organization. The effectiveness of these techniques depends in
part on whether the supervisor creates feelings of mutual confidence, provides opportunities for

55
growth, and effectively delegates tasks.
Mentoring, in which an established employee guides the development of less-experienced worker,
or protégé, can increase employees' competencies, achievement, and understanding of the
organization. At AT&T, for example, protégés are usually chosen from among high-potential
employees in middle or entry-level management. Each executive is encouraged to .select two people
to mentor and must decide how to develop the relationships. Usually, executives counsel their
protégé on how to advance and network in the company, and they sometimes offer personal advice.

Coaching. For high-level executives and other employees who hold visible and somewhat unique
jobs, traditional forms of on-the-job training are impractical. Yet, these employees often need to
develop new competencies in order to be fully effective. In recent years, more and more executives
have turned to personal coaching to address their training needs. A coach might sit in on a meeting to
observe the employee in action and later provide feedback and guidance for how to improve
interaction skills in the future. Most coaches also encourage their "trainees" to discuss difficult
situations as they arise and work through alternative scenarios for dealing with those situations.
Although coaching is rapidly growing in popularity, it's a relatively new technique and few guide-
lines are available to evaluate whether a potential coaching relationship is likely to succeed.
Nevertheless, the evidence of its effectiveness is beginning to accumulate.
An effective coaching program helps managers change themselves and, in the process, change their
organizations.

On-Site, but Not On the Job

Training at the work site but not on the job is appropriate for required after-hours programs and for
programs in which contact needs to be maintained with work units but OJT would be too distracting
or harmful. It's also appropriate for
voluntary after-hours programs and for programs that update employees' competencies while
allowing them to attend to their regular duties.

Corporate Universities and Executive Education Programs. A growing trend in the United States
is the development of corporate universities that offer programs tailored to the needs of the company.
Corporate universities focus on the education of employees and sometimes customers.
-----------------------------------------------------------------------------------------------------------------?

56
Check point!
 Discuss the advantages and disadvantages of on-the-job training
 Explain what developmental job mean and its components
-----------------------------------------------------------------------------------------------------------------

Programmed Instruction. Programmed instruction is an old on-site training method that has
recently become the foundation for many computers based training programs. Here, the instructional
material is broken down to "frames." Each frame represents a small component of the entire subject
to be learned, and each frame must be learned successfully before the next one can be tackled.
An advantage of programmed instruction is that large numbers of employees can be trained
simultaneously, with each learner free to explore the material at her or his own pace. In addition, it
includes immediate and individualized feedback. Although the development of several authoring
systems has eased the burden of developing programmed modules, instruction still must be carefully
planned. It's estimated that 1 hour of programmed instruction requires 50 hours of development
work. Consequently, this approach is effective only if canned programs (e.g., word processing and
database tutorials) are used or if large numbers of employees are to be trained so that development
costs for an original program can be justified. The use of intranets for delivering training makes
widespread use of programmed instruction much more practical today than it was Interactive Video
Training. Interactive video training combines the best features of programmed instruction with the
best attributes of video. Interactive video programs provide a short video and narrative presentation
and then require the trainee to respond to it. This sequence-packaged program, learner response, and
more programmed instruction-provides for individualized learning. Customer-contact employees
take a job knowledge test every six months; the company pays each employee for four hours of study
and preparation and for two hours of test taking. The knowledge required to do well on the test is so
job related that performance on the test essentially reflects performance on the job. As an incentive
for employees to get serious about doing well on the test, the company links their compensation to
performance on the test. Employees who excel in applying their knowledge to job performance
become eligible for additional proficiency pay.

Off- the -Job

When the consequences of error are high, it's usually more appropriate to conduct training off the
job. Most airline passengers would readily agree that it's preferable to train pilots in flight simulators
rather than have them apprentice in the cockpit of a plane. Similarly, it's usually useful to have a bus

57
driver practice on an obstacle course before taking to the roads with a load of schoolchildren.
Off-the-job training is also appropriate when complex competencies need to be mastered or when
employees need to focus on specific interpersonal competencies that might not be apparent in the
normal work environment. It's difficult to build a cohesive management work team when members of
the team are constantly interrupted by telephone calls and subordinate inquiries. Team building is
more likely to occur during a retreat, when team members have time to focus on establishing
relationships. However, the costs of off-the-job training are high. One cause for concern is that
knowledge learned off the job may not executives, to work transfer to the workplace. Research has
shown that the more dissimilar the training environment is to the actual work environment, the less
likely trainees will be to apply what they learn to their jobs. For example, the transfer-of-knowledge
problem is minimal when trainees work with machines that are comparable to the ones in their actual
work environment. However, it may be difficult to apply teamwork competencies learned during a
wilderness survival program to a management job in a large service organization.

Formal Courses. Formal courses can be directed either by the trainee-using programmed instruction,
computer-assisted year for outside instruction, reading, and correspondence courses---or by others, as
in formal classroom courses and lectures. Although many training programs use the lecture method
because it efficiently and simultaneously conveys large amounts of information to large groups of
people, it does have several drawbacks. Perhaps most importantly, except for cognitive knowledge
and conceptual principles, the transfer of learning to the actual job is probably limited. Also, the
lecture method does not permit individualized training based on individual differences in ability,
interests, and personality.

Simulation. Simulation, which presents situations that are similar pilots in its similar to actual job
conditions, is used for both managers and non managers. A common simulation technique for no
managers is the vestibule method, which simulates the environment of the individual's actual job.
Because the environment isn't real, it's generally less hectic and safer than the actual environment; as
a consequence, trainees may have trouble adjusting from the training environment to the actual envi-
ronment. The arguments for using a simulated environment are compelling: it reduces the possibility
of customer dissatisfaction that can result from on-the-job training, it can reduce the frustration of the
trainee, and it may save the organization a great deal of money because fewer training accidents
occur (e.g., pilot training by all airlines is done in flight simulators). Not all organizations, even in
the same industry, accept these arguments. Some banks, for example, train their tellers on the job,

58
whereas others train them in a simulated bank environment.

Assessment Centers. Just as they are popular in managerial selection, assessment centres are an
increasingly popular simulation technique for developing managers. Certain aspects of the assess-
ment centre, such as management games and in-basket exercises, are excellent for training. When
these are used for training purposes, however, it is essential that instructors help participants analyze
what happened and what should have happened. The opportunity for improvement may be drastically
reduced if the trainees are left to decide what to transfer from the games or exercises to the job.

Business Board Games. Companies are finding that it pays if all employees know how the company
makes money, the difference between revenue and profit, and how much
such as Prudential and Sears have created board games, similar in form and shape to Monopoly, that
reveal the workings of the company. Employees actually play the game, and as they do, they learn
about the company and how the company runs the business and makes a profit or loss.

Role-Playing and Sensitivity Training. Whereas simulation exercises may be useful for developing
conceptual and problem-solving skills, two other types of training are used for developing human
relations or process skills. Role-playing and sensitivity training develop managers' interpersonal
insights-awareness of self and of others-for changing attitudes and for practicing human relations
skills, such as leading or interviewing.
Role-playing generally focuses on understanding and managing relationships rather than facts. The
essence of role-playing is to create a realistic situation, as in the case discussion method, and then
have the trainees assume the parts of specific personalities in the situation. When the trainee does get
into the role, the result is a greater sensitivity to the feelings and insights that are presented by the
role.
In sensitivity training, individuals in an unstructured group exchange thoughts and feelings on the
"here and now" rather than the "there and then." Although being in a sensitivity group often gives
individuals insight into how and why they and others feel and act the way they do, critics claim that
these results may not be beneficial because they are not directly transferable to the job.

Wilderness Trips and Outdoor Training. To increase employees' feelings about the here and now
and raise their self-esteem, organizations sometimes use programs that involve physical feats of

59
strength, endurance, and cooperation. These can be implemented on wilderness trips to the woods or
mountains or water.

Exhibit 4 advantages and disadvantages of learning programs

TYPE OF PROGRAM ADVANTAGES DISADVANTAGES

. Brings employees together from . Start-up and equipment costs are
On the Job many locations high
e-Learning and video tele- . Speeds up communications . Requires adaptation to a new
conferencing . May reduce costs learning format
. May be done on or off the job
. Does not interfere with real job . Takes a long time
Apprenticeship training performance . Is expensive
. Provides extensive training . May not be related to job
Internships and . Facilitate transfer of learning . Are not really full jobs
assistantships . Give exposure to real job . Provide vicarious learning
. Gives exposure to many jobs . Involves no sense of full
Job rotation . Allows real learning responsibility
. Provides too short a stay in a job
Supervisory assistance . Is often informal . Means effectiveness rests with the
and . Is integrated into job supervisor
Mentoring . Is expensive . May not be done by all supervisors
On-Site, but Not On the . Tailored to company needs
. Can be costly
Job . Supports company vision and
. Requires skilled management
Corporate universities culture
. Reduces travel costs . Not appropriate for some skills
. Can be just-in-time . Is time-consuming to develop
Programmed instruction
. Provides for individualized . Is cost-effective only for large
on an intranet or the
learning and feedback groups
Internet
. Provides for fast learning . Often no support to assist when
trainee faces learning problems
. Convey consistent information . Costly to develop
Interactive videos to . Do not provide for individual
employees in diverse locations feedback
Off the Job . Are inexpensive for many . Require verbal skills
Formal courses . Do not interfere with job . Inhibit transfer of learning
Simulation . Helps transfer of learning . Cannot always duplicate real
. Creates lifelike situations situations exactly
. Costly to develop
Assessment centers and . Provide a realistic job preview . Costly to develop
board games . Create lifelike situations . Take time to administer
Role-playing . Is good for interpersonal skills . Cannot create real situations
. Gives insights into others exactly; is still playing
. Is good for self-awareness . May not transfer to job
Sensitivity training
. Gives insights into others . May not relate to job
. Can build teams . Costly to administer 60
Wilderness trips
. Can build self-esteem . Physically challenging
___________________________________________________________________________
? Check point
 Explain what off-the-job training mean and Discuss when off-the-job training is appropriate,
 Simulation, which presents situations that are similar to actual job conditions, is used for
both managers and non managers. Mention a common simulation technique for non
managers
___________________________________________________________________________

4.6 Potential Trainees and Training Providers

Who provides the training?
A key question to be addressed when setting up training and development activities is who provides
the required guidance? Training and development activities may be provided by any of several
people, including

 Supervisors and other managers,

 A co-worker,
 An internal or external subject matter expert, and
 The employee.
Who is selected to teach often depends on where the program is held and what skills or competencies
are taught. A basic organizational orientation is usually handled by a member of the HR staff.
Literacy and technical competencies are usually taught by the immediate job supervisor or a co-
worker, although technical competencies may also be taught by internal or external subject matter
experts. Interpersonal, conceptual, and integrative competencies for management are often taught by
training specialists, university professors, or consultants.

Supervisors and Other Managers. In many organizations, on- the-job training is the only form of
training offered. In these circumstances, supervisors almost always are the providers of whatever
training employees receive. For development activities that involve mentoring, supervisors and
managers are appropriate also, as they are in the best position to assess their employees' career needs.
Furthermore, because of their position in the organization, supervisors and managers are accessible
to employees and have control over the employees' work assignments, which facilitates their
effectiveness.
Supervisors and managers may also be effective as trainers in off-the-job programs. Indeed, some

61
CEOs consider training to be one of their more important duties.

Co-workers.. When Disney trains new hires, the company's message is delivered by some of the
best" cast" members in the company. Dressed in full costume, they show through example how to
create happiness-the most important aspect of their role. After the initial training session, new cast
members are paired with experienced employees for 16 to 38 hours of "paired-training," which is
essentially one-on-one coaching. As the Disney example illustrates, co-workers can be very effective
trainers. Often, co-workers are more knowledgeable about the work than anyone else.
Co-workers also play an important role in many management development programs, which
commonly bring together employees from different parts of the organization for several days of
training. Participants in such programs often report that the most valuable learning occurs through
conversations with their colleagues. Furthermore, exposure to the perspectives of colleagues working
around the world helps employees develop more sophisticated "mental maps" of how business is
conducted in different locations.
Clearly, co-workers can be valuable providers of training. Nevertheless, their effectiveness as
trainers or mentors should not be assumed. A concern with relying on co-workers as trainers is that
they may not be able to instruct others. They may also teach others their own shortcuts rather than
correct procedures. If co-workers are to be trainers, they should receive instruction on how to train
and should be given sufficient time on the job to work with trainees.

Experts. Subject matter experts may not be familiar with procedures in a specific organizational
culture. As a result, they may be respected for their expertise but mistrusted because they aren't
members of the work group. Still, if no one in the immediate work environment possesses the
knowledge needed, or if large numbers of individuals need to be trained, the only option may be to
hire experts. Experts who are expressive when delivering training and well organized are especially
effective.

Employee. Self-paced instruction is also an option. With the growing popularity of computer-based
training, self-paced instruction is also becoming more common. Trainees benefit from this method by
learning at a speed that maximizes retention. However, if they aren't given incentives to complete the
instruction in a specified period of time, they may place it on the back burner.
___________________________________________________________________________
? Check point

62
  Discuss potential providers of training
 In addition to different training providers, self-paced instructions can also considered as an
alternative to managers. Explain what self-paced instruction mean and its advantages both
for the company and employee.
___________________________________________________________________________
4.6 Evaluating the effectiveness of training and development

Evaluation involves the collection of information on whether the trainees were satisfied with the
program, learned the material, and were able to apply the skills back on the job. It may be important
to determine whether the trains are capable of exhibiting the appropriate level of skill. It may be
important to know whether or not trainees have changed their behavior and if the change was due to
training. Further it may be critical to know that if the organization places a new group of supervisors
in the same training program that they will also improve their learning or behavior.

Evaluation insures that programs are accountable and are meeting the particular needs of employees
in the cost effective manner. With out evaluation, it is very difficult to show that the training was the
reason for any improvement. As a result management may reduce training budgets or staffs in times
of financial hardship.

Types of criteria
Trainers should try to collect 5 types of data when evaluating training programs
1. Measures of reaction
2. Learning
3. Behavioral change
4. Organizational results
5. Return on investment/ROI
The first 4 of these criteria are widely used to evaluate corporate training programs and the last, ROI,
has recently been added as another important source of evaluation data.
 Reactions - trainees’ attitude towards the training program, instructors, facilities.
 Learning - changes in knowledge by trainees or level of knowledge reached after training
 Behavior - changes in job performance or level of job performance reached after training
 Results - changes in organizational measures, e.g. productivity, turnover, absence due to
training,

63
  ROI - Monetary values of the results/benefits
___________________________________________________________________________
? Check point
 Trainers should try to collect five types of data when evaluating the effectiveness of training
and development programs: discuss these types of data
___________________________________________________________________________

Summary

Training and development should contribute to the attainment of short-term and long-term goals,
both for the company and for its individual employees. In order to be effective, a training and
development program requires the full commitment and support of senior management, and it must
reflect the overall philosophy of the organization. Training is defined as any attempt to improve
employee performance on a currently held job or one related to it. This usually means changes in
specific knowledge, skills, attitudes, or behaviors. Development refers to learning opportunities
designed to help employees grow. Such opportunities do not have to be limited to improving
employee’s performance on their current jobs. Training need analysis is a search for solutions to
performance problems. Needs analysis not only identifies areas were training is needed in your
company but, also helps you determine exactly how training should be applied. Training must also be
targeted at their values. They must be trained to understand and accept the new technology. It
determines not only which problems are most pressing, but which can be most economically solved
through training. Organizational needs analysis begins with an assessment of the short- and long-
term strategy and strategic business objectives of the company. This step is essentially the same as
organizational assessment, except that the focus is specifically on identifying the implications of the
assessment for future training and development activities. A job needs analysis identifies the specific
skills, knowledge, and behavior needed in present or future jobs. A thorough job analysis with
competency modeling provides the information required for job needs analysis. After information
about the job has been collected, the analysis shifts to the person. A person needs analysis identifies
gaps between a person's current capabilities and those identified as necessary or desirable.
Many different techniques can be used for training and development activities. Three general
categories of techniques are on-the-job, on-site, but not on the job, and off-site. Choices about
techniques may be constrained by the type of learning that's to occur-cognitive, skill based, or
affective-as well as by cost and time considerations. A key question to be addressed when setting up

64
training and development activities is who provides the required guidance? Training and
development activities may be provided by any of several people, including supervisors and other
managers, a co-worker, an internal or external subject matter expert, and the employee.
Who is selected to teach often depends on where the program is held and what skills or competencies
are taught. A basic organizational orientation is usually handled by a member of the HR staff.
Literacy and technical competencies are usually taught by the immediate job supervisor or a co-
worker, although technical competencies may also be taught by internal or external subject matter
experts. Interpersonal, conceptual, and integrative competencies for management are often taught by
training specialists, university professors, or consultants.

