Canadian HR Reporter

CANADIAN HR REPORTER February 8, 2016 12 NEWS very, very diffi cult to discipline or actually enforce those policies or diffi cult to enforce legislation be- cause there isn't necessarily a cen- tral HR department that is there for that personal connection." Also, in regards to the employee life-cycle and succession plan- ning, things could change quite dramatically when employees are transient, he said. "When you look at the tradi- tional notion of employment, you have a job that somewhat evolves from start to fi nish, from recruitment to retirement. And that connection, that onboarding connection, may be lost in a shar- ing economy relationship because you typically don't have the tradi- tional style of recruitment, the tra- ditional style where you sit down with the manager, you talk about the position description, you talk about the culture, what the expec- tations are, that sort of things. So that part is somewhat missing." At the same time, many of the key pillars of HR will likely re- main the same, said Mary-Clare Treglia, division director at Offi ce Team in Toronto. "Even though it's not your tradi- tional corporate structure, the de- mands and obligations of the HR team will still be largely the same. e HR team still needs to follow the code of ethics — that won't change. Respect in the workplace, employee relations," she said. And despite having more of a peer-to-peer relationship than an employer-employee one, HR should still put retention initia- tives in place, said Treglia. "You still want to make sure that your employees are happy and sat- isfi ed. An HR professional will be doing employment surveys and engagement, making sure they stay on top of (it) if they have any needs or questions or concerns." Evolving technologies People tend to think these chang- es to the employment relationship began in the last few years, but the employment relationship itself has been developing and chang- ing for the last century, said David Ticoll, distinguished research fel- low, Innovation Policy Lab, at the Munk School of Global Aff airs at the University of Toronto. In fact, the employment relationship is simply a construct of the indus- trial age. "Up until 1900 or so, all econ- omies around the world were agrarian economies… if they weren't agrarian economies, they were hunter-gatherer economies. So, generally speaking, there was not really an employment rela- tionship," said Ticoll, speaking at the Sharing Economy Symposium in Toronto in December. "Some people were employed but the vast majority of people were not employed — they were typically subsistence farmers so they lived off the land… it was very much a self-managed economy." e industrial age is what pro- duced the concept of employment. "With the rise of industrial manufacturing… we needed all these people in these factories," he said. " en we kind of had the golden age of employment after the Second World War, when the idea was that everybody has a job… they were paid well, their income went up and so on and so forth. at all came to an end in the 70s and 80s, coinciden- tally, with the rise of computer technology." So why does the employer- employee relationship still exist in the same manner it did during the beginning of the industrial age? "If we do live in a market econ- omy, why doesn't everybody who wants to create goods go out and just contract with people on a temporary basis, and actually price the value of labour out on a daily basis?" he said. The answer to that is what's been called the "transaction cost" — that is, the cost of search, of contracting, of quality manage- ment and process management involved in each transaction. "And, of course, computer tech- nology and the Internet is funda- mentally (changing) that transac- tion cost… (which) is declining," he said. Self-employment, part-time employment and contingent em- ployment are certainly not a new concept, said Ticoll. "Uber, Airbnb, they didn't cre- ate this stuff . ey may be mov- ing it into new spheres, but it's not something new," he said. "We need to really recognize that we are moving into a new era, and it's not just about, 'Oh, let's sup- port innovation.' ere are some fundamental social changes tak- ing place." New technologies are making it easier for individuals to work from diff erent locations, said Karl Baldauf, vice-president of policy and government relations at the Ontario Chamber of Commerce in Toronto. " ese new technologies and the rate at which they are ap- pearing is providing new income streams for individuals," he said. "More than just the relation- ship between the employer and the employee, people more than ever before are able to utilize as- sets that they have or possessions that they own and take advantage of those to realize new income streams in a way that they never could in the past." Questions about the changing relationships between the em- ployer and the employee are not clearcut because they will largely depend on the technology, he said. "But I do think that the growth of the sharing economy is going to have a profound impact on the way people work," he said. "What's important... is that there is a level playing fi eld and traditional operators are not in- ordinately disadvantaged, and that new players understand their obligations from a tax perspec- tive, and that there is a role for government to play to ensure that that level playing fi eld is there." Overall, there's a real need for HR professionals to be agile and ready to adapt, said McNelly. "HR is going to have to be able to be fl exible in terms of what the traditional concept of an employ- ment relationship is, and almost redefi ne what that relationship is. Because now you have this employment relationship or this relationship with an individual that is kind of in between a full consultant versus a full employee — it's kind of in the middle there," he said. Employee or self-employed? It can be diffi cult to qualify wheth- er an individual is an employee, self-employed or an independent contractor, said Doug MacLeod, principal at MacLeod Law Firm in Toronto, also speaking at the symposium. "If you're an employee, you have certain protections. Em- ployment