A new employee compensation paradigm – moving from Employee Compensation to Family Compensation

 A new employee compensation paradigm – moving from Employee Compensation to Family Compensation 

 

What is family based compensation?

Family based compensation is a new compensation paradigm where an employer pays salary and benefits to the family, specifically, employee and dependent spouse, rather than the employee only. Read on to find out how this model will work in an employee life cycle and what it means to the employer, employee and their spouses.

It is a known fact that money is one of the primary reasons for marital discords. In an era of individuality and independence, both spouses must have near equal share and control of the family finances. This concept is applicable in a single income family setup, where one of the spouses (generally the husband) works and earns money whereas the other (generally the wife) takes care of the household.

The sole idea behind this compensation paradigm is to bring balance of financial control between the spouses. The employee's remuneration is divided between the employee and the spouse in a certain ratio e.g. 60 to 40% between the employee and the spouse.

Near equal spread of financial control between the employee and the dependent spouse will reduce the chances of acrimony due to finances, increase family satisfaction and in general increase employee productivity. Any employee, supported by an empowered and satisfied spouse, will be more effective than an employee struggling to minimize the family conflicts.

Notice that the employer is making no additional payments to the employee. For employees managing income in a single-income family set-up, the overall family income is not impacted. Overall family purchasing decisions are not impacted either. This paradigm is only applicable to employees with financially dependent spouses.

 

Why is the family important?

Companies, today, are trying out various mechanisms to bring work-life balance. Almost employer wants to seen as family friendly. Kids and spouses are invited to the work areas and employees are encouraged to spend quality family time whenever they can. The basic premise is that an employee who spends more time with the family will be a satisfied and more productive employee, supported by a  satisfied family. However, this is not enough and the most fundamental aspect of family satisfaction, financial independence, is conveniently ignored.

The income earners, tend to have an “I am the earner. I am the only one working hard in the family, while you guys are having fun at my expense” attitude, ignoring the realities and hard-work involved on the part of the spouse staying at home and taking care of the household work. The home maker is, often times, frustrated if they don’t any see nay appreciation or compensation for the work they are doing.

How long can employees appreciate the importance of the family in the life of their employees yet fail to compensate the family?      

Family based compensation, in short, involves the family in a single-income family setup, as opposed to traditional compensation methods, where only the employee is compensated.

Employee Life events:

How does the Family based compensation paradigm work given all the possible life cycle events?

1.       New Employment: When an employee first takes a job with a company and he is single, the company pays him, per their policies. The employee income and family income are exactly the same. 

2.      Marriage: When an employee gets married to an individual, who is financially dependent on the employee, the company distributes the employee’s existing income into 2 buckets in a pre-determined ratio. For example, 60% of the income goes to the employee and 40% of the income goes to the spouse. The employee must add the spouse as a “dependent employee” category. The family income is unchanged, while the employee himself gets 60% of what they were making originally. However, if the spouse is working and financially independent, then no adjustments are made. 

3.      Spouse takes paid employment after briefly taking care of household: If the dependent spouse takes up paid employment and is no longer financially dependent on the employee, it is up to the employee and the spouse to determine if they want to continue with the distribution set-up or not. 

4.      Children: Having children may or may not impact the distribution %. Companies may choose to follow a policy where they may want to increase the dependent spouse’s share after birth of  a child. For example, after marriage the employee was paid 60% and the dependent spouse 40%. After the first child, the employee may get paid 50% and dependent spouse 50%. But, this could depend on the company policies. 

5.      Divorce: A divorce situation is a little tricky for the family based employee compensation. Divorces have different settlement procedures. In accordance with the settlement rules, if the employee pays a one-time amount and has no obligation to support the separated former-spouse, then the employee starts making 100% of the company compensation. However, if the settlement states that the employee has a to keep supporting the former spouse, then the employer will adjust the spouse’s share accordingly. Note that initiation of a divorce has no change on the distribution set-up. The formal completion of  divorce triggers the new distribution.  

6.      Re-marriages after Divorce: If an employee re-marries after divorce, the situation has to be understood in the light of the original divorce. The distribution to the new spouse can come only from the employee’s share. To illustrate, let us assume, a male employee makes $10,000/- per month, of which he gets $6,000/- (60%) and his wife gets $4,000/- (40%). The employee and his wife get separated and based on the settlement rules, the former wife now keeps getting 40%. The employee continues to draw the $6000/-

If the employee decides to re-marry, then the new wife will be paid 40% of the employee’s share. In other words, the employee gets $3600/- (60% of $6000/-) and the new wife gets $2400/- (40% of $6000/-). The ex-wife continues getting $4000/-, assuming she is still financially dependent.   

      

7.       Death of Dependent Spouse: In the event of death of the dependent spouse, the employee starts getting 100% of the income.    

8.      Re-marriage after death of dependent spouse: As pointed out earlier, after death of the dependent spouse, the employee starts getting 100%. If the employee re-marries, the original distribution is now established with the new wife.  

9.      Death of Employee: If the employee dies, naturally, all compensation benefits would cease to exist. 

10.   Termination or Retirement of Employee: In the event of termination or retirement of the employee, all compensation or benefits cease to exist. Any termination of retirement one-time payments are paid to the employee and dependent spouse in the distribution ratio established earlier.

Transitioning from existing employee based compensation to family based compensation

In order to truly become a family friendly, relationship based organization, companies would have to make an effort to move to the family based compensation paradigm. As you may have realized, the transition is more on policies rather than forcing the companies to invest more money. Companies may have to be make an initial investment on their payroll processes to add the dependent spouse as a dependent employee and to establish the distribution in the payroll system.  