Self check questions

1. Explain the difference between education and training

___________________________________________________________________________
___________________________________________________________________________
_________________________________________________________

2. Write the four components of the need assessment process

___________________________________________________________________________
___________________________________________________________________________
________________________________________________________

3. Write the possible training providers

___________________________________________________________________________
___________________________________________________________________________
________________________________________________________

4. Discuss how managers can measure the effectiveness of training they provide

___________________________________________________________________________
___________________________________________________________________________
________________________________________________________

CHAPTER SIX

Employee Compensation Management

Chapter objectives

Up on the completion of this chapter you are expected to know about:

 Overview and objectives of employee compensation

 Types of employee compensation

65
  The difference between wages and salary
 Approaches to the determination of wages and salary
 Employee benefits

6.1 Introduction

A typical business organization furnishes different types of benefits to employees and their families
in addition to wage and salaries. These benefits are typically administered by the personnel
department. The relationship between employees’ benefits and wages is both close and complicated.
Employees place limits on total compensation costs (direct wages plus benefits). Therefore, a large
wage increase will probably restrain the amount of increase in benefits, and vice-versa. Yet no clear-
cut method has been agreed upon for distinguishing between various wage payments and benefits.
This module discusses direct pay for time worked and incentive wage related to productivity and
profit. The module will discuss the remaining financial payment received by employees and
employee service.

First discussed are the extent, objectives, and types of employee benefits in a given industry. Next,
remuneration and benefit strategies as two separate categories, direct and indirect benefits, will be
discussed. Sub categories of direct benefits, wage and salary and that of indirect benefit strategies
such as medical and insurance, health and welfare benefits, paid leaves benefit (payment for time not
worked), employee service related benefits (retirement benefits), educational and training benefits
and miscellaneous services will be given a due emphasis. Then the legal requirements from the
Ethiopian civil servant and labour proclamation context will be presented. At last, the
implementation aspect of the different benefit programs discussed hereunder and the major
influences in the selection of benefit strategies will be discussed. As communication is the most
important ingredient in any human resource practices, the importance and ways of communication
the benefit plans to the concerned organizational members will briefly be presented.

6.2 Overview and Objectives of Employee compensation

Management is concerned with attracting and keeping employees, whose performance meet at least
minimum levels of acceptability and keeping absenteeism and turnover to tolerable levels. The
provision of benefits and services are important in maintaining the employees and reducing or

66
keeping turnover and minimizing absenteeism. It is important to note that financial incentives are
paid to specific employees whose work is above standard.

In modern businesses, the tendency for arranging different benefit plans for organizational workers
has come increasing. Management generally has the following objectives behind arranging employee
benefit strategies.

Objectives of Employee remuneration and Benefit Plans include:

 To create sound industrial relations.
 To increase and improve employee moral and to create positive attitude for workers towards their
employers.
 To motivate the employees by identifying and satisfying their unsatisfied needs
 To recruit and retain the best personnel.
 To provide for the needs of employees and protect them against certain hazards of life,
(particularly those which an individual can not him self provide for).
 To provide security to the employees against social risks like old age benefits and maternity
benefits.
 To protect the health of the employees and to provide safety to the employees against accidents.
 To promote employees’ welfare by providing welfare measures like recreation facilities, get-
together programs, parties and invitations.
 To make the organization on dominant influence in the lives of its employees with a view to
gaining their loyalty and cooperation, encouraging them to greater productive efforts.
 To improve and furnish the organizational image in the eyes of the public with a view to
improving its market position and bringing about product acceptance by it.
 To recognize the official trade union’s bargaining strength, for a strong trade union
 Generally constrains an employer to adopt a sound benefits and service programs for his
employees.
 To meet requirements of various legislations relating to fringe benefits which in turn satisfies the
following three goals:
o Social Goal: The fringe benefits act as a social lever in helping conservation of this
precious resource, by guarding against its unnatural erosion and providing the climate for
its development in a working environment.

67
 o Human Relations Goals: The management, through motivation, tries to develop and
maintain, “Human relation”, i.e. mutual interest, individual differences, motivation and
human dignity.
o Macro Economics Goal: For maintaining the growth and stability in the economy of a
country, ideal utilization of the non-human and human resources is imperative.

___________________________________________________________________________
? Check point
 Explain the main purpose and reason of employee compensation
 In modern businesses, the tendency for arranging different benefit plans for organizational
workers has come increasing. Management generally has different objectives behind
arranging employee benefit strategies. Discus these objectives briefly

___________________________________________________________________________

6.3 Types of employee compensation

Remuneration and benefit plans, collectively called employee compensation, fall in two broader
classes. These are:
 Direct and
 Indirect compensation
6.3.1 Direct Compensation

Direct compensation is used to describe the cash received in the form of base salary, overtime pay,
shift differentials, bonuses, and sales commissions etc.

Wage and Salary

In our day-to-day conversation, two terms, wage and salary are used interchangeably. The concept of
wage and salary in an organization is extremely important that concern on administrating them must
be one integral part of businesses. For one thing, wage and salary represent a substantial part of the
total cost of running organizations. For another thing, wage and salary dictate the ability of business
organizations to attract employees from the labor market, and the possibility of these organizations to
motivate and hold their employees.

68
What Do Wage and Salary Refer to?

Though the two terms are used interchangeably, a closer look in to the concepts held behind them
bears a remarkable difference. Salary is used to refer to the amount of money paid to an employee for
his/her service to the organization. It is used to describe the amount paid to an employee whose
output cannot be measured and quantified. This is especially true of a professional employee or an
employee engaged to work as an office clerical stuff.

With a little variation, wage is used to refer simply to an amount paid to non-professional or
unskilled manual labor. Unlike salary wage is paid based on some quantifiable factors such as total
number of hours worked or total number of units completed.
In any cases, organizations must have a sound wage and salary administration policy. The general
objective of such policy is:
a) To control unnecessary costs.
b) Establishment of fair and equitable remuneration
c) To utilize wage and salary as an incentive to greater employee
productivity.
d) Maintenance of a satisfactory public relation image.

Wage and Salary Policy

Every organization has its own wage and salary policy. Various types of wage and salary policies
have been developed based on such factors as:
 The nature of the business
 The location of the business, and
 Levels of competitors wage and salary etc.

The traditional approach to wage and salary policy has been to recognize that wages and salaries
must be at the level that is adequate to attract, retain and motivate employees to competently perform
the tasks assigned to them.

A good salary and wage policy should relate salary and wage levels to its competitors in the industry
or in its regions. It may adopt a policy like this "we shall set wages and salaries which approximate
the average of the companies in the industry"

69
Another good approach to wage and salary is the formula approach, which recognizes the change in
the cost of living and wage and productivity as a basis for wage/salary changes. No doubt that wage
and salary policy should be flexible based on some factors such as the employee productivity and the
cost of living that change from time to time.

The following principles are worth noting while formulating wage and salary plan.

1. Wage policies should be carefully developed, having in mind the interests of:
a) The employees
b) Management as representative of the owner
c) The consumers and
d) The community
2. Wage policy should be clearly expressed in writing to ensure uniformity and stability.
3. Wage decision should be checked against the formulated policies.
4. Management should see that employees know and understand the wage policies.
5. Wage & salary policy should be evaluated from time to time to make certain that
they are adequate to current needs.
6. Departmental performance should be checked periodically against the standard set
in advance.
7. Job descriptions and performance ratings should be periodically checked to keep them up to
date.

________________________________________________________________________
? Check point
 Discuss the components of direct and indirect compensation
 Wage policies should be carefully developed, having in mind the interests of different
parties: discuss these parties
___________________________________________________________________________

Approaches/strategies to the determination of wage and salary

A wide variety of incentive wage plans for operative employees have been devised and used at
different times and conditions. Wage payment system consists of the pay structure and the methods
used to motivate and reward work force for their contribution to the goals of the organization. The

70
various systems that have been developed for wage payments may be regarded as variants or
combinations of different principles of:

1. The time rate system of calculating wage. This system is perhaps the oldest system of
calculating wage or salary. It is also the most commonly used system of salary and wage
calculation. It refers to the payment of a predetermined rate for normal time of work and relative
to a time limit, such as an hour, day, week and month. Under this system the basic rate for a job
is fixed by negotiation, by reference to local rates, or by job evaluation and only varies with time,
never with out-put or performance.

This method is generally common for clerical, supervisory and managerial personnel. The
distinguishing characteristic of this method is that the production of the worker is not taken in to
consideration in fixing the wage. An employee is paid at the settled rate as soon as time contracted is
spent.

Merits of time rate method

a) It is simple and convenient method, for the amount earned by the
worker can easily be calculated.
b) As all workmen employed for doing a particular kind of work receive the same wage, III-will and
jealousy among them are avoided,
c) As there is no time limit for the execution of a job, workmen are not in a hurry to finish it and
this ma mean that they can pay the required attention to the quality of their work.
d) It provides regular and steady income to the worker that enables
them to adjust their budget accordingly.
e) Due to the slow and steady pace of the worker, there is no rough handling of machinery, which is
a distinct advantage for the employer, and
f) It is the only system that can be used profitably where the output per worker is not measurable, or
where the job involves professional, technical or administrative skills.

Draw Backs of Time-Rate Method

a) This system does not take in to account the fact that men are of
different abilities and that if all workers are paid equally, better workmen may not have incentive
to work hard.

71
b) As there is no specific demand on the worker to complete a piece of work within a given
systematic evasion of work and,
c) This system sometimes compels a person to take up a job for which he has neither the liking nor
ability.

2. The Piece-Rate System of Calculating Wage

Piece rate system pay directly related to units of out put produced. Different individuals have
proposed different approaches to calculating wage based on output produced by an employee. The
following are the most outstanding ones.

A. Tailor's Piecework Plan

Tailor proposed for an incentive plan that has two-piece rates. These rates are the higher and the
lower piece rates. In applying such plan, management sets a standard achievable by an average
employee by taking different factors that influence the performance of the employee in to
consideration.

Accordingly, a worker who is able to reach or exceed the pre-determined standard will be entitled to
earn wage calculated on the higher rate, and a worker who performed below the standard will be
paid based on the lower rate. According to Taylor's incentive wage plan, a unit failure to reach
standard will let the employee be paid on the lower rate.

B. Merrick Differential Piece Rate Plan

Merrick's differential piece rate plan is a modification and an improved version to Taylor's piece rate
plan. . Merrick realized that it was necessary to have two categories of the workers, i.e. efficient and
inefficient. According to him, there are some employees who produce more only for their own
personal progress. These employees deserve to be encouraged. Therefore, Merrick introduced three-
piece rates instead of Taylor's two-piece rate system. The lowest rate introduced was termed as
"Basic piece - rate", and the rest are summarized as follows.

No Out put Piece rate wage

1 Less than 83% of the standard task Basic piece rate
2 From 83 to 100% of task 110% of the basic piece

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 (standard) rate
Over 100% of the standard task 120% of the basic piece
3
rate

To workers who are potentially high producers, Merrick's incentive plan is a good one. It seems
reasonable to pay to employees who produced up to 83% of the target equal to 100% of a basic piece
rate. With this, it is believed that all workers should reach 83% of the targeted standard and be
encouraged to go for an extra mile to escape the lowest basic piece rate, and earn a rate 110% of the
basic rate. Employees who have the intention to produce more that 100% of the task for self-progress
purpose would be encouraged by adjusting the highest rate, 120% of the lowest basic piece rate.

3) Payment by Result System (PBR)

Payment by result is a payment system under which money rewards vary with the measured changes
in performance according to predetermined rules. It relates the pay or part of the pay received by the
employee to the number of items he produces or the time he takes to do a certain amount of work.

Under the PRB system, the worker is paid a wage which bears some fairly direct and continuous
relation to his output or performance, or to the average output of the group of workers to which he
belongs. Under this plan, a worker working in a given condition and with given machinery is paid
exactly in proportion to his output. Therefore, the worker's pay during a given period is directly
related to the levels of measured performance.

The most common scheme of payment by results, which is purely individual in character, is what is
called straight piecework. A worker's earning can be calculated on the basis of the number of pieces
produced and the rate per piece. This means, payment of a uniform price per unit of production.

Safe Guard Conditions for Introducing PBR System

The PBR may be introduced with the following safeguard conditions.

a) Quality of output is to be controlled through strong supervision
b) Systems for preventing wastage of material must be designed.
c) Protection for the health of the worker must be there
d) Supply of raw material, maintenance of plants and efficiency of
management are to be assured;

73
 e) Workers are to be guaranteed job security or continued
employment, and
f) Workload is to be fixed by impartial experts. Rates once fixed by
impartial experts. Management without justification should not cut rates once fixed.

Advantages of the PBR-System

a) It pays the workmen according to their efficiency reflected in the amount of work turned
out by them.
b) It involves less supervision as the workers are not likely to while-away (waste) their time.
c) Being interested in the continuity of his work, a workman is likely to take greater care in
the maintenance of machines and equipments.

Disadvantages of the PBR - System

a) A piece rate worker in his anxiety to produce more may neglect the quality of output.
b) The employee with the desire to earn more may work hard to impair his health, unmindful
of the fact that this would ultimately reduce his earning power.
c) Under the PBR system, the worker's earning may suffer because of causes beyond his
control, such as in adequate supply of raw materials, failure of machinery, lack of demand
in the market for the goods produced.
d) Trade unions are often opposed to this system as they are of the opinion that such a
system encourages rivalry among workers and endanger their solidarity in labor dispute.

-----------------------------------------------------------------------------------------------------------------?
Check point

 Discuss the meaning of payment by result system. What kind of pros and cons are found with
this system
 Merrick's differential piece rate plan is a modification and an improved version to one of
management’s great expert: who is this man.

-----------------------------------------------------------------------------------------------------------------

4. Balance or Debt Methods

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This is a combination of time and piece rate. The worker is guaranteed an hourly or a day rate with
an alternative piece rate. If the earnings of the worker calculated at the piece-rate exceed the amount
which he would have earned if paid on the time basis, he gets credit for the balance, namely the
excess piece-rate earning over the time rate earnings. The question of excess payment does not arise.
Where piece rate earnings are less than time rate earnings, he is paid on the basis of the time rate; but
the excess paid is carried forward as the debt against him to be recovered from any future balance of
piecework earnings over timework earnings. This system presupposed the fixation of time and piece
rate on a scientific basis. The obvious merits of this system are that an efficient worker gets an
opportunity to improve his earnings.

