Module 4 - Background TOTAL REWARDS IN PRACTICE In Module 4, we will be looking at the importance of determining compensation program effectiveness. There are basically two commonly used approaches to evaluate the effectiveness of HRM’s total rewards practices: the audit approach and the analytic approach. The Audit Approach  The audit approach focuses on reviewing the outcomes of the human resource compensation function. Key indicators and customer satisfaction measures are typically collected. Electronic employee databases and information systems have made it much easier to collect, store, and analyze key indicators than in the past, when information was kept in paper files.  Some examples of key pay-related indicators include:  · Per capita (average) merit increases · Ratio of recommendations for reclassification to number of employees · Percentage of overtime hours to straight time · Ratio of average salary offers to average salary in community · Fairness of existing job evaluation system in assigning grades and salaries · Competitiveness in local labor market · Relationship between pay and performance · Employee satisfaction with pay Some examples of key benefits-related indicators include: · Average unemployment compensation payment (UCP) · Average workers’ compensation payment (WCP) · Benefit cost per payroll dollar · Percentage of sick leave to total pay · Promptness in handling claims · Fairness and consistency in the application of benefit policies · Communication of benefits to employees · Assistance provided to line managers in reducing potential for unnecessary claims  Many firms have gone to surveys of top-level line executives as a means of assessing HRM effectiveness. For example, relating this to total rewards, the top-level line executives can see how the total rewards system and practices are impacting both employees and the overall effectiveness of the firm from a strategic standpoint. They can also help determine how well HR employees’ perceptions of total reward program effectiveness align with the views of their line colleagues. The Analytic Approach In this approach, focus is placed on either:  a. Determining whether the introduction of a total rewards program or practice (like a new benefit) has the intended effect. Usually evaluators are most interested in determining the degree of change associated with the program or practice.  b. Estimating the financial costs and benefits resulting from a new compensation practice. In this approach, concern is placed on the dollar value (costs vs. benefits) of the new total rewards program or practice. For example, determining the effectiveness and cost-effectiveness of a wellness program might include: · Annual direct program costs, per employee per year · Percentage of cardiovascular disease risks (high blood pressure, overweight, smoking, lack of exercise) reduced or relapse prevented · Amount spent per 1% of risks reduced or relapse prevented  Once the total reward program o ...

1. Module 4 - Background
TOTAL REWARDS IN PRACTICE
In Module 4, we will be looking at the importance of
determining compensation program effectiveness. There are
basically two commonly used approaches to evaluate the
effectiveness of HRM’s total rewards practices: the audit
approach and the analytic approach.
The Audit Approach
The audit approach focuses on reviewing the outcomes of the
human resource compensation function. Key indicators and
customer satisfaction measures are typically collected.
Electronic employee databases and information systems have
made it much easier to collect, store, and analyze key indicators
than in the past, when information was kept in paper files.
Some examples of key pay-related indicators include:
· Per capita (average) merit increases
· Ratio of recommendations for reclassification to number of
employees
· Percentage of overtime hours to straight time
· Ratio of average salary offers to average salary in community
· Fairness of existing job evaluation system in assigning grades
and salaries
· Competitiveness in local labor market
· Relationship between pay and performance
· Employee satisfaction with pay
Some examples of key benefits-related indicators include:
· Average unemployment compensation payment (UCP)
· Average workers’ compensation payment (WCP)
· Benefit cost per payroll dollar
· Percentage of sick leave to total pay
· Promptness in handling claims
· Fairness and consistency in the application of benefit policies
· Communication of benefits to employees
· Assistance provided to line managers in reducing potential for

2. unnecessary claims
Many firms have gone to surveys of top-level line executives as
a means of assessing HRM effectiveness. For example, relating
this to total rewards, the top-level line executives can see how
the total rewards system and practices are impacting both
employees and the overall effectiveness of the firm from a
strategic standpoint. They can also help determine how well HR
employees’ perceptions of total reward program effectiveness
align with the views of their line colleagues.
The Analytic Approach
In this approach, focus is placed on either:
a. Determining whether the introduction of a total rewards
program or practice (like a new benefit) has the intended effect.
Usually evaluators are most interested in determining the degree
of change associated with the program or practice.
b. Estimating the financial costs and benefits resulting from a
new compensation practice. In this approach, concern is placed
on the dollar value (costs vs. benefits) of the new total rewards
program or practice. For example, determining the effectiveness
and cost-effectiveness of a wellness program might include:
· Annual direct program costs, per employee per year
· Percentage of cardiovascular disease risks (high blood
pressure, overweight, smoking, lack of exercise) reduced or
relapse prevented
· Amount spent per 1% of risks reduced or relapse prevented
Once the total reward program or practice has been evaluated,
HRM can explore how to improve its effectiveness in
contributing to the competitiveness of the organization. There
are several different ways HR professionals might attempt to
improve the effectiveness of a total rewards program/practice:
· Restructuring: For the total rewards/HRM function to
contribute strategically to the firm’s effectiveness, the senior
HR person must be part of the top management team.
· Outsourcing: This entails contracting with an outside vendor
to provide a total rewards product or service to the firm, instead