standards (legislation) sets out minimum standards that employees are entitled to, such as minimum wage, vacation pay, statutory holiday pay, termina- tion pay, that kind of thing... most employees are entitled to workers' compensation benefi ts if they get injured at work." ere are also protections for employees when it comes to dis- crimination, health and safety and employment insurance, he said, while independent contractors do not generally have these types of protections. However, there is a test that is applied by the courts when such a situation arises, said MacLeod. " e fi rst thing the courts and administrative tribunals look at is, what is the party's intent? So at the beginning of a contractual relationship, the parties can say, 'We want to be in an employment relationship' or 'We want to be in a self-employment relationship,'" he said. "But that's not the end of it. And there are a number of cases where parties have said, 'We want to en- ter into a self-employment rela- tionship' but a court or adminis- trative tribunal has said, 'We don't care what you intended to do.'" In a case where the individual's employment classifi cation is un- clear, the courts will look at four factors and apply them to the situation. " e fi rst is control, so does the 'employer' tell the individual how to do the work? Does it supervise them? Does it say you have to go through a performance review? You have to apply our way of do- ing things to get the job done?" said MacLeod. " e more control, the more likely they (will be con- sidered) an employee." e second factor is tools — so who provides the capital neces- sary to get the job done? e next issue is chance of prof- it versus risk of loss, he said. " at is, basically, what kind of risk is involved here? If a person is running their own business, they have a chance to change the way they do things to make a profi t… an employee is more likely to get the same pay regardless of how well they do the work." e last factor is whether the person's services are integral to the business, said MacLeod. "If an organization is basically contracting out their core busi- ness, is that something we should look at in deciding whether they're independent or they're entitled to some legal protection." HR connections may be lost SHARING < pg. 1 ere are a variety of factors that have been driving these modest increases, including a low infl ation environment in Canada, said Kapel. "But the reality is that compa- nies, by and large, are able to source and retain the talent they need without spending a lot more on base compensation. So we haven't really been seeing signifi cant in- creases in salary and wage levels for employees in general," she said. "Employees may not see this as equitable. They're working hard but they're not seeing major gains in terms of pay increases. So when they read about rising CEO pay ratios, that may deepen their discontent. And in Canada, the declining value of the dollar is adding fuel to the fi re because it's eroding the av- erage person's purchasing power, said Kapel. "So that's going to make com- pensation levels and pay fairness even more volatile." e optics can be even worse if the company is also issuing lay- off s, said Chamberlain. "When a company is struggling fi nancially or layoff s are taking place, this can be a devastating blow to workplace morale for a variety of reasons. Key executives, HR and team leaders should be in sync about how to handle internal communications to help prevent long-term damage to employee satisfaction or encourage turn- over in key staff . Specifi cally ad- dressing that leaders are open to hearing employees' concerns can help workers feel empowered to speak up about leadership's wages or any other issue." Pay fairness So, should organizations rethink how executives are compensated? That's the multi-million-dollar question, said Cotton. Executive pay often isn't strong- ly liked to performance, he said — so what are executives being rewarded for and are they being rewarded in the right way? In the long run, pay transpar- ency ultimately benefi ts workers and levels the playing fi eld, help- ing workers earn equal pay for equal work, said Chamberlain. "On one hand, CEOs are under intense pressure and are tasked with leading an entire business toward profi tability, and on aver- age their compensation refl ects competition for their skills in the marketplace. However, bringing transparency to not only their salaries but also workers' salaries allows us to shed light on any un- justifi ed or hard-to-explain pay diff erences that might exist." e CIPD survey found seven in 10 employees (72 per cent) would like to see greater pay trans- parency and 53 per cent want it to be published for all levels. When asked which measures would best improve the link be- tween the pay of CEOs to that of employees and their organi- zation's success, the top ranking suggestions were: "Publish the ratio between CEO pay and the pay of the typical employee" (51 per cent); "Limit the size of CEO bonuses and incentives" (51 per cent); and "Require CEOs to pay back bonuses and incentives if the company's performance declines" (62 per cent). ere has been a good deal of discussion about the idea of im- plementing a pay-ratio rule that would limit CEO pay. But that idea should be considered cau- tiously, said Chamberlain. "As an economist, my view is that we should rely on the market to set wages as much as possible — even CEO wages. e labour market generally does a good job of paying workers in line with their productivity and contribu- tion to overall business goals," he said. "Although there is some evi- dence that CEO pay is distorted by undue infl uence on corporate boards, it is counteracted by the fact that companies aimed at profitability have a power- ful incentive to not systemati- cally overpay CEOs. I'm not sure lawmakers better understand the value of a CEO than share- holders and corporate boards themselves." CEO PAY < pg. 9 Optics worse with layoff s Credit: Yuya Shino (Reuters) Mike Orgill, Airbnb's director of public policy in Asia and Pacific, at a news conference in Tokyo in November.

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