HR Adaptations for Employee Compensation

Upstock Team

June 17, 2023

HR Adaptations for Employee Compensation

August 30, 2023

HR Adaptations for Employee Compensation

The human resources (HR) department of any organization plays a critical role in the development and implementation of employee compensation strategies. As regulatory landscapes continue to evolve, employers must be more adaptable in terms of employee compensation. From reasonable accommodations for employees with disabilities to equity compensation trends, HR must stay up-to-date with the latest changes and trends to ensure that employees receive a fair and equitable compensation package. 

In this article, we'll explore the different HR adaptations for employee compensation, including reasonable accommodations, the Job Accommodation Network (JAN), compensation models, and the future of HR compensation strategies.

HR Adaptations for Employee Compensation Through the Years

The world of work has undergone numerous transformations over the years, and HR departments have had to adapt to changing regulations, economic trends, and social expectations to ensure that employees receive fair and equitable compensation for their work. This includes ensuring equal opportunity for qualified applicants in every job category, providing temporary accommodations for disabled employees where necessary, and engaging in an interactive process to explore modifications to work schedules or other job requirements that may enable an employee's ability to perform the job. 

To keep up with changing workforce dynamics and economic situations, HR professionals are encouraged to be mindful of the job application process, including conducting a job interview that is accessible to a blind employee and ensuring that all job postings and even the hiring process are free from discrimination.

Furthermore, to ensure compliance with relevant laws and regulations, HR departments are asked to turn to private resources for guidance on best practices for compensation, as well as for navigating the legal requirements for equity compensation plans. On the same note, HR professionals are also required to be mindful of the business necessity for various compensation structures and benefits, as well as the job performance and qualifications of each individual employee. 

Finally, whenever a vacant position arises, HR departments have started to become proactive in seeking out a qualified individual and engaging in an interactive process to explore possible accommodations that may enable the qualified applicant to perform the job effectively.

Understanding Reasonable Accommodations in the Workplace

Reasonable accommodations are adjustments made by an employer to enable an employee with a disability to perform the essential functions of their job. The Americans with Disabilities Act (ADA) requires employers to provide reasonable accommodations to employees with disabilities, absent undue hardship, which is defined as an action requiring significant difficulty or expense. 

This Act stipulates that employers must identify reasonable accommodations that allow an individual with a disability to enjoy equal benefits and perform the essential functions of his or her job. To clarify, reasonable accommodations may include job restructuring, redistributing marginal job functions, modifying workplace policies, making existing facilities accessible, and providing qualified readers, sign language interpreters, or other auxiliary aids.

The Job Accommodation Network (JAN)

The Job Accommodation Network (JAN) is a free service provided by the U.S. Department of Labor's Office of Disability Employment Policy (ODEP). This service provides information, guidance, and resources to employers on how to provide reasonable accommodations for employees with disabilities. 

As is mandated by the government agency, Job Accommodation Network (JAN) helps an employer identify reasonable accommodations, facilitate the accommodation process, and provide training materials to both employers and employees. The JAN service is available to all employers, regardless of size, and can help employers comply with the ADA and other Equal Employment Opportunity Commission (EEOC) laws.

Essential Functions of Compensation Models and Laws That Back Them Up

Compensation models and packages are crucial components of an employer's HR strategy to attract, retain, and motivate their employees to perform specific job functions well or their assigned job duties. These models and packages must adhere to various laws and regulations that protect the rights of employees and ensure fair compensation for their work.

To help you navigate the complex world of compensation laws, we've compiled a list of compensation models and packages that are backed up by different employment laws and other laws in America. By understanding these laws and their corresponding compensation models, employers can develop a compensation strategy or even a package that is not only compliant but also competitive and attractive to top talent.

1. Salary Basis

This compensation model is used to comply with the Fair Labor Standards Act (FLSA) regulations for exempt employees. It requires paying qualified employees a predetermined salary amount regardless of the number of hours worked in a week.

2. Piece-Rate Pay

This compensation model is used to comply with the FLSA regulations for non-exempt employees. It requires paying employees based on the number of units produced or job tasks completed.

3. Performance-Based Pay

This compensation model is often used in sales and commission-based positions and aligns with the Equal Pay Act of 1963. It requires equal pay for equal work regardless of gender or other demographic factors.

4. Equity Compensation

This compensation model is used to provide equity ownership in a company to its employees and aligns with the Securities Act of 1933 and the Securities Exchange Act of 1934. It allows companies to offer stock options, restricted stock units (RSUs), or other equity-based incentives to employees.

5. Health Insurance Benefits

This compensation package aligns with the Affordable Care Act (ACA) and requires employers to offer health insurance to their employees.

6. Retirement Benefits

This compensation package aligns with the Employee Retirement Income Security Act (ERISA) and requires employers to provide retirement benefits to their employees. This can include 401(k) plans, pensions, and other retirement benefits.

7. Workers' Compensation

This compensation package aligns with state workers' compensation laws and requires employers to provide coverage for employees who are injured or become ill on the job.

