Compensation in Canada and Spain - Research Paper Example

Compensation in Canada and Spain Table of Contents Regulations for Canada 3 Minimum Wage 3 Bonuses in Canada and Examples of Bonuses in Canadian company 5 Performance Appraisal 6 Management by Objectives 6 Industrial Relations 6 Contributing Factors for the Regulations in Canada 7 Regulations for Spain 8 Minimum Wages 9 Examples of regulations in Spanish company 9 Performance Appraisal 10 Management by Objectives 11 Bonuses in Spain and Example of Bonuses in Spanish company 12 Contributing Factors for Bonuses in Spain 12 References 15 Regulations for Canada The Canadian government is particularly cautious about the country’s worker’s health and safety. Occupational health and safety forms the most important aspects of the government’s human resource development policies. It has also formulated suitable compensation policies for workers and employees suffering from injuries during the course of employment (BD, “Canadian Sharps Safety Regulations”). The Canadian government has made special regulations as regards to the working hours of employees. The country has a number of statutory holidays. Among them many are national holidays while some holidays differ according to the provinces. But workers cannot refuse to work on statutory holidays if his job requires him to do so (Workrights.ca, “Statutory Holidays”). Minimum Wage The minimum wages have been set by the Canadian government. The minimum wage is the lowest wage that an employee can be paid by his employer. There are strict regulations pertaining to the protection of workers in the absence of unions. The minimum wages are primarily meant to influence the compensation level of employees. The act as introduced in the year 1918 has undergone a lot of changes but every province in Canada is bound to function according to the laws pertaining to minimum wages. Minimum wages are not same in all the provinces. This requires the workers to navigate through the links for each province to collect maximum information on minimum wages prevailing in that area. It is to be noted that all workers are not included in the minimum wages law. Certain designated workers are excluded from the minimum wages rate. This is laid down in the regulations. The list of minimum wages in each province in Canada has been provided in the figure below. Figure 1: Minimum wages in provinces in Canada (Source: Retail Council of Canada, “Training and Resources”) The minimum wages have been raised by a number of provinces in Canada in the year 2010. In fact it has been set as a percentage of the gross domestic product per worker. But this has had a negative impact on the Canadian society in the form of increased unemployment. Employers have responded to the rise in minimum wages by resorting to job cuts (Karabegovik, p.2). Bonuses in Canada and Examples of Bonuses in Canadian company The compensation and bonus structure in Canada is well formulated and structured. The compensation structure was initiated in Canada in the year 1910. The structure carries proper compensation for employees working in organisations. Along with this, it also establishes other aspects of securities for all employees. Bonuses in Canada are paid depending on the corporate earnings. This is done with the view to reduce the taxable income. According to the “Canada Customs and Revenue Agency (CCRA)” (CGA, p.2) a corporate resolution must be present to declare the bonus of employees. But there is a problem that the resolution is often overlooked. However, according to the court’s view, the resolution is not really necessary provided the companies in Spain have their own bonus structure (CGA, p.2). BDO Dunwoody LLP is the “sixth-largest accounting and consulting firm in Canada” (PBLO, “BDO Dunwoody LLP”). It provides a cash bonus amount of $6,000 on the completion of an employee’s accrediting of chartered accountancy. The firm gives a maternity leave payment of 85% of her salary for seventeen weeks. Apart from this, it has a program to help employees seeking work assignments in the organisation’s internationally placed offices. It also provides $10,000 as referral bonus for the recommended candidates (PBLO, “BDO Dunwoody LLP”). Performance Appraisal The performance appraisal system has been set by the Canadian government. It gives a clear and uncomplicated idea of what is expected of the employees at the workplace. It involves the following three steps. Firstly it sets expectations for individual’s performance. Then it provides continuous feedback to the individuals. Finally the formal review of performance is done (Service Canada, “Performance Appraisals”). Management by Objectives The government has implemented programs in organisations which entail planning for attaining future goals instead of mere handling the present crisis. The program aims at setting objectives for all operations, systematically