Costing the Kronos Compensation Complexity; back into the sea!
In my last blog I told a brief ‘sea story’ about my first experience in getting and not getting differential pay while working on a boat. (Kronos Supplemental Pay; A Sea Story ) I raised the issue that although many companies have no problem coming up with new and complicated differential/supplemental pay schemes, none of us seem to be able to associate the overhead cost of maintaining these schemes year after year. In putting this question out to my loyal readership, both of you commented with some insight about the issue.
The first insight was actually from a cost controller at a manufacturing company. He has spent so much time over the years re-arranging production and shift schedules trying to find the optimum production rate at the lowest labor cost he never thought to question the existence of all the differential rates that caused him to do all the math in the first place. A large part of his job and value (cost?) at the company was working all the differential pay rates into a production schedule to establish per unit cost.
“Material is a piece of cake”, he chuckled (okay, cost guys aren’t known for their humor). “It’s the number of chefs in the kitchen for how long and at what times that keeps me up at night”. Granted this speaks mostly of overtime and shift-differentials rather than special pay rates like ‘guzzling’ (yep, that’s a real one I heard the other day from a client) but this tells me we are simply at the tip of the ice berg. (Oh, that reminds me of another sea story… but I digress)
The second insight I got from a very experienced HR Manager in a union shop whose first thought was agreement and second was “Good luck getting that genie back in the bottle”. I assured her that I wasn’t trying to eradicate supplemental pay; just measure its overhead at some meaningful level. Companies could then do what they wanted with the information. “I don’t know about ‘the company’ but I can tell you for the employees and unions it’s all about the bottom line hourly rate being as high as possible.” she said.
“You mean it’s not about matching the pay to the appropriate market value of the type of work?”, I asked.
“You mean like the keeping up with the industry standard rate for ‘Guzzling’?, she asked.
Okay, she referred to one of her own special pay codes but I was thinking back to ‘Guzzling’. You see, that client had recently gone back to their unions to propose a simpler pay structure than the existing one (calc’d by a team of people) that was going to be a big problem (i.e. we told them what it would cost) to implement in Kronos Timekeeper. The simplified structure meant that the employees would lose a little money in one situation but gain pay in two other situations. i.e. the bottom line to each employee was slightly higher at the end of the month. At last report the unions were amenable to the idea.
I told you this was an idea whose time has come. Now let’s all put on our cost accountant bow ties, nor’easters, and guzzling boots and wade into this a little further until we get some usable metrics for the rest of us! Tell me what you think about all this!