3. of producing the product/service using employees within the
firm.
· Process Redesign/Reengineering: Completely reviewing
critical work processes to make them more efficient and able to
deliver higher quality total reward services. This may also
include implementing new technologies (e.g., HRM information
systems).
Sources:
Erfurt, J., Foote, A., & Heirich, M. (1992). The cost-
effectiveness of worksite wellness programs. Personnel
Psychology, (45) 22.
Noe, R., Hollenbeck, J., Gerhart, B., & Wright, P. (2006).
Human Resource Management. New York, NY: McGraw-Hill
Irwin.
Tsui, A., & Gomez-Mejia. (1988). Human Resource
Effectiveness. Washington, DC: The Bureau of National Affairs.
Required Material
Aldana, S. (2018). Wellness ROI vs. VOI: The best employee
wellbeing programs use both. Retrieved
from https://www.wellsteps.com/blog/2018/01/10/wellness-roi-
employee-wellbeing-programs/
Heathfield, S. (2016). Are you getting the best benefit from
your employee benefits? Retrieved
from https://www.thebalance.com/most-of-employee-benefits-
1917723
Helios HR. (n.d.), What makes up a great total employee
rewards package? Retrieved
from https://www.helioshr.com/2013/11/what-makes-up-a-great-
total-rewards-package/
Hipple, S., & Stewart, J. (1996). Earnings and benefits of
contingent and noncontingent workers. Monthly Labor Review,
119(10), 22-30. Retrieved from the Trident Online Library.
Lawrence, T. (2012). Integrating contingent workers. Baseline,
(114), 13. Retrieved from the Trident Online Library.
Pedulla, D. S. (2013). The hidden costs of contingency:
Employers’ use of contingent workers and standard employees’

4. outcomes. Social Forces, 92(2), 691-722. Retrieved from the
Trident Online Library.
The Kaiser Family Foundation (2018). Employer Health
Benefits 2018 Annual Survey: Section 1: Cost of Health
Insurance, pgs. 31-42. Retrieved
from http://files.kff.org/attachment/Report-Employer-Health-
Benefits-Annual-Survey-2018.
Optional Material
Armstrong, M., Brown, D., & Reilly, P. (2011). Increasing the
effectiveness of reward management: An evidence-based
approach. Employee Relations, 33(2), 106-120. Retrieved from
the Trident Online Library.
OWLPurdue. (2012, May 9). Purdue Owl: APA formatting: The
basics [Video file]. Retrieved
from https://www.youtube.com/watch?v=pdAfIqRt60c&list=PL8
F43A67F38DE3D5D
Society for Human Resource Management. (2017). Visit the
SHRM website (www.shrm.org) for some of the latest
information on dynamic HRM topics, certification details, and
SHRM membership information.
Module 4 - Case
TOTAL REWARDS IN PRACTICE
Case Assignment Overview
Signature Assignment: Quantitative Reasoning, Introduced
Level
In this assignment, your quantitative reasoning skills will be
assessed at the “introduced” level. The Quantitative Reasoning
rubric will be useful for this purpose. Then in HRM520 your
quantitative reasoning skills will be further assessed at the
“reinforced” level. Finally, in HRM599 your skills will be
assessed at the “emphasized” level.

5. Case Assignment
To begin this assignment, look over the 2018 Employer Health
Benefits Survey that provides information on the rising costs of
health insurance to employers and employees, specifically turn
to Section 1: Cost of Health Insurance.
Also, read the article, Wellness ROI versus VOI, by Dr. Steve
Aldana of WellSteps. Dr. Aldana discusses the importance of
using both Return on Investment and Value on Investment in
determining the best wellness programs to implement to help
drive down health care costs, absenteeism, and presenteeism.
See the area where three calculators are provided found
at https://www.wellsteps.com/blog/2018/01/10/wellness-roi-
employee-wellbeing-programs/.
Watch the videos provided with the calculators for possible
impact on health care costs, absenteeism, and presenteeism of
wellness programs. (Adobe Flash is needed for viewing the
videos).
For each of the topics -- health care costs, absenteeism, and
presenteeism -- run some numbers to see the impact that
wellness programs might have on reducing costs. (It will be
helpful for you use some of the numbers from the 2018
Employer Health Benefits Survey for costs of health insurance
premiums. Plug in three scenarios for each of the three topics.
The numbers used may be the same for each topic, or different.
Try to use numbers that show significant differences when
calculated, however.)
Prepare three tables in Word (Insert>Table) to show the
numbers you chose. Your table for each should be set up like
this:

6. Health Care Costs:
Health Care Costs:
Annual Health Care Costs
Annual Cost Increase
Number of Employees
% of employees obese
% that are smokers
Target percent obese
Target percent smokers
Example H1:
Example H2:
Example H3:
Absenteeism:
Absenteeism:

7. Annual Health Care Costs
Annual Cost Increase
Number of Employees
% of employees obese
% that are smokers
Target percent obese
Target percent smokers
Example A4:
Example A5:
Example A6:
Presenteeism:
Presenteeism:
Annual Health Care Costs
Annual Cost Increase
Number of Employees

8. % of employees obese
% that are smokers
% of employees 1 or more risk factor.
Target percent obese
Target percent smokers
Example P7:
Example P8:
Example P9:
Write a 3- to 4-page narrative summarizing and analyzing the
data. Do not merely repeat the numbers from your tables
without analyzing the findings and making recommendations for
employers (and employees). Include your tables along with your

9. 3- to 4-page summary AND at least one graph to go along with
each table. Be sure to indicate which example each graph
belongs with.
Cite any sources utilized.
Assignment Expectations
Your submission will be evaluated using the criteria as stated in
the Quantitative Reasoning rubric. The following is a review of
the rubric criteria:
Critical Thinking: Expressing quantitative analysis of data
(factual information) to support the discussion showing what
evidence is used and how it is contextualized.
Interpretation: Explaining information presented in
mathematical terms (e.g., equations, graphs, diagrams, tables,
words)
Presentation: Ability to convert relevant information into
various mathematical terms (e.g., equations, graphs, diagrams,
tables, words)
Conclusions: Drawing appropriate conclusions based on the
analysis of factual information/data.