Only such a change can bring a true revolution in employee productivity and move focus from employee satisfaction to family satisfaction.

The Political Quadrant

Often times, it becomes difficult to judge politicians running for a position. Who is the best candidate for the US Presidency? In the Indian context, who is the best candidate for the Prime Ministership? While political alliances may throw in names, will that candidate be the perfect or “near-perfect” choice for the premiership?

This blog presents a simplified quadrant that judges who could be the best fit for a role. It focuses on the following:

1.    Political Vision: This focuses on the future. What will the person do? What is his/her vision for soci0-economic issues? Vision for national and international issues? This is futuristic and is based out of how the person articulates his/her understanding of the issues at hand and the possible solutions. Articulation is a very important part, otherwise their is no other way of communication with the masses and external world.

2.    Administrative Impact: This focuses on the administrative abilities of the person. This has nothing to do with the length of the administrative experience, but the pure impact, which obviously has to be a positive one. 

Obama won the presidential race in 2008 because of the high value of the “Political Vision” he demonstrated. He was low on Administrative Impact, but he won due to the Political Vision.

Below is an analysis of the current leaders in India, based on the “Political Quadrant”.

The choice is for people to make on who they want to be led by!

Same Sex Marriages – So what?

The Wikipedia defines Marriage as follows:

“Marriage (also called matrimony or wedlock) is a social union or legal contract between people called spouses that establishes rights and obligations between the spouses, between the spouses and their children, and between the spouses and their in-laws.^[1] The definition of marriage varies according to different cultures, but it is principally an institution in which interpersonal relationships, usually intimate and sexual, are acknowledged.”

Webster defines it as follows:

“a (1) : the state of being united to a person of the opposite sex as husband or wife in a consensual and contractual relationship recognized by law (2) : the state of being united to a person of the same sex in a relationship like that of a traditional marriage marriage>

b : the mutual relation of married persons : wedlock

c : the institution whereby individuals are joined in a marriage

2

: an act of marrying or the rite by which the married status is effected; especially : the wedding ceremony and attendant festivities or formalities

3

: an intimate or close union 

”

Looking closely at both definitions, the following attributes emerge:

1.    Rights and obligations

2.    Mutual consent

3.    United or union

4.    Other entities like children, in-laws

I think, it is human made boundaries like the “spouses” have to be of opposite sex. The reality is that in a same sex marriage, there is only thing that the couples cannot do i.e. to bear children. However, is that the sole purpose of a marriage? Yes and no!

Yes, because, the human race has to continue. If no one on the earth ever bore a baby, the human race would become extinct.

No, because, it is not mandatory for married couple to have children.

Then why this fuss?

Top 3 Benefits of same sex marriages:

1.    Population Explosion: There is another solid reason to promote same sex marriages. The world population is exploding, whereas resources are not. Mortality rates are going up and will continue to do, as we gain more control on medical sciences. Same sex marriages will help control population explosion

2.    Care for children: The only way, same sex spouses can raise children is by adopting them. This is actually very good for the hundreds of orphans and unwanted children born all over the world. It is best to hand over such children to parents who can care for them and raise them the right way.

3.    World economy: Same sex marriages will provide a boost to the world economy. There will be increased emphasis on new scientific research, social sciences, medical sciences, education, new government and business policies. In short, there will be significant opportunities, if same –sex marriages are legalized

Same-sex Marriages FAQ

1.    Is it unnatural: Absolutely not. In several parts of the world, where same-sex marriages are being discussed, several people are coming out in support. The fact that so many people feel positive about same sex means it is certainly not unnatural

2.    Is it a new fad? No, because, it has been in existence for several years. It is becoming a new discussion point now.  

3.    Does religion support it? Every religion is moulded by an interpretation by its followers. But, there is nothing concrete to prove no religion supports it. Religions are silent about marriages.

4.    Is it criminal? Criminality is something that has to be in accordance with the law. If laws are enacted to support same-sex marriages, they would not be criminal

5.    Is it moral or ethical? Morality is to with proper behaviour. Ethics relate to right and wrong. The society defines moral and ethical based on an accepted framework. The key word here is social acceptance. There is no logical reason why same sex marriages must not be socially acceptable. Unlike acts of terrorism, it doesn’t kill anyone. If it is legalized, sooner or later, people will start socially accepting it

6.    Is it socially harmful? As I pointed out earlier, opposite sex marriages are important for the existence and continuance of the human race. If everyone indulged in same sex marriages, the human race would become extinct. But, as long as we accept same sex marriages as just another marriage, it is not socially harmful

The death of the email

Just a few years ago, we used emails for pretty much everything:

·         Informal communications between friends

·         Formal communications between colleagues working in the same company

·         Formal communications between folks representing different entities (including customer service, sales/marketing, job applicants)

·         Government to Government or citizen to government forums

·         Others

Social media has changed a lot of this and people rarely use emails for informal communications. It is mostly facebook or goople plus for informal communications.

Then came social media adapted by enterprise which is gradually killing any emails communications between employees of the same company, or even multiple companies collaborating on a single project or new product innovation. Companies could use Jive, for example, to communicate internally within.

Even customer service is turning to the social media to address customer redressal or just answer questions or lead them to company ecommerce sites when a consumer can make purchases. No more info@company.com or sales@company.com

We can also a trend when companies are increasingly using social media for attracting talent. LinkedIn has job forums or job openings advertised which lead applicants to company websites where they can upload their CVs. The hire@company.com or recruit@company.com is dying a slow death.

Governments and political formulations are increasingly moving to computer based systems and trending towards twitter or facebook to connect with their supporters. 

Email is dead! Long live social media!!