analyzing these objectives, evaluating means for attaining them, setting budgetary proposals for attaining the objectives, formulating and reporting on plans for every program (Regehr, p.1). Industrial Relations Industrial relations in Canada allow and empower the composition of bargaining units. This is done on the application provided by the employer or the bargaining agent. The board decides whether the bargaining unit is suitable for collective bargaining or includes specific positions from the unit (HRSDC, “Industrial Relations in Canada”). Contributing Factors for the Regulations in Canada The regulations discussed so far were particularly meant to protect the labor force during the economic crisis. All Canadian companies were severely affected by the economic downturn. This called for certain changes in the company’s compensations structure. This was done to provide protection to both employers and employees. It is seen that the labor laws in Canada are particularly protective towards the employers of organisations. It is evident from the rule which states that employees would not be given permanent employment contracts in organisations. The law tries to protect the interest of employers more than the workers. In fact it also says that employers may turn down the contract of employees in case of redundancies. Canada holds one of the highest positions in individualism. The society is characterized with more individualistic attitudes than collective approaches. The country’s power distance index is low reflecting its low level of inequality and equal distribution of power. It gives an idea about the organisational culture in the country. There exists cooperative interaction among power levels which creates a stable and steady cultural environment. This is depicted in the figure below. Figure 2: Figure showing Power Distance Index and Individualism in Canada (Source: ITIM International-b, “Cultural Dimensions”) Regulations for Spain Employment regulations prevailing in Spain are more flexible and are on the path of modernization. The country required a reform in the labor market on account of the recession. This called for the “deregulating the use of fixed-term contracts by firms” (Dorantes & Padial, “The legal basis for short-term employment in Spain”). The new rules and regulations primarily focused on changing the concept of ‘lifetime jobs’. The policies introduced the concept of “fixed term contracts” (Dorantes & Padial, “The legal basis for short-term employment in Spain”). The above contract allowed firms to employ and dismiss workers at low costs. Earlier, workers employed in a firm, were allowed to work for a lifetime. The new regulations tried to redefine the concept. Fixed term employment provided resistance to the changes but eventually its magnitude fell from 35% to 24% of the entire workforce. The legislation also made it mandatory to pay all kinds of workers fixed wage rates. A number of rules have also been formulated with regard to temporary work agencies operating in Spain. The objective behind placing the workers under the act was to protect them from being hired out to other employers on a temporary basis in order to meet the labor market requirements. This practice is regarded as illegal and is said to harm the basic rights of workers. It is also mentioned in the legislations that work contracts between workers and temporary agencies are meant to fix the work durations and term of service. The contracts are also meant to be in writing and should be “registered in the Employment Office within ten days of their conclusion” (NATLEX, “Chapter 3. Labour relations in the temporary work agency”). Minimum Wages The minimum wages in Spain is set by the government each year. It is “€540.90 per month or €7,572.60 per year for persons over 18 years of age (including 12 monthly and 2 extra payroll payments) for 2006” (INTERES, “Wages and salaries”). However, the minimum wages do not always remain equal for all kinds of jobs. It is generally regulated in the labor negotiations. The law also states that there should be two extra payments every year, one during Christmas and another as stipulated in the labor argument. However people have claimed that they should get 14 monthly salaries in a year so that it would amount to 631euro per month (Economypoint, “Spain”). Examples of regulations in Spanish company A brief summary can be produced in favor of the Spanish company Latham & Watkins. This company was seriously affected by the global economic crisis. The company’s labor market was destroyed completely destroyed because of the crisis. Unemployment rate had reached 19.4% in 2009, as compared to 8.3% in 2007. In response to the crisis, the government proposed certain changes in the labor laws with the view of suggesting alternatives to reduce cost rather than employee dismissal. The purpose for such reforms is to protect employees in terms of