Are Traditional Employment Contracts Fair to Both the Employer and Employee?

Feb 19, 2019 9:45:07 AM

Most employment contracts still based on the number of hours that employees spend working. Pay and deductions are based on attendance, regardless of the employee’s productivity. For a vast number of jobs time-sheeting is not a measure of productivity, so why should employees who take longer to complete tasks be paid the same amount?

Employment Contracts

Companies Shouldn't Deduct on Attendance Anymore

In the past, attendance was the purpose of hire, as well as the deliverables. If an employee did not report to work then the deliverables were not produced or were delayed. In modern businesses, results aren't tied with attendance.

You might find employees who work for only a few hours, yet give the company higher productivity rates than those who work the full day. With the presence of advanced technology, employees might not even need to come into the office. If an employee doesn't come into the office but still gets the job done, then a deduction would not be fair to that employee. On the other hand, if an employee comes into the office and does not work, then it’s unfair for the employer to have to pay.

With having employment Contracts where pay is still based on attendance, it won’t be fair for either the employer or employee. With current technology, employees can potentially be connected to work 24/7, allowing a greater work-life balance. By removing the restrictions of set working hours, managers can reach out to their employees if and when they need to, not just when they are in the same location.

Pay should be always centred on results and effort, where companies and employees are in agreement about the required deliverables and fees. If an employee delivers more, then they should be compensated more and in turn, get less if they deliver less. In other words, the contract between employee and employer should define the measure of success and the compensation plan. This agreement will be immediately welcomed by highly skilled employees who are driven to get results, while underperformers who may not have the passion to succeed will lean towards the old employment structure, based solely on their attendance.

The New Era of Freelancing

Already, skilled workers are moving towards freelance work and self-employment, as they are feeling restricted and undervalued in the office environment. Many skilled workers are turning to freelancer sites and in turn, companies are starting to do the

same. Instead of the risk of hiring a low performer on a fixed salary, companies are favouring subcontractors to ensure tasks are completed. While freelancers are traditionally more expensive per hour than employees, they can save companies in the long run by producing high-quality work without the need for costs such as hiring, training, office equipment, salaries, and employee benefits.

With these employment contracts not supporting modern employment structures, I encourage skilled workers to re-evaluate their market rate value and to negotiate a better deal with their employers. Employers buy their employees time based on their skillset, so pay and deliverables should reflect this.

For companies, re-assessing contract structures are essential, especially for result-based proactive jobs such as sales. With my own company, I found that

breaking down employees pay into two parts was most effective: a lower fixed sum for the employees time dedication, and then a higher part for the deliverables produced, without any cap. This will create a fairer work environment for both parties, linking the companies financial gain to the employees to instil a sense of ownership and a drive for success.

Companies need to stop investing in attendance systems to monitor the performance of their employee’s and instead, invest their money in building an Employee Performance system. Attendance integrated with Payroll is an outdated practice, encouraging a workplace environment where employees aren't driven by the companies success or future.

SimpleStrata

To be able to craft new relationships with your employers, you need to have the right infrastructure in place. We offer a powerful yet simple tool that helps you to set and meet your goals. SimpleStrata splits results from efforts and allows you to check each separately - meaning you can keep track of your goals easier, and see clearly how they’re being implemented. Scores are generated from your results and are then tracked effectively using the platform. This means if you’re looking to create drastic change to your employees’ performance, and that of your company, you’ll be able to do so in real-time, and with much less time and hassle than doing it from scratch.

 

 

At the time of writing, SimpleStrata has already helped achieve a 40% increase in employee and management awareness on their goals and KPIs, and reduced the time required for collecting performance data by roughly half.

 

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