5. Incentive Rate System

The incentive rate system of wage calculation is used in a situation where:

Output is measurable in homogeneous units.
Product specifications do not vary frequently, and:
Worker’s effort can directly influence output.

Methods commonly used in incentive rate system of wage calculation involve:

a) Straight piece work: - where a constant rate of pay per unit of output is made, and
b) Bonus plans: - This involves in general the determination of standard tasks and bonus
payments are made when a worker produces above a standard.

6. Job Evaluation System

This system of wage calculation is a method where jobs are described, analyzed, compared and
evaluated within a unit, a branch or an industry. The main characteristics of job evaluation system
include:
a) It is a good and systematic approach;
b) It is an analysis of the work involved in its starting point;
c) It is an attempt to determine the requirements of the work
involved for any incumbent.
d) It is a process by which jobs in an organization are appraised.

75
 e) It is a process of analyzing and describing positions, grouping these positions and
determining their relative value by comparing the duties of different positions in terms of
their different responsibilities and other requirements.
f) It is a system to deal exclusively with assessment of the job and not concerned with
employees assigned to the job.
g) It is designed only to establish wage differentials and is not concerned with the absolute
wage level.

Generally, job evaluation system is a systematic approach, which provides a basis of comparing jobs,
and determines the relative worth of different jobs in an organization.

The system has two basic objectives; namely:

1. Comparing jobs and determining their level within each occupational group.
2. Comparing jobs between occupational groups.

Achievement of the first objective is important for promotion, career planning and personnel
development. Achieving the second objective is of interest because of wage comparisons.

In job evaluation system, one has to understand that it is not the man, but the job to be rated. It is
therefore an important tool of personnel administration and wage decisions.

Job evaluation systems are useful in achieving internal equity of pay between useful selected criteria
to compare jobs within an organization so that they can be ordered for the purpose of assigning
differential pay. Job evaluation systems provide a rationale for paying different rates for different
jobs. It is the process of analyzing and assessing of jobs to ascertain reliably their relative worth,
using the assessment as basis for a fair and equitable wage structure.

___________________________________________________________________________
? Check point
 Discuss the main characteristics of job evaluation system
 Explain what incentive rate system mean and in what kind of situation is it appropriate
 Balance of debt method is a combination of two different methods. Explain these two
methods
___________________________________________________________________________

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6.3.2 Indirect Compensation

Indirect compensation includes benefits and services. It can be defined as all employer provided
reward and service other than wage and salaries.

Need for Extending Benefits:

Most of the organizations have been extending the fringe benefits to their employees, year after
year, for the following reasons.
 Employee demands;
 Trade Union demands;
 Employers Preference;
 As a social security;
 To improve human relation.

Features of Benefits

It is difficult to classify and distinguish between direct wages and indirect benefits. Some of the
differences are:
1. Wages are directly related to the work done and are paid regularly, usually weekly,
fortnightly or monthly. Fringe benefits, on the other hand, are those payments or benefits that a
worker enjoys in addition to the wages or salary he or she receives.
2. These benefits are not given to workers for only specific jobs they have performed but are
offered to them to stimulate their interest in their work and to make their jobs more attractive and
productive for them
3. Fringe benefits represent a labour cost for the employer. In the circumstance, everything
which a company spends over and above straight time pay should be considered as fringe benefits
4. A fringe is never a direct reward geared to the output, effort or merit of an employee. It is
offered, not on the basis of the hard work or long hours of work put in by an employee but on the
basis of length of service, his sickness, sex, the hazards of life he or she encounter in the course of
his work, etc.
5. To be termed a fringe benefit a labour cost should be intended by an employer as a benefit
desired by his staff. It is a fringe benefit when all the employees enjoy it.

77
6. A fringe must constitute a positive cost to the employer and should be incurred to finance an
employee benefit. If the benefit increases workers efficiency, it is not a fringe, but if given to
supplement his wages, it is.

Factors Influencing Decisions on Benefits

A number of factors influence the decision to set up a particular employee benefits and service
program. According to Nielson, the criteria governing such a program are:
 Cost
 The ability to pay
 The bargaining strength of the trade union,
 Tax consideration
 Public relations
 Social responsibility and
 The reaction of the employees.
Many other factors also influenced the concept of fringe benefits, for instance:
 Rising prices and cost of living has brought about incessant demand for provision of extra
benefits to the employees.
 Employers have found that fringe benefits present attractive areas of negotiation when large wage
and salary increases are not feasible.
 As organizations have developed more elaborate fringe benefits programs for their employees,
greater pressure has been placed upon competing organization to match these benefits in order to
attract and keep employees.
 Recognition that fringe benefits are non-taxable rewards has been a major stimulus to their
expansion.
 Rapid industrialization and the growth of a capitalistic economy have made it difficult for most
employees to protect themselves against the adverse impact of these developments.
 The growth volume of labour legislation, particularly social security legislation, made it
imperative for employers to share equally with their employees the cost of old age, survivor and
disability benefits.
 The growth and strength of trade unions has substantially influenced the growth of company
benefits and service.

78
 Labour society and competition for qualified personnel has led to the inflation, evolution and
implementation of a number of compensation plans.
 The management has increasingly realized its responsibility towards its employees.

A “tripartite” concept of individual protection has developed in recent years.

First, every individual is expected to be at least partially responsible for his own present and future
well being. Second, industry is now expected to protect its workers from the hazards of life. Finally,
the government is involved in supporting and financing worker assistance programs. The
contribution of these three parties varies in accordance with the nature and purpose of the various
employee benefits and services programs.

The typical decisions mangers face in the design and management of benefits plans include (the four
C’s)
 Competitiveness: how should our benefits compare to our competitors?
 Coverage and Forms: which benefits should we offer?
 Communications: how can we best inform employees about their benefits
 Choice: what degree of choice or flexibility can we include? How can we accommodate
employee’s interests and concerns?

___________________________________________________________________________
? Check point
 Discuss reasons that urges companies to extend their fringe benefits for their employees
 Different factors influence the decision to set up a particular employee benefits and service
program. Discuss the criteria that govern such a program as developed by Nielsen
 Discuss the typical decisions most mangers face in the design and management of benefits
plans
___________________________________________________________________________

Types of Employee Benefits and Service

It has been recognized that certain benefits must be supplied by the organization for its employees,
regardless of whether it wants to or not. Most companies’ today offer a wide variety of benefits,

79
especially larger companies. Some of the benefits are compulsory (required by law), while others are
not required by law. The following are types of employee benefits and services:
1) Medical and safety benefits
2) Education and training benefits
3) Payment for time not worked
4) Employee service related benefits
5) Other employee benefits
a. Loan benefits
b. Pension or provident fund
c. Employee allowance
d. Funeral benefits
e. Dependant benefits and other

The United States Chamber of Commerce classified benefits items in five categories. These are:
a. Payment that have to be made under any specific legislation
b. Pensions and such other payments as have been agreed upon;
c. Paid rest period, lunch periods, wash up time, travel time, time taken to change clothing, and
get ready time.
d. Payment for time during which an employee has not put in any work at all; and
e. Other items, including profit sharing payments, bonus, etc.

These benefits are usually known as fringe benefits. The International Labour Organization has
defined “fringe benefits” as:“Wages are often augmented by special cash benefits, by the provision
of medical and other service, or by payments in kind that form part of the wage for expenditure on
the goods and service. In addition, workers commonly receive such benefits as holidays with pay,
low-cost meals, low-rent housing, etc. Such additions to the wage proper are sometimes referred to
as ‘fringe benefits. Benefits that have no relation to employment or wages should not be regarded as
fringe benefits, even though they may constitute a significant part of the workers total income.”Thus,
fringe benefits are those monetary and non monetary benefits given to the employees during and post
employment period which are connected with employment but not to the employees’ contribution to
the organization. A vital benefit for all workers is the availability of safe working conditions.
Industrial accidents result in both suffering for the injured worker and major in both suffering for the
employer through loss of experienced employees, increased insurance premiums, and poor morale.

80
Many large companies employ doctors and nurses to investigate working condition and treat minor
illnesses and job related accidents. Some companies sponsor recreation programs. Firms can not
afford to provide all benefits, so they choose those which they feel will give the most satisfaction to
their employees and being out their best for the firm. Fringe benefits are primarily a means in the
direction of ensuring, maintaining and increasing the income of the employee. It is a benefit which
supplements to a worker’s ordinary wages and which are of value to them and their families in so far
as it materially increases their retirement. Benefits will have no positive effect if they are not
supported by a satisfactory salary structure.

___________________________________________________________________________
? Check point
 Explain how the United States Chamber of Commerce classified benefits items
___________________________________________________________________________
i. Employee Medical and Insurance Benefits

Employee’s medical and safety should be taken care of in order to protect the employee against
accidents, unhealthy working conditions and to protect the worker’s productive capacity.

In Ethiopian Labour Proclamation No. 377/2003, part seven stipulated certain requirements
regarding working conditions with a view to provide occupational health and safety requirements.
Article 92 of this proclamation obliges an employer to take the necessary measure to safeguard
adequately the health and safety requirements. These provisions step to ensure that workers are
properly instructed and notified concerning the hazards of their respective occupations and the
precautions necessary to avoid accident and injury to health and ensure that the work place and
premises do not cause danger to health and safety of the workers. Provisions relating to pre-
executions, process of work shall not be a source of cause of physical, chemical, biological,
ergonomically and psychological hazards to the health and safety of the workers. Article 93 of the
proclamations also obligate a worker for proper use of all safeguards safety devices and other
appliance furnished for the protection of his health or safety of others.

Article 99 of the same proclamation also defines disablement as “any employment injury as a
consequence of which there is a decrease or loss of capacity to work”. The effects of such
disablement are:
a. Temporary disablement

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b. Permanent partial disablement
c. Permanent total disablement, and
d. Death

In addition to these, the proclamation also defined occupational accident and occupational disease as
“occupational accident means any organic injury or functional disorder sustained by a worker as a
result of any cause extraneous to the injured worker or any effort he makes during or in connection
with the performance of his work. And occupational disease means any pathological condition
whether caused by physical, chemical or biological agents who arise as a c consequence of:-
a. The type of work performed by the worker or
b. The surrounding in which the workers is obliged to work during a certain period prior to the
date in which the disease become evident

In addition to safety and health measures, a provision for the payment of compensation has also been
made under Labour Proclamation No. 377/2003. It is intended to meet the contingency of invalidity
and death of a worker due to an employment injury or occupational disease specified under the
proclamation. Amount of compensation depends on the nature of injury and monthly wage of the
employee. Dependents of the employee are eligible for compensation in case of death of the
employee.

___________________________________________________________________________
? Check point
 Explain the purpose of employee safety and health benefit
 In Ethiopian Labour Proclamation No. 377/2003, part seven, stipulated certain requirements
regarding working conditions with a view to provide occupational health and safety
requirements. Discuss the intention and meaning of Article 92 of this proclamation
___________________________________________________________________________

Types of Medical Benefits

Today, various medical services like hospital, clinical and dispensary facilities are provided by
organizations not only to employees but also to their family members. The Ethiopian Labour
proclamation No. 377/2003 Article 105 deals comprehensively with the medical benefits to be

82
provided to employees by their employers. Medical benefits under this Article of the proclamation
include the following where a worker sustains employment injury:
1. General and specialized medical and surgical care
2. Hospital and pharmaceutical care
3. Any necessary prosthetic or orthopaedic appliances

In addition to these, Article 107 of the proclamation identifies various kinds of cash benefits when a
worker who has sustained employment injury:
a. Periodical payment while he is temporarily disabled
b. Disablement pension or gratuity or compensation where he sustains permanent
disablement
c. Survivors pension gratuity or compensation to his depended where he dies

Medical benefit shall be provided to an insured employee or to a member of his family where the
benefit is extended to his family. This benefit is provided in the following firms:
a. First- aid- facility
b. Medical service given by organization owned health centres
c. Refund of employee pharmaceutical expenses
d. Coverage of medical expenses
a. Full versus partial coverage of medical expense
b. In patient versus out patient
c. Local versus overseas

An insured person shall be entitled to medical benefits during any week for which contribution are
payable, or in which he/she is eligible to claim sickness or maternity benefits or eligible for disable.

Voluntary arrangements: However, most of the large organizations provide health services over
and above the legal requirement to their employees free of cost by setting up hospitals, clinics,
dispensaries and homeopathic dispensaries. Company’s elaborating health service programs include:
i. Providing health maintenance service, emergency care, on the job treatment care
for minor compliant, health counselling, medical supervision in rehabilitation,
accident and sickness prevention, health education program, treatment in
employee colonies etc

83
 ii. Medical benefits are extended to employee family members and to the retired
employees and their family members
iii. Small organizations that cannot set up hospitals or large organizations (in those
places where hospitals can not be set up because of various reasons) provide the
medical services thought local hospitals and doctors. Sometimes they provide the
facility of reimbursement of medical expenses borne by the employees.

___________________________________________________________________________
? Check point
 Explain when and how employee medical benefits are delivered for the beneficiary based on
proper Ethiopian labor proclamation
___________________________________________________________________________

ii. Employee Insurance Benefits

Insurance programs or various types represent an important part of any benefit package. Insurance
plans or benefits protect employee or their dependent from financial difficulties that can arise as a
result of disability or death.

Many risks encountered thought out life illness, accident, permanent disability and death, among
others can be offset by buying insurance. Midsized and large employers can buy insurance more
cheaply than can individual employees, so employer sponsored insurance is a preferred, benefit
because the rate is based upon, group risk rather than individuals risk.

Company sponsored medical insurance programs are designed so that the employer either pays the
entire premium (contributory) a portion of it, with the employee responsible for the balance
(contributory).

Three Major forms of insurance are involved: Health insurance, Life insurance and Accident and
disability insurance.

I. Health Insurance

Health insurance is one of the most costly kinds of insurance, but it is extremely popular with
employees. Health insurance provides health care coverage for both employees and their dependents,

84
protecting them from financial disaster in the wake of a serious illness. Studies indicate that
employees prefer health insurance over most other benefits. Typically, health insurance includes
hospitalization (room, board, and hospital service charges), surgical fees (actual surgical fees or
maximum limits), and major medical fees, (maximum benefits typically $5,000-10,000 beyond
hospitalization and surgical payment). Plans for salaried employees typically are of the major
medical variety and provide “last-dollar coverage.” This means that the employee must pay the first
$200 of the cost or a similar deductible each year. Benefits may be based on either a specific cash
allowance for various procedures or a service benefits that pays the full amount of all reasonable
charge

Articles 711 of Commercial Code define health insurance as insurance against accident and illness:
“An insurance policy against accident is a contact whereby the insurer undertakes to pay a specified
sum to the insured person where the insured person is the victim of an accident during the period
specified in the policy, or the beneficiary named in the policy, where the insured person dies”.

Because the cost of individually obtained health insurance is much higher than that of an employer
sponsored group health insurance if it were not provided by their employer. In addition to normal
hospitalization and outpatient doctor bills, some plans now cover prescription drugs and dental, eye,
and mental health care. Obviously, cost containment of health spending will be an important issue for
companies and the nation for many years. The benefits specialist in the human resource department
can make an important contribution to the bottom line by keeping spending on health insurance
under control. For example many companies are now requiring employees to make larger
contributions toward the cost of their health insurance. In an effort to get the rise costs under control,
organization undertook major cost containment programs. Some of the Popular Cost Cutting
Programs are explained as follows.