working hours, severance payments and fixed term contracts. It has increased employers flexibility towards amending terms of employment applicable to workforces and create opportunities for employing the unemployed (Takagi, Cueto & Navasques, “Austerity Measures — A Snapshot of Changes to Labor Laws Resulting from the Global Economic Crisis”).The significant changes introduced by the Spanish government are as follows. The government has fixed the maximum duration for fixed term employment. However, the conditions do not apply to contracts suited for particular market conditions, like the seasonal work. The law also provided that employees entering into two identical contracts with an employer for terms exceeding 24 months each would be treated as permanent employees. The law also increased the compensation for employees who were terminated in advance in fixed term contracts. The law also said that collective redundancies would be made on grounds of economic, organizational and technical reasons. The required notice period for dismissal of an employee was reduced from 30 days to 15 days. It is also to be noted that an employer failing to comply with the dismissal procedures of an employee would not render the redundancy as null and void. Rather, he would have to compensate for the damages done instead of employing the employee. The government has also introduced certain other changes. It has reduced the amount of social security contributions that employers had to pay in Spain. It has tried to introduce practices to enhance equal opportunities in organizations. The government has introduced the changes with the hope that this would enable employers to overcome and cope with difficult economic situations (Takagi, Cueto & Navasques, “Austerity Measures — A Snapshot of Changes to Labor Laws Resulting from the Global Economic Crisis”). Performance Appraisal There has been effective implementation of performance programs in the Spanish companies which has given rise to positive impacts on their financial results. Research has shown that performance appraisal system in companies have yielded greater profits in organisations. The following diagram depicts the above statement. Figure 3: Formal appraisal system and their impact on profits (Source: Ricart & Corrales, p.9) Management by Objectives In the Spanish companies, the concept of management by competencies has gained popularity over the concept of management by objectives. More and more number of organisations is seeking to follow the new concept. It concentrates more on the capabilities, attitudes and knowledge of individuals performing the task to meet objectives. Under the present system, the tasks are framed in the organisation in order to fit the people. This is done taking into account the competencies of the people in the organisation (Manila Bulletin, p.1). Industrial Relations Under the Spanish law, collective agreements are done under a category of the law and its implementation affects all the workers in the organisation. The structure has been steady and remained stable for long. Since 2005, the number of company agreements has also increased. During the same time the national sectoral agreements have increased while the provincial sectoral agreements have shown a decline (Eiroline, “Collective bargaining”). Bonuses in Spain and Example of Bonuses in Spanish company Companies in Spain work on comprehensive compensation structures. This includes both long term and short term benefits. The company has a board and a compensation committee especially meant to design, draft, implement, and administer the compensation and benefit plan of employees. The company employs the best talents in works mentioned in the quote “in these matters, we employ our expertise in the relevant tax, employment, corporate, securities and stock exchange laws and regulations” (Latham & Watkins, “Benefits and Compensation”). The company has a team of highly experienced and skilled practitioners who use their best expertise to construct tax structures and also undertake regulatory activities such as the administration and designing of executive compensation. They also construct the company’s benefit plans which include ERISA structuring. The executives work along with other boards and committees in every facet of drafting, designing, administering and implementing the compensation arrangements and the employee benefit plans. The company is experienced in negotiating, designing, implementing, drafting and administering compensation arrangements of all kinds as well as in all contexts. It formulates plans for the CEO and all senior executives. It formulates other arrangements and severance plans. The company also proposes equity plans and stock options for other companies, both private and public. Most importantly the company emphasizes on the bonus plans of employees and other long term compensation and incentive plans (Latham & Watkins, “Benefits and Compensation”). Contributing Factors for Bonuses in Spain It is apparent from the above discussion that the country tries to provide full protection to the workers of the country. The laws are formulated in a manner that provides them with the maximum protection. The structure is well formulated. It was initiated because of the imbalances occurring in organisations. There was a general tendency of employers to misuse the services of workers. This called for government intervention and formulation of policies to protect the workers’ interest. The compensation structures were developed by skilled expertise. The law also advocates a certain amount of equality between the ground level employees and the higher level employees. This is evident from the fact that the structures developed were equal for all employees. Organizations in Spain encourage workers’ participation in management and matters like collective bargaining. It tries to emphasize more on issues related to industrial relations in organisations. This is evident from the practices and policies of the famous company, Latham and Watkins. Further, the benefit plans of employees are particularly suited to meet the requirement of employees more than their employers. Until the year 2007, Spain was one of the most dynamic of all European nations. Since then the economy began to slow down as its domestic consumption reduced and the construction sector began to lose its momentum. The country’s foreign debt also increased considerably resulting from the financial crisis. All these factors had a severe impact on the nation’s labour market. This called for the proper implementation of employment protection regulations in organisations. The power distance index in Spain is also quite high, suggesting that there is much inequality in society. There is much individualism in society as well. This is shown in the figure below. Figure 4: Figure showing Power Distance Index and Individualism in Spain (Source: ITIM International-a, “Cultural Dimensions”) References B. C. Human Rights Coalition. Some Recent and Significant Equality and Human Rights Decisions. June 2004. A Year In Review. November 2, 2010. . BD. Canadian Sharps Safety Regulations. 2010. Healthcare Worker Safety. October 26, 2010. . CGA. Salaries, bonuses, and management fees. Owner/manager remuneration, Part 1. November 4, 2010. . Dorantes, C, A. & Padial, R. S. The legal basis for short-term employment in Spain. 2005. Fixed term employment and its poverty implications: Evidence from Spain. October 26, 2010. < http://www.irp.wisc.edu/publications/focus/pdfs/foc233h.pdf> . Economypoint. Spain. June 23, 2006. Minimum wage [6 / 7]. November 4, 2010. < http://www.economypoint.org/minimum-wage/p5.htm#>. Eiroline. Spain: Collective bargaining. October 26, 2009. Spain: Industrial relations profile. November 4, 2010. . HRSDC. Industrial Relations in Canada. May 8, 2007. Labour. November 4, 2010. < http://www.hrsdc.gc.ca/eng/lp/spila/clli/dllc/dll/03legislative_changes_industrial_relations.shtml>. INTERES. Wages and salaries. 2006. Labor and Social Security regulations. October 26, 2010. < http://www.us.spainbusiness.com/icex/cma/contentTypes/common/records/viewDocument/0,,,00.bin?doc=257874>. ITIM International-a. Cultural Dimensions. 2009. November 4, 2010. < http://www.geert-hofstede.com/hofstede_spain.shtml>. ITIM International-b. Cultural Dimensions. 2009. November 4, 2010. < http://www.geert-hofstede.com/hofstede_canada.shtml>. Karabegovik. A. October 2010. Creating a vibrant, dynamic labour market. November 4, 2010. . Latham & Watkins. Benefits and Compensation. 2010. Latham & Watkins. October 27, 2010. . Manila Bulletin. Management by Competencies. October 13, 2008. November 4, 2010. < http://www.bernardovillegas.org/resources/Management%20by%20Competencies.doc>. NATLEX. Chapter 3. Labour relations in the temporary work agency. No Date. Act 14/1944 of 1 June regulating temporary work agencies. October 26, 2010. < http://www.ilo.org/dyn/natlex/docs/WEBTEXT/37077/64919/E94ESP02.htm#c3>. PBLO. BDO Dunwoody LLP. October 14, 2006. Employer snapshots. November 4, 2010. . Regehr, T. D. Results-Oriented Management and Archives. November 4, 2010. < http://journals.sfu.ca/archivar/index.php/archivaria/article/download/10585/11437>. Ricart, J. E. & Collares, J. M. Appraisal (1). March 2000. Managerial Appraisal and Compensation: the Case of Spain. November 4, 2010. . Service Canada. March 1, 2010. Performance Appraisals. November 4, 2010. < http://www.hrmanagement.gc.ca/gol/hrmanagement/site.nsf/eng/hr11577.html#Top_of_Page>. Takagi, Y., Cueto, J. G. & Navasques, J. D., Austerity Measures — A Snapshot of Changes to Labor Laws Resulting from the Global Economic Crisis. October 14, 2010. Latham & Watkins. October 26, 2010. . Workrights.ca. Statutory Holidays. January 17, 2007. Workrights.ca, Know Your Rights. October 26, 2010. . Read More