8. Paid Time Off

This compensation package aligns with various state and federal laws such as the Family and Medical Leave Act (FMLA) and requires employers to offer paid time off for eligible employees. This can include sick leave, vacation time, and other forms of paid time off.

9. Bonuses and Incentives

These compensation models align with various state and federal laws and are used to reward employees for good performance or for reaching certain goals.

In addition to these, here are some laws upon which certain compensation models are based:

Americans with Disabilities Act (ADA)

This law prohibits discrimination against individuals with disabilities and requires employers to provide reasonable accommodations to enable employees with disabilities to perform their essential job functions with special workplace accommodations. To ensure compliance with ADA, employers have started offering compensation models that provide additional pay or benefits for employees who are requesting reasonable accommodations.

Since it is a special law, the ADA defines an individual with a disability as someone with a physical or mental impairment that substantially limits one or more major life activities. Employers are required to provide reasonable accommodations that do not create an undue hardship for the employer to enable employees with disabilities to perform their essential job functions. This could include providing a sign language interpreter for a deaf employee or making modifications to job duties to accommodate an employee with a physical impairment. An employer generally must also consider the use of a service animal as a reasonable accommodation for individuals with disabilities.

On a case by case basis, employers may be able to offer a light duty position to employees with disabilities who are unable to perform their regular job duties. However, employers must be careful to avoid discrimination against individuals functional limitations and ensure that all employees are treated fairly. Employers may also need to consider the potential for a direct threat to the health or safety of other employees when making accommodations for individuals with disabilities.

Fortunately, there are certain compensation models that provide additional pay or benefits for employees who are requesting reasonable accommodations, which simultaneously help employers comply with the ADA and create a more inclusive work environment for employees with disabilities. Still, it is important for employers to understand both the disability and the essential job functions to determine the appropriate accommodations that can be made without creating undue hardship. By doing so, employers can ensure that all employees, including those with disabilities, enjoy equal benefits and opportunities in the workplace.

Dodd-Frank Wall Street Reform and Consumer Protection Act

This law includes provisions that require public companies to disclose the ratio of CEO pay to median employee pay, as well as provisions that require clawbacks of executive pay in certain circumstances. To help companies comply with this law, there are compensation models that have been designed to ensure transparency and accountability in executive pay, such as those that tie executive pay to performance metrics or that include clawback provisions.

The Future of HR Compensation Strategies

The future of HR strategies for employee compensation packages will likely involve a greater focus on flexibility and personalization. As the workforce becomes more diverse and employees' needs and preferences change, HR professionals need to adapt to these changes and offer customized compensation packages. This may involve offering different types of compensation, such as equity compensation or flexible work arrangements, and providing personalized benefits that meet employees' individual needs. Furthermore, HR professionals must be aware of emerging trends in employee compensation, such as the gig economy and remote work, and be able to develop strategies that address these trends.

Indeed, HR adaptations for employee compensation are critical for ensuring that employees receive fair and equitable compensation for their work. As such, employers must be adaptable in terms of regulatory changes and trends, including reasonable accommodations, compensation models and packages, and equity compensation. By providing appropriate reasonable accommodations and job restructuring, employers can help employees with disabilities perform the essential job functions and enjoy equal employment opportunities. In addition, employers should make efforts to provide clear communication and training materials to all employees about the accommodation process and their rights under the law.

It is important to note that accommodating employees with disabilities is not only the right thing to do, but it can also benefit the employer. By providing accommodations and support, employers can create a more diverse and inclusive work environment, which can lead to improved employee morale and productivity. Moreover, it can help employers attract and retain talented individuals who may have unique perspectives and abilities that can benefit the organization.

Equity, The Future of Employee Compensation 

As the workforce and regulatory landscape continue to evolve, HR professionals must be prepared to adapt and create new strategies for employee compensation that address the needs of all employees. This includes providing reasonable accommodations, using compensation models that align with current trends, and creating an inclusive work environment that values diversity. By doing so, employers can create a workplace that supports all employees, leading to increased job satisfaction and productivity for all.

Interestingly, one of the innovative HR strategies that ensure regulatory compliance while similarly motivating work productivity is by offering company shares in the form of equity compensation. This remuneration package is becoming an increasingly popular trend among startups and tech companies. It involves giving employees a share in the company's ownership, usually in the form of stock options or restricted stock units (RSUs). 

From the employer’s perspective, it is a way for companies to attract and retain top talent, since it allows employees to benefit from the company's success. As such, HR professionals must be aware of the different equity compensation models like stock options and RSUs, and ensure that they also comply with federal and state laws.

Meanwhile, we at Upstock take legal and regulatory compliance to heart. That’s why our equity management platform ensures little to no need for complex paperwork and back-and-forth legal agreements. On top of that, our RSU and token-based plans are designed to give employees a share in the company's ownership, aligning their interests with the success of the business. If you’re curious about how we do it, just send us a line to speak to one of our equity experts.

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