A) Traditional Health Insurance: Provided by an insurance company that acts as an intermediary

between the patient and health care provider, traditional health insurance plans (also called fee for
service plans) developed a fee schedule based on the cost of medical services in a specify
community. They then incorporate these fees into the costs of insurance coverage. Traditional health
insurance plans have several important features. First, they include a deductible that a policyholder
must meet before the plan makes any reimbursement. Second, they require a monthly group rate
(also called a premium) paid to the insurance company. The premium is usually paid particularly by
the employer and partially by the employee. Third, they provide for coinsurance. The typical

85
coinsurance allocation s 80/20 (80 percent of the cost is covered by the insurance plan and 20 percent
is picked up by the employee). The deductible, premium, and coinsurance can be adjusted, so the
employee and employer’s costs of health care insurance vary depending on how the parties agree to
allocate the costs. Traditional plans give employees the greatest amount of choice in selecting a
physician and a hospital. However, these plans have several disadvantages. First they often do not
cover regular checkups and other preventive services. Second, calculating the deductible and
coinsurance allocation requires a significant amount of paper amount of paper work. Each time they
visit a physician, employees must fill out claims forms and obtain bills with long, itemized lists of
services. This can be frustrating for patients and costly to physicians,, who often need to hire clerical
woks solely to process forms.

B) Health Maintenance Organization (HMO): A health maintenance organization is distinctly

different from the traditional health care plan. An HMO is a medical organization consisting of
medical and health specialists offering both outpatient and hospital coverage for employees and their
families at a flat annual fee. People covered by an HMO have unlimited access to medical services
because the HMO is designed to encourage preventive health care to reduce ultimate costs. HMO
members pay a monthly premium, plus a small co-payment of deductible.

Some HMOs’ annual flat fee per member acts as a monetary disincentive to the HMO’s particularly
doctors who might otherwise be tempted to give patients unnecessary medical tests or causally refer
them to expensive medical specialists.

HMOs have two major advantages. First, for a fixed fee, people covered by the HMO receive most of
their medical service (including preventive care) without incurring coinsurance or deductibles or
having to fill out coinsurance or deductibles or having to fill out claims forms. Second, HMOs
encourage preventive health care and healthier lifestyle.

The major disadvantage, from the employee’s viewpoint, is that they most use physicians employed
or approved by the HMO, and these may or may not be the doctors of their choice. In addition some
consumer groups have citizen HMOs for skimping on patient care to save money on medical costs.

In the case of serious illnesses, the specialists consulted must also belong to the HMO, even if there
are doctors in the area with better reputations and stronger qualifications. The HMO, may service a
limited geographic are which may restrict who can joint the plan.

86
C. Preferred Provider Organizations (PPOs): A PPO is a health care plan based on agreements
between doctors, hospital, and other related medical service facilities with an employer or an
insurance company to provide a board set of medical service at a discounted or attractive price per
participant. They provide service for a fixed fee. The fee is lower than that which doctors and
hospitals normally charge their customers for the bundle of service and the monthly premium is
lower than that charged by a traditional plan for the same service. In return for charging a lower fee,
the doctors and hospitals that join the PPO network expect to receive a larger volume of patients.
Members of the PPO can use it for preventive health care (such as checkups) without paying a
doctor’s usual fee for the service. PPOs collect information on the utilization of their health service,
so that the employers can periodically improve the plan’s design and reduce costs.

A precise definition of PPO is difficult to give, but most include a select panel of providers, an
emphasizes on cost efficiency, marketing to purchasers rather than users, and some flexibility in
choice of providers together with financial incentives to use selected providers.

PPOs, like HMOs must provide cost efficient health care and emphasize cost containment in order to
compete. PPOs combine some of the best features of HMOs (managed health care and a wide array
of medical services for a fixed fee) with the flexibility of the traditional health insurance plan. They
include provisions that allow their members to go outside the PPO network and use non-PPO doctors
and medical facilities unlike HMOs. People who select non-PPO doctors and hospitals pay additional
fees in the form of deductibles and co-payments determined by the PPO. Because PPOs have few of
the disadvantages of traditional health insurance plans or HMOs, they are expected to continue
growing rapidly.

? Check point
 Discuss the important features of traditional health insurance, and the merits and demerits
of this plan.
 What is preferred provider organization/PPO/.

-----------------------------------------------------------------------------------------------------------------

D. Employee Payment of Deductible: The deductible system requires that the employee pay an
initial fee for each office or hospital procedure. Most major medical insurance policies have both an
annual deductible and a coinsurance clause. Suppose that an insurance policy has an 80%

87
coinsurance clause. After applying any deductibles that may be applicable, the insurance company
will pay 80% of the claim and the patient will be responsible for the difference. Because the patient
pays 20% of the claim, this amount is called a 20% co payment. In effect, requiring employees to
pay a deductible helps to reduce costs and claims for minor illnesses. Of course, it discourages
employees from obtaining preventive treatment and early diagnosis of illness because the deductible
must first be established. The following example illustrates this concept.

E. Self-funded Insurance: Self-funded plans are funded by the employee, not an insurance
company. In this instance, the employer sets a side a certain amount of money to pay claims during
the year. In addition, a contract often is written with a heath insurance company to cover claims over
the amount set a side and to administer to claims payments process. Self-funded insurance can cut
costs in several ways. First, the employer earns interest on the money set a side for claims, provided
it is inverted. Second by paying such a huge deductible (for example, 500,000 birr), the actual policy
with the insurance carrier can be very low. Third, the agent (the carrier) is eliminated on the bulk of
the claims. Self-insurance has become very popular as a cost cutting strategy. For it to work, on
employer should have at least 100 or more employees over which to spread the costs.

F. Wellness/Fitness Programs: Many companies are becoming more aggressive in preventive

actions to cut health care costs. A wellness program assessed employees’ risk of serious illness (for
example, heart disease or cancer) and then teaches them how to reduce that risk by changing some of
their habits (such as diet, exercise, and advice of harmful substances such as alcohol, tobacco, and
caffeine).

More and more companies and communities have no smoking policies in the workplace and
encourage employees through contents and awards to give up smoking. Some employ health and
fitness experts to advice executives and managers. Many firms sponsor employee athletic teams and
tournaments in softball, basketball, etc.

Other sponsor weight loss programs while others demand it. Some firms are even paying employees
to get healthy. Other follows the reverse approach by fining employees who do not have a healthy
lifestyle.

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G. Coordinate Health Insurance: Coordinate health insurance plans for families with two working
spouses. Human resource staff can encourage spouses who have duplicate coverage under two
different insurance plans to establish a cost sharing arrangement.

H. Other Techniques: To reduce the cost of prescription drags, companies are looking at new ways
to deal with pharmacies. Some options include joining discount mail-order drug plans, requiring that
prescription be filled using generic drugs when they are available, and negotiating with local
pharmacies to lower price on drug. Some firms are even toying with the idea of an in- company
pharmacy.

Another in company trend is employers providing medical care for workers at job locations or in
company run clinics to lower health care costs and reduce employee downtime due to visits to
doctor’s offices.

___________________________________________________________________________
? Check point
 Explain the responsible party for paying for self-funded insurance
 According to some studies, many companies are becoming more aggressive in preventive
actions to cut health care costs, describe at least two methods that companies consider in
such actions
 Explain the insurance plan for two working spouses
___________________________________________________________________________

II. Life Insurance

Life insurance is a benefit commonly available from organizations. When provide for all employees,
it is called group life insurance. Group life insurance is one of the oldest and most widely available
employee benefits. Commercial Code Article 691 defines life insurance as follow:

“A life insurance is a contract whereby the insurer undertakes against the payment of one or more
premiums to pay to the subscriber or to the beneficiary a specified sum of certain conditions
dependent upon the life or death of the subscriber or a third party insured’’

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The insuring organization collect contributions from each member, invests these contribution,
guarantees both their safety and a minimum interest, and distributes benefits to the estates of the
members who die.

Life insurance benefits are the traditional means of providing financial support for survivors
following on employee’s death. This insurance usually provides lump-sum benefits to the designated
beneficiary. Most plans include coverage for retirees and dependents of employees. Many also allow
employees to increase the value of the policy at attractive group rates. In the majority of plans, the
employer pays the whole premium for the employee.

III. Accident and Disability Insurance

In addition to health, life and dental insurance, many organizations provide some form of accident or
disability insurance or both. Disability insurance is designed to protect the employee who
experiences a long term or permanent disability. Normally, a one-to-six month waiting period is
required following the disability before the employee becomes eligible for benefits. As with
accidents insurance, disability insurance benefits are usually calculated as a percentage of salary.
According to Federal Civil Servants (No. 515/2007), and Labour Proclamation (377/2003), a
temporary worker who has sustained permanent total disability shall be entitled to compensation
amounting to five times of his annual salary, but in the case of permanent civil servant, who has
sustained permanent total or partial disability, due to employment injury shall be entailed to benefits
provided for in the relevant pension law. Any payment to be made for accident and disability is
exempted from taxation and may not be attached; deducted by way of set off or assigned by the
beneficiary; also indicated in the same proclamation.

IV. Education and Training Benefits

Training and education refer to the teaching or learning activities carried on for the primary purpose
of helping members of an organization to acquire and apply the knowledge, skills abilities and
attitudes needed by that organization. Broadly speaking, training is the act of increasing the
knowledge and skills of an employee for doing a particular job. Many organizations support off–the–
job general education for their employees. Training and educational benefits which include:
 sponsorship for off duty courses,
 educational leave,

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  tuition fee,
 refunds and scholarship,
 setting up of schools,
 hostels,
 providing grants - aid to the other schools where a considerable number of students are from
the children of employees, and
 Provision of reading rooms and libraries for the benefits of employees etc.

V. Employee Paid Leaves

Paid leave means payment for time not worked. It provides breaks from regularly scheduled work
hours so that employees can purse leisure activities or take care of personnel or civic duties. Paid
leave is one of the most expensive benefits for the employer.

Classification of Paid Leaves

Benefits of paid leaves includes: Sick leave with pay, vacation pay, paid rest and relief time, paid
lunch periods, grievance time, bargaining time, travel time, pay for religious holidays, pay for the
time spent in offering evidence in a court of law or other statutory bodies; and payment for the time
spent on casting one’s vote at election time. Below are the main categories of paid leaves.

Annual Leave (Paid Vacations): Employers provide paid vacation to give their employees time
away from stresses and strains of the daily work routine. Vacation time allows employees to recharge
themselves psychologically and emotionally and can lead to improved job performance. The purpose
of annual leave is to enable an employee get rest and resume work with renewed strength. Normally,
an employee must meet a certain length-of- service requirement before becoming eligible for a paid
vacation. Also, the time allowed in paid vacations generally depends on the employee’s length of
service. Unlike holiday policies that usually affect everyone in the same manner, vacation policies
may differ among categories of employees. According to the Federal Civil Servants Proclamation
No. 515/2007, Article 37, specifies that a civil servant shall be entitled to annual leave of 20 working
days for his first year of service and additional leave of one working day for every additional year of
service; provided however, that the duration of annual leave shall not exceed 30 working days. In the
same manner, Article 77 of the Labour Proclamation No. 377/2003 indicate that a worker shall be
entitled to uninterrupted annual leave with pay which shall in no case be less than fourteen (14)

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working days for the first one year of service and plus one working day for every additional year of
service. Federal Civil Servants Proclamation (No. 515/2007) state that annual leave shall be granted
with in the budget year in accordance with a leave made known to the civil servant and prepared on
the basis of due consideration of the interest of the government office and as much as possible, the
preference of each civil servant. However, the office may authorize the postponement of annual leave
for two budget years where the government office, due to compelling reasons, is unable to grant a
civil servant his annual leave within the same budget year; provided that the accumulated leave shall
be granted to the civil servant in the third budget year.

There shall be no payment in lieu of annual leave, provided; however that payment may be made for
unused annual leave due to termination of appointment.

Sick leave: Sick leave provides full pay for each day that an employee experiences a short-term
illness or disability that interferes with his or her ability to perform the job.

According to Proclamation No. 515/2007, Article 42, any civil servant shall be entitled to sick leave
where he is unable to work due to sickness and the duration of sick leave to be granted to a
permanent civil servant shall not exceed eight months in a year or twelve months in four years,
whether counted consecutively or separately staring from the first day of his sickness and with full
pay for the first three months, with half pay for the next three months and without pay for the last
two months.

A physician’s written excuse is often necessary in order to be eligible for pay and to return to work if
the illness is longer than three consecutive days or for more than six days within a budget year.

According to Proclamation No. 377/2003, Article 85, a worker shall be entitled to sick leave when he
or she is incapable of work owing to sickness other than resulting form employment injury and the
leave shall not be more than six months counted consecutively or separately in the course of any
twelve months period starting from the first day of his sickness. Payment for such leave shall be
granted in the following manner:
1) The first one month with 100% of his wage;
2) The next two month with 50% of his wage;
3) The next three months without pay

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A liberal sick leave policy can cause excessive absenteeism. It may communicate that the company
does not value good attendance. A human resource benefits specialist must monitor and control sick
leave benefits to prevent employees from using sick leave to take care of personal business or to
reward themselves with a mental health day off from work. The human resource department should
consider instituting the following guidelines:
Set up a “wellness pay” incentive programs that monetarily rewards employees who do not
use any sick days. Wellness programs may also encourage employees to adopt healthier
lifestyles and file for health benefits.
Establish flexible work hours so that employees can take care of some personal business
during the week there by decreasing their need to use sick days for this reason.
All employees to take one or two personnel days each year. This helps to discourage
employees from regarding sick days as time off to which they are entitled even if they do
not get sick.

Maternity and Parental Leave: The demand faced by expectant employees and working parents
has created pressures to further accommodate childbirth; adoption and child-rearing responsibility for
both women and men. The Federal Civil Servant Proclamation (No. 515/2007, Article 41) and
Labour Proclamation (377/2003, Article 88) states a pregnant civil servant or employee shall be
entitled to a period of 30 consecutive days of maternity leave with pay preceding the presumed date
of her confinement and a period of 60 consecutive days of maternity leave after her confinement.

According the federal civil servants proclamation no. 515, 2007, Sub article 6 of Article 41 states
that any civil servant shall be entitled a paternity leave with pay for 5 working days at the time of his
wife’s delivery.

Leave for Personal Matters: As stated in the Federal Civil Servant Proclamation (No. 515/2007,
Article 43), any civil servant shall be entitled leave for personal matters such as mourning, wedding,
examination and the like for a maximum of seven days within a budget year.

Special Leave with Pay: According to the Federal Civil Servant Proclamation (No. 515/2007,
Article 44), any civil servant shall be entitled to special leave with pay where:
 He is summoned by a court, any other competent authority, for the time utilized for the same
purpose.
 He participates in the election of government officials, for the duration of the voting.

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Sub article 1 of Article 81 of the Ethiopian labour proclamation 377/2003 states that a worker will be
entitled to leave with pay for 3 working days when:
 He concludes marriage, or
 His spouse or descendants or ascendants of another relative, whether by affinity or
consanguinity upon the second degree dies.
Special Leave without Pay: According to the Federal Civil Servant Proclamation (No. 515/2007,
Article 45):
 A civil servant who has completed his probation, upon sufficient ground, applies for a special
leave without pay; the head of the government institution may authorize the grant of such
leave if it does not adversely affect the interest of the institution.
 A civil servant who has completed his probation period and runs for election shall be entitled
to leave without pay during the election campaign and for the duration of the voting.

Sub article 2 of Article 81 of the Ethiopian labour proclamation 377/2003 states a worker shall be
entitled to leave without pay for upon 5 consecutive days in the case of exceptional and serious
events.

Paid holidays: The typical number of paid holidays has been increasing. Typical paid holidays are
New Year’s Day, Labour Day, Christmas, Good Friday, Mauled, Id Al Adaha (Arafa), etc.
Proclamation No. 515/2007 and 377/2003 specify that any civil servant or employee shall incur no
reduction in his regular pay of occupant of having not worked on a public holiday or on a day offices
are closed by the order of the government.

___________________________________________________________________________
? Check point
 Define life insurance as stated in the commercial Code Article 691
 Explain the waiting periods/months that are required following the disability before the
employee becomes eligible for benefits.
 Many organizations support off–the–job general education for their employees. Discuss this
benefits which are commonly used by managers.
 Describe the main categories of paid leaves which are commonly arranged by companies in
Ethiopia
__________________________________________________________________________

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VI. Service Related Employee Benefits

In addition to the above-discussed benefits, organizations also provide a wide range of services that
employees find desirable. These services are usually provided by the organization at no cost to the
employee or at a significant reduction from what might have to be paid without the organization
support. These events can have a major impact on the personnel representatives’ reputation. And
planning and scheduling these events requires much more time and effort than other organizational
members appreciate.

Types of Service Related Employee Benefits

Employee service is something of a catchall category of voluntary benefits, including all other
benefits or services provided by employers. These are such varied programs as housing service,
transportation service, cafeterias service, free parking lots, ability to purchase company products at a
discount, personal and financial counselling, legal advice, employee assistance programs, and sports
and recreation service. The extent and attractiveness of these benefits vary considerably among
organization. For example, purchase discounts would be especially attractive to employees of retail
or an airline. Below, some of the most common types of employee related services are discussed
below.

Housing service: Because of real estate prices skyrocketed, the idea of employers assisting
employees in obtaining affordable housing is gaining favour. Housing services including company
owned housing project and subsidized housing. Of all the requirements of the workers, decent and
cheap housing accommodation is of great significance. The problem of housing is one of the main
causes for fatigue and worry among employees and this comes in the way of discharging their duties
effectively. Scarce affordable housing causes labour shortages, diminished productivity,
unacceptable recruitment levels, reiterations and wage-cost distortions, and stagnant corporate real
estate values. As a result, some corporations are experimenting with a variety of employer-assisted
housing schemes:
1. Reducing the down-payment barrier
2. Assisting in post purchase carrying costs, and
3. Participating in programs to produce new or substantially rehabilitated housing units.

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In case of organizations that are located very far from towns where housing facilities are not
available, most of the organizations built quarters nearer to factory and provided cheap and decent
housing facilities to their employees, while few organizations provide and/or arrange for housing
loans to employees and encourage them to construct houses.

Transportation service: including parking lots and bus service. Company provide conveyance
facilities to their employees from the place of their residence to the place of work at most of the
industries are located outside town and all employees may not get quarter facility

Cafeteria/canteen services: One of the recent developments in this field has been the formulation
of the cafeteria compensation concept depending on their age, their educational and income levels,
their life style and other forms of preference, different categories of employees need and demand
different combinations of benefits and services. Because of the variety of options in the benefits area,
many employers have shifted to or are considering “cafeteria plan”. Cafeteria plans allow employees
to pick and chose from a variety of benefits options much as a person chooses food at a cafeteria.
Cafeterias plans are also called flexible plans. Among the benefits and service that are most
commonly offered are life insurance, health insurance, pension, protective clothing and equipment,
rest periods and vacation. Some benefits, such as holidays, vacation and pension enable employees to
meet their self actualization needs; they make it possible for them to be away from their job,
participate in other activities and share in other experience even while they continue to receive their
wages or salaries.

For example, a young, single-parent mother may place greater value on child care, health care, and
similar benefits than a 55 year old make who may be more interested in retirement benefits, long
term health care and in retirement benefits, long term health care, and life insurance. A typical
young man generally desires to have direct wages and educational assistance, while some other
employee may want to buy extra vacation days; even others would like to trade the ones they have in
for cash. Cafeteria plans allow for such switches.

The cafeteria compensation concept generally involves the idea that each employee ought to design
and tailor his own indirect compensation program by personally picking and choosing the benefits
and service he would desire to have from among the many such benefits and service provided by his
company. It may be pointed out here that no company provides all these benefits and service. Those
that are provided are determined by the needs of the employees and the preferences of a company.

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Choice and decision generally depend upon the discretion of each individual employee and not on a
management fiat or a centralized collective bargaining agreement. Flexible plans might be of interest
to organizations for several reasons:

1. Employee benefits are a very significant component of overall compensation

2. Flexible benefits can allow employers to limits their contributions without alienating employees,
since options give employee some control over the distribution of benefit
3. Life-style has changed in the past several years, causing employee to re-evaluate the need for
certain traditional benefits.
4. Benefits can be useful in recruiting and retaining employees. However, when a mandatory
benefits package is largely unresponsive to a prospective employee’s needs or to the retention of
present employees, the organization is wasting money
5. The high cost of benefits is causing organization to try to communicate effectively the real cost of
the employee. By making specific benefits choices, the employee become intimately familiar
with the costs associated with each benefits and
6. A flexible plan can have a positive impact on employee attitudes and behaviour.

The major problems with flexible plans are:

 a flexible plan requires more effort to administer,
 Union often oppose flexible plans because the employees are required to give up control
over the program details or face losing some of their previously negotiated benefit
improvements, and
 employees may not choose those benefits that are in their own best interests

Sports and Recreation Services: Including athletics, beauty parlous, social clubs, recreational
areas, orchestras, entertainment programs, parties, picnics, libraries and reading rooms, community
service activities, new Year gifts, Christmas gifts, birthday gifts, productivity /performance awards,
etc. Companies provide these facilities with a view to inculcating a sense of association,
belongingness, openness and freedom among employees. These activities help employees to
understand others better.

Eating Facilities: Eating facilities that include the provision of company restaurants, cafeterias,
canteens, lunchrooms, vending machines, and fully or partially subsidized food

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Legal aid and Employee Counselling: organization provide assistance or aid regarding legal
matters to employees as when necessary thorough company lawyers or other lawyers. Widespread
need exists for legal counselling in such areas as divorce, real estate, traffic violation, wills, taxes and
so fourth. Some community-based legal services have been offered in populated areas but are usually
limited to those individuals with very low-income levels; consequently, many employees are not
eligible for them. In addition to this, organizations also providing counselling service to the
employee regarding their personal problems through professional counsellors. Employee counselling
reduces absenteeism, turnover, tardiness etc.

___________________________________________________________________________
? Check point
 In addition to the main benefits, organizations also provide a wide range of services that
employees find desirable. These services are usually provided by the organization at no cost
to the employee or at a significant reduction from what might have to be paid without the
organization support. Please discuss the major types of such benefits
 What are the characteristics of cafeteria/canteen service? Discuss the especial advantages
that employees can secured through this service

___________________________________________________________________________

Other Employee Benefit

The last category of employee benefits is other employee benefits, which include other than those
already discussed in the previous tasks. These benefits usually provided as a package of items, for
example loan benefits, disablements benefits, dependant benefits, funeral benefits, pension or
provident fund and the like. Generally, benefits are offered on a take-it-or-leave-it basis with the
exception of pension schemes in which participation is usually compulsory. In addition to normal
wages, an employee, whether he is a worker in a factory or a clerk or a manager, expects in good
organizations to get extra benefits including the following:

Loan benefits (Credit Societies): The objective of setting up of these societies is to encourage thrift
and provide loan facilities at reasonable terms and conditions, primarily to employees. Some
organizations encourage employees to form cooperative credit societies with a view to fosterling
self-help rather than depending upon money leaders, whereas some organizations provide loans to

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employees directly. Some firms offer purchase discounts to employees in the form of buying clubs or
employee discounts on company merchandise.

Non-financial Benefits: The use of a company car, company expense accounts, club memberships,
helping buying and selling a home, and the use of company owned result condominiums are
examples of perks available to managers, executives, and some employees. Also, financial planning
and counselling, including tax preparation advices, are often offered to mangers and executives.

Disablement Benefits: These benefits come under the Proclamation No.377/2003 and 515/2007 the
only condition of payment of disablement is that disablement or death must be due to, or in the
course of employment. Disablement benefits are two kinds- permanent total disablement and below
permanent total disablement. The rate of payment varies according to the seriousness of the
disablement. In permanent total disablement the benefit is paid a sum equal to five times his annual
wages. Where the injury sustained by the worker is below permanent total disablement a sum
proportionate to the degree of disablement is calculated.

Dependents Benefits: This also comes under the Labour proclamation 377/2003. If a worker dies
as a result of an employment injury, the dependents get dependent compensation for workers not
covered by the public servant pension law a sum equal to five times the annual salary of the deceased
in the following manner:
a) 50% (fifty percent) for the deceased worker’s lawful husband or wife;
b) 10% (ten percent) each for the deceased worker’s children who are below the age to eighteen
years old;
c) 10% (ten percent) each for the deceased worker’s parents who were being supported by him.

Funeral Benefits: In addition to dependant benefits Article 110 of Labour Proclamation state funeral
benefits for dependents. Payment for funeral expense shall be not less than two-month wage of the
worker subject to the provision of the collective agreement or work rule.

Product or Service Benefits: Such as company-operated stores and discounts on company product
or services even free of charge. Most of the large organizations located far from the towns and which
provide housing facilities near the employees’ colonies and supply all the necessary goods or service
at fair (discount) prices.

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Child-Care Facilities: Some companies have recently instituted corporate child-care centres for
employees’ preschool children during the workweek, including nurseries and day care centres for
children. Corporate child/day care centres have had mixed results, having one may help recruit
employees who have younger children and it may reduce absenteeism. However, use of the day care
centre may be limited if its location is inconvenient. There is some evidence to suggest that middle
level employees have little interest in this service.

Retirement Benefits: Industrial life generally breaks joint family system. The saving capacity of he
employees is very low due to level wage, high living cost and increasing aspirations of the
employees and his family members. As such employers provide some benefits to the employees
after retirement and during old age, with a view to create a feeling of security about the old age to
create a feeling of security about the old age. Pension and provident fund benefits are called
retirement benefits.

Pensions: A pension represents a fixed payment, made regularly to a former employee or his
surviving dependents, provided an employee has fulfilled specific conditions of employments for a
specific length of time. Pension plans are considered for long service and are not incentives to work
more efficiently or effectively unless the premium is tied to a stock option plan.

Funding of Pensions: Funds for paying pension benefits are acquired in two basic ways:
1. An unfunded plan pays pensions out of current income generated by the organization.
2. A funded plan plays benefits out of money set aside and invented specifically to pay
pension benefits; this is the more popular method because a specific fund is set aside to
pay benefits.

Insurance for Pensions: Insured pensions are administered through an insurance company that
guarantees payment of the benefits. Uninsured pensions are administered by the employer and
considered to be less stable and sound than insured pensions. However some insured pensions are not
too safe

Contributions: A non-contribution pension is one in which all of the funds for the pensions are paid
by the employer. In a contributory pension, both the employee and the employer fund the pension
according to Article 4 of Public Civil Servants Pensions Proclamation No. 345/2003, the amount of
the contribution payable to civil service fund, base on the salary of public servant by the employer

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six percent (6%) and by the public servant four percent (4%) and for military and policy fund service
contributions by the employer sixteen percent (16%) and by the public servant four percent (4%).
Article 13 of the proclamation states as: “a public servant who has completed at least ten years of
service and retires upon attaining retirement age shall receive retirement pension for life”. Regarding
to the amount of retirement pension, Article 14 specifies that the retirement pension due to any civil
servant shall amount to thirty percent (30%) of the average salary for the last three years preceding
retirement, increased for each year of service beyond ten (10) years for a public servant by one point
one two five percent (1.125%) and for a member of defence force or police by one point five percent
(1.5%). However, the retirement pension to be paid shall not exceed seventy percent (70%) of the
indicated the average salary.

Pension Benefits: Retirement plans come in two main types; defined contribution and defined
benefits plans. A defined contribution plan is one in which the contribution rate paid by the employee
is fixed and retirement benefits vary. Profit sharing, employee stock ownership plans and thrifts plan
are defined contribution plans. In a defined benefit plan, the benefits paid to employees are set as are
the methods used to determine them. This allows the use of statistics to determine the employer
contribution. Because a defined benefit plan provides a greater assurance of benefits and
predictability of benefit available at retirement, older employee generally prefer this type of plan.
Many small companies are switching to defined contribution plans simply because they are cheap
than defined benefit plans.

In a portable pension plan, employees can more their pension benefits from one employer to another
without losing benefits. Reimbursement of contribution: Vesting is the right to receive benefits
from a retirement plan. A person becomes vested after working and contributing for a period time.
According to Article 21 of Proclamation No. 345/2003 a public servant who separate from work due
to resignation prior to completing ten (10) years service shall be entitled to no benefit. If the
employee leaves prior to the vesting requirement, the only funds the employee receives upon
employment termination are the funds the employee has contributed. In the case of when a public
servant who separates from work due to resignation after completing ten (10) years, but prior to
completing twenty (20) years of service, the only funds the employee receives are the funds he or she
has contributed. Once vested or has completed at least ten (10) years of service and retires upon
attaining retirement age, however, pension rights are retained and both employee and employer funds
are received.

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Provident Fund: This benefit is meant for economic welfare of the employee. The most appropriate
course seemed to be to provide for compulsory contributory provident funds where both the
employer and the employee are required to contribute. Such a scheme would instil in the worker or
employee the sprit of regular saving. In the light of such considerations particularly to mitigate
hardship caused to the employee a retirement. Provident fund program provides for monetary
assistance to the employees and/or their dependents during post retirement life. Thus, this facility
provides security against social risks and this benefit enable employees in large private organization
and non- government organization. Generally the organizations pay the provident fund amount with
interest to the employee on retirement or to the dependents of employee in case of death.

Gratuity: This is another type of retirement benefits to be provided to an employee either on

retirement or at the time of physical disability and to be dependents of the deceased employee.
Gratuity is a reward to an employer for his long service with his present employer. According to
proclamation No. 345/2003, article 15, gratuity is payable to employee who has not completed ten
(10) years of service and retires as attaining retirement age. The amount of gratuity for a public
servant is the salary of the month preceding retirement multiplied by the number of years of service
and for a member of the defence force, or police is the salary of one and one-half mouth preceding
retirement multiplied by the number of years of service. Any gratuity is affected in lump sum at
once.

___________________________________________________________________________
? Check point
 What kind of impact you expect from designing child care service for Ethiopian organizations
 Explain the concept of gratuity based on the Ethiopia labour proclamation No. 345/2003,
article 15.
 Discuss where provident fund is applicable here in Ethiopia and why
 A non-contribution pension is one in which all of the funds for the pensions are paid by the
employer. In addition to this, according to Article 4 of Public Civil Servants Pensions
Proclamation No. 345/2003, firms can consider contribution pension programs: please
explain the characteristics of this system

___________________________________________________________________________

Managing an Effective Benefits Program

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It is important for organization to review pay and benefits programs on a regular basis. The
continuing ability to recruit, retain and motivate staff is vital to employee in sourcing. Benefits, in
particular, should be carefully examined, as they are usually more visible than pay, and can develop
into major irritants if their application is seen to be unfair by those concerned. When top managers
make decisions about benefits and services, they must consider the following facts:
 Mandated programs must be funded
 There is little evidence that benefits and service really motivate performance. Nor do they
necessarily increase satisfaction
 Most employees view benefits and service as entitlements.
 Union, competitors, and industry trends continue to pressure managers to provide or increase
voluntary benefits
 Cost of benefits and service continue to escalate dramatically

To manage a benefits program effectively, certain steps are necessary. Four of these are discussed as
follows.

Step1: Set Objectives and Strategy for Benefits

There are three strategies for benefits:

1) Pacesetter strategy; be first with the newest benefits employees desire.
2) Comparable benefits strategy. Match the benefits programs similar organization offer.
3) Minimum benefits strategy. Offer the mandatory benefits and those that are most desired and
least costly.
The decision about which strategy to use is made on the basis of management’s goals

Step 2: Involve Participations and Union

Whatever strategy is chose, it makes sense to find out what those involved desire in benefits and
service. Yet, in most organizations, top managers alone judge who benefits the employees prefer.
Without getting some inputs on employees’ preference, it is impossible to make these decisions
intelligently. Therefore, it is wise to permit (and encourage) employees’ participation in decision
making on benefits and service. When employees share in these decisions they show interest in them.
One way to get employees participation in the decision is to poll them with attitude surveys.

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Another is to set up employee benefits advisory committees. When the organization is unionized, it
is vial that the union leadership be involved. Many times, the leadership knows what employee want
in benefits.

Step 3: Communicate Benefits

Although most organizations provide some form of benefits to their employees, the average
employee often has little idea of what he or she is receiving. How can benefits and services affect
the satisfaction and performance of employees if they do not know about or understand the benefits?
It has always been desirable to improve communications, for this reason. The method used in
communicating the benefit package is as important as the readability of the document. One
successful method of communication is a personalized statement sent periodically to each employee.
For organization that uses a computerized payroll system, some benefits information can easily be
printed on each employee’s check stub. Other methods for communicating benefits information
include employee handbook, company newsletter or magazines, booklet, posters and visual
presentations, such as videos, slide shows, flip charts, and benefits web sites. Meetings and
conferences can also be used to explaining an organization’s benefits. Establishing toll free number,
which lets employees call (free) to enrol in a benefits programs 24 hours a day, can also be used to
explain an organization benefits.

Step 4: Monitor Costs Closely

In addition to considering costs involved in the choice of benefits, it is vital that mangers sure the
programs are administered correctly. Review of insurance claims is especially important. More
efficient administration procedures using computerized methods, also can lead to greater savings and
more satisfied employees. At this stage, human resource manger may conduct cost-benefit analysis
of benefits. When the costs of benefit increases, the price of products and services also increase.
Higher benefits can reduce permanent employment, also since it is cheaper to pay overtime or to hire
part-time employees than to pay full-time wages and benefits. It is rational for employees to want
additional benefits since benefits constitute tax-free income. The costs of such benefits, however,
have been rising substantially, and many organizations cannot afforded to offer benefits and high
wages as well.
The costs of benefits can be calculated fairly easily:
1. Total cost of benefits annually for all employees.

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 2. Cost per employee per year: basis 1 divided by number of employee hours worked.
3. Percentage of payroll: basis 1 divided by annual payroll.
4. Cost per employee per hour: basis 2 divided by employee hours worked.

The benefits side of the equation is anther issue; however, there has been little significant empirical
research on the effects of benefits on productivity. Together, these four steps will make any benefits
program more effect.

___________________________________________________________________________
? Check point
 When top managers make decisions about benefits and services, they must consider different
factors: discuss these factors
 Describe steps that managers should consider to mange benefits effectively

___________________________________________________________________________

Management Guidelines and Future Benefit Charges

Management Guidelines

Several key guidelines in the benefits area to be recognized from a strategic viewpoint:
1. Benefit should be strategically managed, not just “administered”
2. Benefits costs and options are increasing dramatically. Many choices are available, and many
ways to reduce costs have been found. Human resource mangers need to be aware of the
possibilities to provide the best advice to their organization
3. The cost effectiveness of benefits and benefits contributions to the bottom line is and will
continue to be emphasized.
4. Benefits can best be used to gain competitive advantage by maintaining or increasing benefit
levels while decreasing benefit costs
5. A changing heterogeneous workforce will require a flexible or cafeteria-style program.
6. Management of benefits must comply with a host of federal and state regulation and
requirements.

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 7. Since present and prospective employees are often unaware of value of benefits provided
them, benefits packages should be clearly and succinctly communicated to employees on a
regular basis.
8. Health-care and insurance costs a well as retirement costs for the elderly will likely increase
dramatically and life spans are increased, there by placing pressure on employee benefits
plans.

Future Benefit Changes

While no one can accurately predict the future state of benefits with a high degree of certainly, one
analysis suggests the following trends:
1. More paid leave. Leave will be provided for long term “refresher” sabbaticals and for social
service pursuits
2. Education and Training. Rapidly changing job skill requirements and a short age of new
entrants into the labour force will compel employer to regularly offer education and training
programs, leaves, and reimbursement for a wide variety of training to employees.
3. Career planning. Many employers will offer formal career counselling programs to help
employees plan corers that adjust to their changing lives
4. Housing. Moving assistance and mortgage aid will become even more common
5. Late retirement. Due to shortages of workers and skills increase, companies will be bending
over backwards to help their older employees and reward employees for staying on past a
certain age or period of service
6. Vacation. Employees will be able to “buy” extra vacation time if they deserve it by trading it
for other available benefits such as sick leave or even a portion of hospital care.
7. Health care. Universal coverage under a national system will be available in some form.
8. Domestic partner benefits. Domestic partners can be the same or opposite sex of the
employees. Some examples include individuals who have selected an alternative lifestyle,
common law marriages, or couples living together without marriages. Objections to offering
benefits to these significant others are sure to arise, ensuring more attention being placed on
this issue in the future.

___________________________________________________________________________
? Check point
 Discuss any possible future challenges and prospects of employee benefits

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___________________________________________________________________________

Problem Raised by Benefits Programmes

Many problems arise when these programmes are adopted and administered. These are:
1. Charge of Paternalism: when too many benefits and services are offered to employees, a feeling
develops that employers are playing the role of parents and the workers are looked upon as their
children. Moreover, the latter some times develop the feeling that these benefits and services are
their “right” which is not really so.
2. Excessive Expenditure: The administration of these benefits and services is a fairly costly affair,
involving large outlays of direct and indirect financial expenditure, and often involves a great
deal of paper work.
3. Fads Become fashionable: With the introduction of these benefits and services in one company,
other concerns vie with one another to introduce them as well. Credit unions and severance pay
are examples of benefits, which were once considered to be novel, but are now commonplace in
industry.
4. Maintenance of the Least Productive Workers: With an increase in benefits and service,
employees, particularly when they are not very productive, tend to stick their jobs, and are not
interested in changing.
5. Neglect of Other Personnel Functions: When a management becomes more concerned about the
provision and administration of benefits and service, it often pays very little attention to other
aspect of personnel programmes. Over-emphasis on these benefits and services may often
develop a concern among the employees for their future security rather than for their present
productivity. The relationship between a company’s benefits-and-services programmes and
employee motivation for increased is somewhat weak.

1.3. Legal Requirements

The government plays a central role in the design of any benefits package. While controlling the cost
of benefit is a major concern of employers, the social and economic welfare of citizens is the major
concern of the government. Income- maintenance laws were enacted to provide employees and their
families with income security in the case of death, disability, unemployment, or retirement. These
are pay allocated for retirement, survivors, and disability insurance, redundancy, lay off in the case
compensation of the workers. At a broad level, government tax policy has had, and will continue to

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have a major impact on the design of benefits programs. Two principles have had the greatest impact
on benefits. One is the doctrine of constructive receipt, which holds that an individual must pay taxes
on benefits that have monetary value when the individual receives them. The other principle is the
antidiscrimination rule, which holds that employers can obtain tax advantages only for those benefits
that do not discriminate in favor of highly compensated employees.

On the starting of work, employees are entitled to:

 protect against dismissal or other unfavorable treatment on the grounds of race, sex,
trade union activity,
 equal pay (both men and women),
 paid time off for antenatal care,
 paid time off for trade duties,
 paid time off for safety representative duties ,
 time off for trade union activities ,
 time off for public duties,
 statutory sick pay,
 written statements of terms of the contract,
 itemized pay statement,
 monetary compensation if employer becomes insolvent,
 be consulted in the event of redundancies

___________________________________________________________________________
? Check point
 Discuss how and when “fads becomes fashionable” becomes a problem for sound employee
benefit plan
 On the starting of their work employees are entitled for different rights: please describe
these rights, and explain the importance of the awareness of mangers about these rights.
___________________________________________________________________________

2. Implementing Remuneration and Employee Benefit Strategies

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2.1. Surveying Major Influences on Remuneration and Employee Benefit

Payments systems are not devised in an ideal world where every external factor works in the
organization’s interest. On the contrary, payments systems, in particular, are subject to major
influences from external forces. As Fig. 20.1 shows, these external influences, combined with
internal issues, such as productivity, produce a complex background against which to construct an
effective payments system.

Key Factors Influencing Pay

These factors represent what might be called the 'facts of life' for both employers and employees.
How, then, are they important? Let us consider them in turn.

1. The ability to pay. Organizations vary in their ability to meet their wage and salary commitments.
Those which are profitable and which enjoy a good cash-flow, will, other things being equal, find
it easier to be generous to their employees. Those which are struggling for survival will find it
difficult to meet even their minimum obligations. Both prosperous and weak organizations still
have to decide how much of their revenues to set aside for labor costs in comparison with amounts
required for investment in new plant and machinery, for example. Thus the ability to pay is as
much a question of individual judgment as it is of economic necessity. Hence the arguments that
can rage between employers and trade union representatives on this particular issue. Managers
have to look at all their resources; employee representatives need only consider the price of their

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 labor. Managers have to consider investment in the future; employee representatives need only
focus on the here-and-now.

2. Comparability. Both employers and trade unions are bound to consider what comparable jobs are
being paid elsewhere. A firm will look at its industry to see what rates are being paid. Unions
tend to look at rates for jobs. The public sector tends to look at the private sector for comparisons,
especially in terms of occupational groups (e.g. junior cleric at top management etc.). Pay Review
Bodies are one mechanism by which governments can update public sector pay, especially of key
groups such as the Services and judges. Comparability is also important when considering equal
pay claims (see below).

3. The bargaining strength of the trade union. As we have just mentioned, the organization’s 'ability
to pay' is as much a question of judgment as anything else. The ability of the trade union to
influence this decision depends very much on its bargaining power. If the employer's need for
labor is desperate and if the skills he requires are scarce, then, other things being equal, the
union's position will be very strong, and certainly strong enough to divert financial resources
away from longer term investment to present wage and salary demands. Conversely, where labor
is in plentiful supply, the union's position is weaker; and where the organization is reducing its
labor force by means of redundancies, the union's position is at its weakest.

4. Labor market conditions. The general economic situation produces changes in the labor markets
of an economy. When trade is buoyant, the demand for resources is high. As a major resource
labor is also in demand, at least in general terms. The important point for organizations is the
state of the particular labor markets that they are drawing upon. Certain skills are always in short
supply, even when labor in general is plentiful, and organizations seeking to recruit persons with
these scarce skills will have to pay a premium price. Where the skills sought are in surplus,
however, then the recruiting organization is in an advantageous situation.

5. Cost-of-living. When the cost-of-living is high, i.e. when inflation is rising, there is enormous
pressure on employers to raise wages and salaries by the rate of inflation. Otherwise employees
are effectively experiencing a cut in their purchasing power. This problem is often restrained in
the short term by government action in the form of an 'incomes freeze' - an event which Britain
has seen several times since the mid 1960s. However, it should be recognized that wages and
salaries make up only one element, albeit important, in rising prices, and that inflation is triggered

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 by a variety of factors. Other forms of government action to reduce inflation are generally those
of a fiscal nature (e.g. taxation).

6. Government action. Over the years governments have intervened actively in pay issues. In a few
cases they have legislated to achieve certain ends, by introducing a statutory incomes policy to
keep wage levels within defined limits, or by passing acts designed to protect particular groups of
employees (e.g. those covered by Wages Councils, and women employees). In other cases,
governments have relied on fiscal measures (taxation, interest rates, exchange rates etc.) to
influence wage rates. Government policy is a crucial factor in pay determination. Although, as
ministers are the first to point out, governments themselves cannot bring about full employment
and prosperity. This can only be achieved by those responsible for providing the goods and
services that we need for consumption at home and to pay for the goods and services that we buy
from others (i.e. imports).

7. Productivity. Ultimately, so long as there are markets (i.e. buyers) for goods and services, it is the
efficiency with which these items are produced that determines whether prosperity can be
recovered. Wage negotiators can invariably make progress in seeking higher pay, therefore, if the
management can see that extra money can be made 'self-financing', i.e. that higher wages can be
more than paid for by improvements in productivity, i.e. improved output in relation to inputs.
Two key elements here are (a) management's willingness to invest in new plant, machinery and
processes, and (b) the employees' (trade unions') willingness to accept greater flexibility in work
practices.

8. Existing differentials/Custom and Practice. No pay structures can remain free of the influence of
existing differentials between groups of employees, and of 'Custom and Practice' (i.e. pay
practices that have evolved over time and have come to be accepted). Some differentials will
have been established on the basis of job evaluation; others may have been established as a
response to the pressures of particular groups at a particular point in time. The former may still
have certain face validity; the latter may no longer be defensible. In addition to basic pay, many
firms have introduced a variety of additional payments to supplement total earnings (overtime,
bonuses etc.), many of which have grown up as a matter of custom and practice. At the present
time 'Custom and Practice' arguments are becoming increasingly untenable due to changes in
technology, the decline of once - major industries, and the effects of recent labor legislation
especially that bearing on equal opportunities.

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9. Organizational/technological change. An organization which is in a relatively stable condition,
both internally and in relation to its external environment, is able to implement its pay and salary
policy with relative ease. Conversely, an organization undergoing massive change, perhaps as a
result of market pressures or of technological change, will probably find that it has to completely
restructure its payments system. Few firms have been unaffected by the widespread use of
computers in the office and on the shop floor, which has led to a demand for new skills and new
job definitions, whilst reducing the demand for many former skills and jobs.

___________________________________________________________________________
? Check point
 Discuss how the bargaining power of trade unions affect the benefit plan of a given
organization
 Are these all mentioned factors key for our country too? Why, Why not?
 Explain how organizational and technological changes affect your organizations employee
benefit plans.
___________________________________________________________________________

Summary
Management is concerned with attracting and keeping employees, whose performance meet at least
minimum levels of acceptability and keeping absenteeism and turnover to tolerable levels. The
provision of benefits and services are important in maintaining the employees and reducing or
keeping turnover and minimizing absenteeism. It is important to note that financial incentives are
paid to specific employees whose work is above standard. Remuneration and benefit plans,
collectively called employee compensation, fall in two broader classes. These are: Direct and Indirect
compensation.

Direct compensation is used to describe the cash received in the form of base salary, overtime pay,
shift differentials, bonuses, and sales commissions etc.
Indirect compensation includes benefits and services. It can be defined as all employer provided
reward and service other than wage and salaries.

It has been recognized that certain benefits must be supplied by the organization for its employees,
regardless of whether it wants to or not. Most companies’ today offer a wide variety of benefits,

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especially larger companies. Some of the benefits are compulsory (required by law), while others are
not required by law.

Self check questions

1. What are the two major types of employee compensation
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2. Wage policies should be carefully developed, having in mind the interests of different parties,
please mention these parties
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3. Discuss the methods under the Piece-Rate System of Calculating Wage
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4. Most of the organizations have been extending the fringe benefits to their employees, year after
year, as a response of fro different demands and claims please describe these demands and claims
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5. Discuss the three benefit strategies
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CHAPTER EIGHT
Managing Grievance
8.1. Introduction
Just as a procedure for conflict resolution between management and the workforce is essential; every
organization also needs to have a system in place to deal with areas of disagreement that arise between
the individual and the organization. Where the individual is aggrieved due to an action or lack of action
by management, this can lead to a grievance process. Where the organization is dissatisfied with the
action, or lack of action of an employee, this can lead to a formal disciplinary process and ultimately, if
serious enough, to dismissal.
Definition
 A grievance is a complaint, real or ill-founded, by an employee against the behaviour of
management.
 A grievance is a formal dispute between an employee and management on the conditions of
employment.

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A grievance is an expression of dissatisfaction or a complaint by an individual that usually concerns
the application, interpretation, implementation of or change to a statutory right or existing procedure,
rule, custom, working practice or agreement. It may be that the complaint or dissatisfaction is
concerned with the consistency of implementation, interpretation, with the failure to apply with the
application, etc. in inappropriate circumstances of one or more of what are often referred to as rights,
rights not necessarily in terms of legislative rights but in the context of the agreement, procedure or
custom and practice.

Discipline
 Discipline is an emotive word in the context of employment. There is no doubt that discipline
at work can be one of the most difficult issues with which a manger has to deal. It brings to the
forefront matters relating to an individual’s performance, capability and conduct and, in the
context of employment.
 Discipline helps or attempt to improve the behaviour, orderliness, etc., of by training conditions
or rules
An inevitable consequence of employing people is that there must be a set of rules laid down which, to
a large extent, regulates their behaviour. The original meaning of discipline was associated with
learning and study-but now its associations are closer to punishment and penalties. It may be regarded
as the exercises of management’s legitimate prerogative of control. This is unfortunate in many ways
because the concept of self-discipline and working within a mutually agreed upon code of behaviour
are essential features of an effective workplace today.
__________________________________________________________________________
? Check point
 Dear student, have you read the definitions above? Excellent! So can you discuss how
grievance affect the healthy functioning of a given organization
 What is discipline?
__________________________________________________________________________

Negotiating
Negotiation involves two parties (such as individuals, companies, employers, trade unions, employee
representatives) coming together to confer with a view to concluding a jointly acceptable agreement. It
is a process whereby interest groups resolve differences between and within themselves. It can,

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therefore, apply to a number of situations, from resolving an argument between tow mangers to
meeting with the trade union to determine this year’s annual pay increase.

If both parties to the agreement do not have the same understanding as to what they have agreed, they
run the risk of having to spend time that could be used for more fruitful purposes, resolving disputes
between themselves over whether one party is behaving in accordance with that which was agreed
upon.

Negotiating involves two main elements:

1. Purposeful persuasion; and
2. constructive compromise
Compromise is only possible if sufficient common ground exists between the two parties. The
overriding objective of any negotiations is for the parties to reach an agreement and not to score
debating point or save the face of one or both parties. Negotiation is a problem soling technique.
So we can define negotiations as:
Tow parties coming together to confer with a view to making a jointly acceptable agreement by the use
of purposeful persuasion and constructive compromise.
There are four main types of negotiating situations in which mangers may find themselves:
1. Between managers- involves a negotiated settlement to an issue(s) usually confined to an
individual and resolving a difference between two managers
2. Grievance handling to resolve complaints by employees about the behaviour of management.
Grievances normally relative to individual employees but if they are not handled with care,
they can develop into a concern to a group o employees;
3. Bargaining results in a negotiated agreement to resolve issues of collective concern to
employers and employees,
4. Group Problem- solving results in a negotiated agreement to resolve issue(s) such as the
conditions of which one party will co-operate with the other with regard to action initiated by
the other party.
__________________________________________________________________________
? Check point
 Is negotiation the only way to solve grievance? Why? Why not?
__________________________________________________________________________

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8.2 Managing Grievances and complaint
Grievance is a complaint by an employee about management behaviour. It may be real or it may be the
result of a misconception or a misunderstanding. The purpose of managing grievances is to rectify
matters that have been and are going wrong, by:
1. Investigating the situation;
2. Identifying what has caused the employee complaint; and
3. Taking the appropriate action to resolve the complaint to the mutual satisfaction of the
employee and the management.
In managing employee grievances, management acquires and develops and ability to distinguish real
from unfounded grievances and then to explain clearly to the employee why their complaint merits no
action by management. The grievance needs to be resolved at the earliest possible stage. A key aspect
of fairness at work is the opportunity of the individual employee to complain about, and receive
redress for, unfair treatment.

Identifying common employee grievances/complaints

Complaints from individual employees can centre on many aspects of management behaviour.
Complains about management’s behaviour tend to come from individual employees as sated above and
can range over a wide number of issues such as:
a. a bonus payment has been calculated incorrectly
b. a disciplinary penalty that is too harsh
c. a promotion that has been unreasonably denied’
d. access to a training opportunity that has been disallowed;
e. a job that is currently under graded;
f. an employee that has been sexually harassed by another employee or manger;
g. insufficient car parking spaces in the company car park
Although complaints about management behaviour usually come from individual employees, if they
are not handled sensitively they can (and do) develop into collective employee complaints. The
resolution of employee grievances involves negotiation in that both management and the complaining
employee seek to persuade each other that their suggestion to resolve the grievances are the correct
ones. However, this is unlikely to happen and a mutually acceptable solution will involve the parties
making concessions towards each other’s positions. The most common employee grievances can be :
introduction of new working practice; disciplinary matter; interpretation of terms and conditions;
staffing levels; personal issues; discriminate’ grading’ bullying; health and safety and pay.

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Importance of handling employee grievances/complaints
A grievance is liked an infection. Unless it is dealt with quickly, and efficiently, it will fester and may
spread quickly, causing unnecessary pain and suffering (lower productivity, reduced co-operator and
commitment).
Employee grievances are an outward expression of worker dissatisfaction which, if not resolved, can
result in unsatisfactory work behaviour which has adverse consequences for the organisation’s
competitive position. Unresolved dissatisfaction gives rise to:
(a) Employee frustration
(b) Deteriorating interpersonal relationships
(c) Low morale
(d) Poor performance seen in lower productivity and a poorer quality of output or service
(e) Disciplinary problems including poor performance by employee, resignation and loss of
good staff
(f) Increased employee absenteeism.
If grievances are not addressed, they can adversely affect an organization and the quality of life of its
employees. It is, therefore, essential to the continued prosperity and wellbeing of the company and its
employees tat employee complaints abut management behaviour are attended as quickly as possible
and as neat to their source as can be. There is a clear business case for the effective professional
management employee grievances.
__________________________________________________________________________
? Check point
 As you read from the paragraph, complains about management’s behaviour tend to come from
individual employees and can range over a wide number of issues, please discuss these issues.
__________________________________________________________________________
Complicating factors in Grievances
Grievances constitute a most complicated subject in adjusting with employee, determining cause,
recognizing, distinguishing between valid and invalid cases, and dealing with different types of
employees. Let us see some of the reasons.
a) Difficulty in Appraising
Handling grievances depends partly on determining grievances validity. Determining when an
irritation or a complaint becomes a grievance calls for further judgement. A considerable measure of
trouble in ascertaining grievance validity is due to the fact that there can be no blueprint for every
action that an organization or its employees may take.

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b) Unexpressed Grievances
Some grievances are not pushed because of fear. Fear is also a potent reason why companies become
organized. When people are afraid to talk, they take it out in other ways, generally by not doing their
best work. Reluctance to complaints is another reason for unexpressed grievances. Quiet, introvert-
type people in particular are loath to present grievances. Sometimes they will quit without mentioning
any complaint rather raise a fuss.

c) Pent-up grievances
The natural outcome of unexpressed grievances is that they make rankle and finally pop. The trouble
with this type of grievance is that the explosion is invariably caused by a bad mood or series of
irritations and is accompanied by emotion. Under such circumstances it is doubly hard for he
supervisor to remain objective. The much talked grievance drainage is sound. Supervisors who repel
grievances defeat themselves. Having his grievance heard s some help to an employee even when
nothing can be done about it.

d) Unadjusted Grievances
There is no obligation to give on unjustified grievances, but every grievance should be concluded with
a serious attempt to satisfy the employee, especially when nothing can be done in his behalf. That is
the time greatest effort is needed. Equally important, obviously, is the need to act on all grievances.
e) Group aspects of Grievances
A serious complication in the adjustment of grievances is the impact of group reaction. This takes
place when as few as two become involved in a grievance. In its simplest form, group action is an adult
carry-over of the childhood fear of backing down or of letting the other fellow down.
Employees talk about grievances to one another until an entire department can become antagonized by
the way a supervisor handles them. Companies dislike having employee run off a supervisor, but it can
be done subtly if the people do not respond to him and if he cannot get results from his group.
Grievance handling
Much of human resource mange’s or an employee relations manger’s time can be occupied by dealing
with individual employees’ problems or complaints. However, most employee grievances are dealt
with satisfactorily before they reach the formal grievance procedure. Not all grievances are so simple
in nature and resolved quickly. Management deals with all grievances in a competent and systematic
manner which involves a number of stages:

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 1. Hearing the grievance sensitive(i.e. sharing the feeling of the employee)
2. Prepare for meeting with the employee and/or their representative;
3. Confirming the common ground between the employee and he management
4. Resolving the grievance; and
5. Reporting the outcome
Grievances can be actual or unfounded and distinguishing between them is an important responsibility
of both employer and employee representatives. They have a common interest to avoid wasting time,
resources, effort and emotion in putting inappropriate issues through formal procedures. However, all
grievances are important and must be treated on their merits. If management receives a complaint
which it judges to be ill-founded, it is not good practice to dismiss in an arbitrary manner. They must:
- Find out why and how it has happened and

- Explain clearly and openly whey it is a complaint which merits no action.

__________________________________________________________________________
? Check point
 Hi student! You see how much grievance is difficult for managers? Good! So please could you describe
factors that makes grievance more complex
__________________________________________________________________________
Minimizing and Capitalizing on Grievances
a) Reducing grievances
The following tips can help key grievances from becoming serious:
1. Anticipation: accurate forecasting of the effects of management actions will prevent grievances
form being registered. This involves a close check with the operating organization. What it boils
down to is avoiding mistakes.
2. Timing: compounding of irritations must be prevented. The effects of irritation added to irritation
multiply geometrically rather than by simple addition. Careful preparation and timing of changes
which may be unpopular will lessen the number of grievances.
3. Keeping in Touch with Employee Attitudes: a number of difficult situations have arisen because
department heads or top supervisory were so busy with special problems or projects that they did
not take the time to keep their fingers on the pulse of the organization.
4. Effective Publicity: good publicity, in connection with proper timing, can eliminate opposition,
etc., by all possible publicity devices is important in minimizing grievances.

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5. Aggressiveness: Nipping grievances promptly in the bud is smart management. Otherwise the sore
will fester and spread. A fallacious management approach is to wait in an office for grievances to
come and then wait in the same place for them to die.
b) Principles for Handling Grievances
Most grievance handling guides are obvious, but a few need special treatment since principles are
sometimes ignored with resultant serious trouble.
1) Settlement by the immediate supervisor: a sad state has been reached when no grievance
can be settled on the first level of supervision. To guard against continuous appeal and
overruling, the first level must be slow in grievance answering and careful in investigation.
Unless it incompetent in its efforts to adjust and to obtain agreement from the complainant,
appeals result which weaken authority and jeopardize future settlements at that level. If
mistakes are made, it is much easier to correct them at the lowest level that to have someone
in higher authority override a decision.
2) Good Written Records: those who have had much dealing wit labour relations grow
increasingly careful to put agreements, grievances, grievance answers, decisions, warnings,
leaves, and discipline records in writing in order to avoid confusion, prevent discrepancies,
and make creating both parties are talking about the same thing.
3) Adjustments Based on Principle: giving answers based on principle carry more weight with
employees and enhance respect. This is another incentive for good grooming in management
principle so that supervisors will be better prepared for handling grievances. When answers
are based on principle, they are more consistent and consequently less vulnerable to attack for
discrimination or favouritism.
4) Avoidance of Buck passing: the strong grievance handler will discuss a grievance answer on
its merits. Buck passing is a normal tendency, especially if the complainant fells that the
supervisor was personally responsible for handling grievances. Throwing a solution off on
someone else, however, has far worse long-time effects than taking the blame, for employees
will eventually feel there is no use in bringing up grievances to anyone who always passes
the buck.
5) Agreement from the complainant: it is sometimes possible to get the employee to suggest a
solution, but this device can backfire if the employee then feels that his is the only answer or
that the company will accordingly do what he suggests.
__________________________________________________________________________
? Check point

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  Please discuss the principles of grievance
__________________________________________________________________________
c) Capitalizing on grievances
Replacing a defensive by an offensive approach to grievances is psychologically sound and good
collective bargaining in the case of unions. Although it may be mixing apples and bananas, it is
sometimes possible to obtain a commitment for more careful workmanship in response to an
expenditure which eliminates a disagreeable feature of work. A wage increase on an operation may be
accompanied by a work load closer to standard. At other times, when a grievance is adjusted to the
satisfaction of the complainant, it is possible to explain what has been involved so that some or any of
the following may be mentioned: efforts made to secure the move; backing given by the supervisor or
administrator involved; evidence of reward or recognition to the employee for his work, service, etc.;
proof of interest and concern on the part of the company. This must be done in god taste and without a
pt on demonstration, but it is only right that the company’s part in the move be brought out.
It is possible to capitalize on grievances in another way, particularly if the employee or employees are
partially responsible for the complaint about conditions. If a work load is too hard, it may be because
the employees are not following the correct method or are not keeping machines in proper adjustment
or state of repair. Easy or loose job standards may be the reason why a company cannot afford a wage
increase. In other words, counter-complaints may be registered to offset the grievance or to obtain
needed reforms at the same time that a grievances is adjusted.

Grievance procedure
The employee grievance process involves systematic set of steps for handling and employee
complaint. Most union contracts provide the channels and mechanism for processing these grievances.
A formal, written grievance procedure is sound management whether an organization operates under a
union agreement or not.
Purpose of the procedure
The grievance procedure provides the means whereby individual employees process their complaint
against management behaviour. A procedure for dealing with grievances is found in organizations
which operate without trade unions as well as those that operate with them. A grievance procedure
benefits employees as they know where they stand and know what to expect.
The purpose of the procedure is to:
(a) Ensure consistency in managing grievances;
(b) Reduce the risk of unpredictable action

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 (c) Clarify how grievances will be dealt with; and
(d) Support a positive employee relations environment.
The grievance process has at least three purposes and consequences:
1. By settling smaller problems early, it may prevent larger problems (such as strikes) from
occurring in the future.
2. Properly analyzed, grievances serve as a source of data to focus the attention of the two parties
on ambiguities in the contract for negotiation at a future date.
3. The grievance process is an effective communication channel from employees to management.
Forms of the Procedure
The forms of grievance procedure vary immensely. In a small non-union establishment, the procedure
will be found in the employee’s contract of employment and expressed in a statement, of which the
following would be typical: in larger and unionised organizations, the grievance is likely to be
reproduced in the further particulars of the employment contract where a typical wording would be.
A typical grievance procedure follows a standard format which:
1. Opens with a policy statement followed by general principles and sometimes by what
constitutes a grievance;
2. Consists of a number of stages. At each stage, the aim is to identify action that stops the
problem recurring or continuing. There are usually three to four stages in a procedure;
3. Defines time limits for the completing of each stage, designed to ensure a speedy resolution of
the grievance;
4. Provides a right to representation for the employee laying the complaint against management
by an individual independent of the employer.
The method by which formal grievances are processed varies with the labour contract. Let us see
sample grievance procedure
Grievance Procedure
Introduction
1. Every employee has the right to seek redress for grievances relating to his/her
employment, and it is important that every individual should understand the correct
procedure for doing this.
2. It is very important that grievances are settled fairly, promptly, and as near as possible to
the point of origin.
Procedure

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 Stage 1: The employee with the grievance must first raise it with his or her immediate team
leader/manager.
Stage 2. If the matter has not been satisfactorily resolved during stage 1, then arrangements
ill be made for the employee to see the nest level of management.
Stage 3. If the grievance remains unresolved after the above meeting, then arrangements will
be made for the employee to attend an interview with the Head of Department and, if
necessary, the company Personnel Manager.
Stage 4. If the grievance is still unresolved then a meeting will be called to give the employee
an opportunity to discuss his/her grievance with a director of the company. In attendance will
be the senior manger responsible in his department and the company personnel manger.

__________________________________________________________________________
? Check point
 Please discuss the grievance procedure
__________________________________________________________________________
8.3 Managing Discipline
A discussion of discipline has three parts. First, the common rules in place which, if broken in some
way, lead to disciplinary action; secondly, the disciplinary procedure and external guidance that is
given on how it should be formulated; and thirdly, issues that arise as to operating the procedure in
practice.
Rules for Discipline
a) The importance of clear Rules
Rules should be written for the benefit of both employer and employee. Their purpose should be to
define and make clear exactly what standards of behaviour are expected in the workplace. The
important point is to ensure that the following principles are followed, whatever rules are
established:
 The are clear
 They cannot be misinterpreted
 They are capable of distinguishing between ordinary misconduct and gross misconduct
Failures to be clear and failing to make a proper distinction between types of misconduct have caused
many organisations to suffer losses at Employment Tribunals. It is no good having a very clear
procedure, laying down the type and number of warnings that an individual should receive, if the rules
which are being applied are imprecise or don not reflect that attitudes and requirements of the

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particular business. The potential difficulties caused by this lack of clarity mean that whatever
procedure you establish, reflects the organisation’s structure and culture-the norms and beliefs within
which an organisation functions. This is where the writing of clear company rules is so important. Not
only do they help to distinguish between ordinary and gross misconduct, but they provide employees
with clear guidelines on what is acceptable in the workplace, in terms of both behaviour and
performance. There is also a need to ensure that rules reflect current industrial practice and
government rules. For example, the Federal Civil Servants Proclamation No. 262/2003 (article 68)
states about the suspension of a civil servant form dusty only if he is formally charged with a criminal
or disciplinary offence for which his dismissal is to be expected if it is proved against him. In such a
case, a civil servant may be suspended from duty by with holding his salary for a period not exceeding
one month if that course of actions necessary in the interest of the civil service.

b) Disciplinary penalties
Generally, rules will cover about: time-keeping, absence, health and safety, misconduct, use of
company facilities, confidentiality, and discrimination.
The prudent employee relations specialist will ensure that the organisation’s rules and the subject of
regular monitoring to ensure that they properly reflect the organization’s current values and
requirement.
Rules can also be evolved through custom and practice. Not all rules are written down. Rule books
would be far too long if they had to include every conceivable situation, so common sense assumer
that, for example, certain violent behaviour would not be allowed. Rigorous disciplinary penalties may
be imposed for the following offences (Article 66)
 To determine one’s duty by being disobedient, negligent or tardy or by none-observance of
procedures
 Deliberately obstruct work or to collaborate with others in committing such offence;
 Deliberate procrastination of cases or mistreatment of clients
 Unjustifiable repeated absenteeism or non-observance of office hours inspire of being
penalized by simple disciplinary penalties;
 To initiate physical violence at the place of work
 Neglect of duty by being alcoholic or drug addict
 To accept or demand bribes
 To commit an immoral act at the place of work
 To commit an act of theft or breach of trust

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  To commit an act of misrepresentation or fraudulent act
 To inflict damages to the properly of the government due to intentional act or negligence
 Abuse of power and
 To commit any breach of discipline of equal gravity with the offences specified above.
Committing either of the above offences by a civil servant would result the imposition of rigorous
disciplinary penalties which could be:
1. Fine up to three month’s salary
2. Down grading
3. Dismissal
__________________________________________________________________________
? Check point
 Dear distance learners, I think you read the rules of discipline from the above paragraph? Good! Please
discuss the importance of these rules to build proper discipline in a given organization.
__________________________________________________________________________

Handling Discipline
The ways in which mangers and employee relations specialists approach disciplinary issues will be
subtly different depending on the nature of the problem. Most organizations will have some form of
disciplinary procedure, and probably some company rules, but the use and application of the procedure
may vary from company to company and from manger to manger. In some organizations disciplinary
action is very rarely taken either because standard are clear or accepted by employees or because
standards are clear and accepted by employees or because standards are vague and applied
haphazardly. In others, standards are maintained by an over reliance on mechanistic procedures, which
usually acts as a demotivating influence on the workforce.

Principles Underlying Disciplinary Procedure

There are a number of principles that underlie the procedure which are extremely important and help to
ensure good personnel management practice. The following list offers guidance on these principles:
 No disciplinary action will be taken against an employee until the case has been fully
investigated
 At every stage in the procedure the employee will be advised of the nature of the complaint
against him or her and will be given the opportunity to state his or her case before any
decision is made

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  At all stages the employee will have the right to be accompanied by a shop steward,
employee representative or wok colleague during the disciplinary interview.
 No employee will be dismissed for a first breach of discipline except in the case of gross
misconduct when the penalty will be dismissal without notice or payment in lieu of notice.
 An employee will have the right to appeal against any disciplinary penalty imposed
 The procedure may be implemented at any stage if the employee’s alleged misconduct
warrants such action.
Whatever the nature of the problem, once the decision has been taken to invoke the formal disciplinary
procedures it is important to ensure that its application cannot be challenged.
Preparing for the Disciplinary Interview
There are steps that need to be taken in preparing to conduct a disciplinary interview. There are twelve
points to consider:
1. Prepare carefully and ensure that the person conducting the disciplinary hearing has all the
facts
2. Ensure that the employee knows what the nature of the complaint is
3. Ensure the employee knows the procedure to be followed.
4. Advise employees of their right to be accompanied
5. Enquire whether there are any mitigating circumstances
6. Ensure consistency in your actions and approaches
7. Consider explanations
8. Allow employees time to prepare their case
9. Arrange a suitable place for the interview
10. Ensure that personnel records etc are available
11. Where possible, be accompanied by a helper
12. Try to ensure attendance of witnesses
The Disciplinary Interview
Good preparation helps the second part of the process, conducting the actual disciplinary interview.
There are six points to remember at this stage:
1) Introduce those present
2) Explain the purpose of the interview and how it will be conducted
3) Set out precisely the nature of the complaint and outline the case by briefly going through the
evidence

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 4) Give the employee the right to reply. Put simply, if there is no right of reply, there is no natural
justice.
5) Allow time for general questioning, cross-examination of witnesses etc.
6) Sum up. There is a need to be clear about what conclusion have been reached and what
decisions are to be made and for this reason it is better to adjourn, if only briefly, so that a
properly considered decision can be made
Careful preparation and a well-conducted interview are not guarantees that individuals will not
complain of unfairness, but they are essential if the test of reasonableness is to be satisfied.
Counselling
Counselling is more than simply offering help and advice. It is helping, in a non-threatening way, an
individual to come to terms with a particular problem. The problem may be about performance, with
time-keeping, about drug or alcohol abuse or about other employee, for example an accusation of
sexual harassment. Counselling an employee, whatever the nature of the problem, needs careful
preparation. With a drug or alcohol problem most mangers lack the necessary skills to carry out such a
sensitive task, but even if they conclude that specialist help is required they can still help to bring the
problem out in to the open. In other cases, provided the problem is approached in a systematic way,
this type of intervention may avoid disciplinary action.
__________________________________________________________________________
? Check point
 As you read, there are generally twelve steps that need to be taken in preparing to conduct a
disciplinary interview. Dear student can you remember and write down these points?
__________________________________________________________________________

Disciplinary Procedures
The purpose and scope of a disciplinary procedure should be very clear. It should allow all employees
to understand what is expected of them in respect of conduct, attendance and job performance and set
out the rules by which such matters will be governed. The aim is to ensure consistent and fair treatment
for all.

The objectives of the procedure are three-fold:

1. It is to point out the employee the error of his or her ways. It is important to clearly
establish that a gap exists between the level of performance or behaviour required from the

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 employee and that which has been observed and to obtain the employee’s acceptance of that
gap
2. To set the employees on the path of improvement.
3. To come to a decision on a fair sanction for the offence committed

Disciplinary procedures should include the following essential features:

a) Be in writing
b) Specially to whom they apply
c) Provide for matters to be dealt with quickly
d) Indicate the disciplinary actions that may be taken
e) Specify the levels of management which have the authority to take the various forms of
disciplinary action, ensuring that immediate superiors do not normally have the power to
dismiss without reference to senior management
f) Provide for individuals to be informed of the complaints against them and to be given the
opportunity to set heir case before decisions are reached
g) Give individuals the right to be accompanied by a trade union representative or fellow
employee of their choice.

h) Ensure that, except for cases of gross misconduct, no employees are dismissed for a first breach
of discipline
i) Ensure that disciplinary action is not take until the case has been carefully investigated
j) Provide for the right of appeal and specify the procedure to be followed.

Depending on the gravity of the offence, the Federal Civil Servants Proclamation states the following
penalties which may be imposed on a civil servant for breach of discipline:
(a) Oral warning
(b) Written warning
(c) Fine up to one month’s salary
(d) Fine up to three month’s salary
(e) Down grading
(f) Dismissal
The penalties specified from (a) to (c) are classified as simple disciplinary penalties. The penalties
specified from (d) to (f) are classified as rigorous penalties.

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__________________________________________________________________________
? Check point
 Please discuss what kind of objectives might one attaché with discipline procedures
__________________________________________________________________________

Summary

A grievance is an expression of dissatisfaction or a complaint by an individual that usually concerns

the application, interpretation, implementation of or change to a statutory right or existing procedure,
rule, custom, working practice or agreement. It may be that the complaint or dissatisfaction is
concerned with the consistency of implementation, interpretation, with the failure to apply with the
application, etc. in inappropriate circumstances of one or more of what are often referred to as rights,
rights not necessarily in terms of legislative rights but in the context of the agreement, procedure or
custom and practice.
An inevitable consequence of employing people is that there must be a set of rules laid down which, to
a large extent, regulates their behaviour. The original meaning of discipline was associated with
learning and study-but now its associations are closer to punishment and penalties. It may be regarded
as the exercises of management’s legitimate prerogative of control. This is unfortunate in many ways
because the concept of self-discipline and working within a mutually agreed upon code of behaviour
are essential features of an effective workplace today.

Self check question

1. What are the two main elements of negotiating

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2. as most agree the unresolved dissatisfaction may gives rise to different problems, discuss these
problems
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3. Describe ways to keep grievance from becoming serious

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4. Disciplinary procedures should include different essential features, put down some of these features

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Reference Books
Bernardin, H. John. (2003). Human resource management. New Delhi; Tata Mac- Graw-Hill
Ppublishing Company.

Casio, Wayne F. (2006). Managing Human resource. New Delhi; Tata Mac-Graw-Hill Publishing
Company.
Cole , G.A. (1997). Personnel Management. Ashford colored press. Great Britain.
Arthur, Dannie (19987). Managing Human resource in small and mid sized companies.
HAmacom; New york

Stone, R. J. (1998). Human Resource Management (3rd ed.) New York: John Wiley and Sons
Australia, Ltd

Answers for the self check questions

Chapter II
1. Answer for question number one

- Ensure optimum utilization of human resources currently employed

- Assess or forecast future requirements
- Cope up with the changing scenario
- Attaching with business plans of organization
- Anticipate redundancies

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 - Provide basis for human resource development
- Assists in productivity bargaining
2. Answer for question number two
- Government
- Organizations
- Individuals
3. Answer for question number three
- Uncertainties due to changes
- The absence of HRIS
- Resistance from employee
- Resistance from the management team
4. Answer for question number four
- Government
- Economic conditions
- Social condition
- Technological challenges
- Competitions

5. Answer for question number five

- Organizations strategies and objectives
- Organizations size and structure
- Organization culture and management philosophy
- Work force factors
- Labor union
- Organizations financial ability
- Organization of HRP activities
6. Answer for question number six
- Judgmental techniques
- Statistical techniques
7. Answer fro question number seven

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 - Net HR Requirement = Estimated HR demand - Net future HR supply
- Net HR supply, on the other hand, is estimated as
o Net supply of HR current inventory + changes in current inventory
- Net supply of HR =HR current inventory + Potential additions - potential lasses
8. Answer for question number eight

- Freeze hires
- Reduce part-time or part-time
- Transfer work -in tempera rely
- Reduce work weeks
- Temporary shutdown or layoff
- Excuse absenteeism
- Temporary assignment to other units
9. Answer for question number nine

- Recall form leaves

- New hires
- Permanent transfer in worker
- Training and development
- Transfer work -out permanently
10. Replacement charts are a visual representation of who will replace whom in the event of job
openings, where as Succession planning is a plan that identify back up candidates who are, or
soon will be qualified to replace current executives or upper-level managers.

Chapter IV
1. Answer for question number one
There is very slight difference between training and education. Education has more abstract objectives
geared to the needs of the individual and to society, where as training has specific behavioral
objectives to make workers more effective in their jobs. In addition to this, the time horizon for
education is generally long, where as training can be very short-term especially when it concerned
with the acquisition of specific skills.
2. Answer for question number two
- Organizational
- Job

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 - Personal
- Demographic
3. Answer for question number three

- Supervisors and other managers,

- A co-worker,
- An internal or external subject matter expert, and
- The employee.
4. Answer fro question number four

- Measures of reaction
- Learning
- Behavioral change
- Organizational results
- Return on investment/ROI
Chapter VI
1. Answer for question number one
- Direct and indirect
2. Answer for question number two
- The employees
- Management as representative of the owner
- The consumers and
- The community
3. Answer for question number three
- Tailor's Piecework Plan
- Merrick Differential Piece Rate Plan
4. Answer for question umber four

- Employee demands;
- Trade Union demands;
- Employers Preference;
- As a social security;
- To improve human relation.

5. Answer for question number five

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 - Pacesetter strategy; be first with the newest benefits employees desire.
- Comparable benefits strategy. Match the benefits programs similar organization
offer.
- Minimum benefits strategy. Offer the mandatory benefits and those that are most
desired and least costly.
Chapter VIII
1. Answer for question number 1

- Purposeful persuasion; and

- constructive compromise
2. answer for question number two
- Employee frustration

- Deteriorating interpersonal relationships

- Low morale

- Poor performance seen in lower productivity and a poorer quality of output or

service
- Disciplinary problems including poor performance by employee, resignation and
loss of good staff
- Increased employee absenteeism.
3. Answer for question number three
- Anticipation
- Timing
- Effective publicity
- Keeping in Touch with Employee Attitudes:
- Aggressiveness

4. Answer for question number four

- Be in writing

- Specially to whom they apply

- Provide for matters to be dealt with quickly
- Indicate the disciplinary actions that may be taken

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