MANAGING HUMAN CAPITAL

MBA ASSIGNMENT

SHEIKH SAEED

AUGUST 2009

LONDON SCHOOL OF COMMERCE

LONDON SCHOOL OF COMMERCE (UWIC)
MBA 1 ASSIGMENT

Managing Human Capital
MR. RAJENDRA KUMAR

Assignment
Due date: Value: Length: Instructions: Please answer both parts (a) and (b). They are debate type questions and are of equal value. a. Do you think “management freedom of action in deciding relative pay rates is constrained by the product market, the labour market, collective bargaining, technology and the internal labour market ” Discuss and debate. What factors should management consider in your opinion? Substantiate with many examples “It is important in our highly litigious society to manage dismissals properly.” Explain why you agree or disagree with this statement. Discuss and debate. 19th August 2009 30% Approximately 4000 words

b.

Guidelines: 1. Thorough literature review must be evident. 2. Discussion on the factors that need to be considered when increasing pay should be undertaken and how and on what grounds employees can be dismissed should be explained 3. There must be sufficient linkage between theory and practice. 4. Harvard style of references should be used

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TABLE OF CO TE TS

I TRODUCTIO ......................................................................................................................................1 FACTORS I FLUE CI G PAY RATE DECISIO S ...........................................................................2 THE LABOUR MARKET....................................................................................................................... 2
Example 1: Example 2: Example 3: Example 4: Regional affects pay rate ..........................................................................................................2 Knowledge affects pay rate ......................................................................................................3 Skills affects pay rate ...............................................................................................................3 Gender affects pay rate.............................................................................................................3

COLLECTIVE BARGAINING............................................................................................................... 4 Definition of Collection Bargaining .................................................................................................... 4
Example 5: Example 6: Example 7: Example 8: Example 9: Example 10: Example 11: Summer of discontent in UK....................................................................................................5 Why not to blame economic recession .....................................................................................5 Shell tankers dried petrol stations.............................................................................................5 Management forced to agree to demands .................................................................................5 South Africa’s petroleum worker..............................................................................................5 The “Crazy” train drivers ........................................................................................................6 Cadbury’s Crunchie pay deal...................................................................................................6

TECHNOLOGY...................................................................................................................................... 7
Example 12: Example 13: Example 14: Example 15: Example 16: Online recruitment...................................................................................................................7 Technology cost Vs Labour cost..............................................................................................7 New technology, new challenges.............................................................................................8 Using technology to control pay rates .....................................................................................8 Suffice knowledge is Technology! An extract .........................................................................8

Adjusting technological changes ......................................................................................................... 8
Example 17: Example 18: Effect in office or admin pay rates ..........................................................................................9 Car park automation ................................................................................................................9

PRODUCT MARKET ........................................................................................................................... 10
Example 19: Example 20: Less freedom to increase pay rate..........................................................................................10 Less freedom to reduce pay rates ..........................................................................................10

Characteristics of Product market...................................................................................................... 10
Example 21: Example 22: Example 23: Economic & product life cycle..............................................................................................11 Inter-industry pay difference during current Recession.........................................................11 External relativity of pay rates ..............................................................................................11

INTERNAL LABOUR MARKET......................................................................................................... 12 Advantages for the employers ........................................................................................................... 12 Advantages for the employees........................................................................................................... 12
Example 24: Example 25: Example 26: Example 27: Example 28: A socio-economic relationship ..............................................................................................13 Civil Services and NHS.........................................................................................................13 Train and Progress.................................................................................................................13 Maintaining Organizational Culture ......................................................................................13 Limited Ports of entry ...........................................................................................................14

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HA DLI G DISMISSALS .....................................................................................................................15 DISMISSALS IN A HIGHLY LITIGIOUS SOCIETY ........................................................................................ 15 Types of Dismissals ........................................................................................................................... 15
Example 29: Terminating Employment Contracts......................................................................................15

Impact of Dismissals ......................................................................................................................... 16
Example 30: Example 31: Last in, First Out ...................................................................................................................16 Dismissal without Following Procedures ..............................................................................17

Documentation & Investigation of Actions ....................................................................................... 17
Example 32: Example 33: Example 34: Example 35: Investigation before Dismissal ..............................................................................................17 Tribunal found real motive behind dismissal.........................................................................18 Constructive dismissal upheld...............................................................................................18 Fair grounds but without procedures .....................................................................................18

FAIRLY DISMISSING AN EMPLOYEES ....................................................................................................... 19 Conduct ............................................................................................................................................. 19
Example 36: Gate Gourmet workers ..........................................................................................................19

Capability .......................................................................................................................................... 19
Example 37: Setting targets for employees ................................................................................................19

Legality.............................................................................................................................................. 20
Example 38: Drivers losing License...........................................................................................................20

Redundancy ....................................................................................................................................... 20 Other Substantial Reasons ................................................................................................................. 20
Example 39: Example 40: Whistle blowing ruling..........................................................................................................20 Proselytizing in the workplace ..............................................................................................21

Employment Laws and ACAS Code of Practice ............................................................................... 21
Recent changes in Employment Laws ............................................................................................................21 ACAS code of Practice...................................................................................................................................21

CO CLUSIO .........................................................................................................................................23 REFERE CES .........................................................................................................................................24 BIBLIOGRAPHY.....................................................................................................................................27

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INTRODUCTION
Determination of pay rate for employees directly relates to the performance of employees and productivity of the business. An organization can not retain the efficient human resource without considering the factors influencing their pay rates. Similarly it is highly likely that prevailing labour market will entice organization to acquire human resource at relatively less cost. Moreover the employment of new human capital may undermine the existing employees if they feel underpaid as compare to new employee of same skills. (Pfeffer & Langton, 1993)

Factors discussed in his report illustrate the importance of understanding various types of constraint faced by the management during pay rate decisions. In one organization factors influencing its operations may put constrains on freedom to increase pay rate, while in another organisations management could be forced to increased pay rate to retain and attract the required labour.

Considering the numbers of lawsuits contested in courts of employment tribunals in recent years, it is evident that we are living in a highly litigious society where any minor mistake in our judgement can end up in a court of law. Modern societies, particularly Great Britain and United States, have evolved stringent laws to protect human rights and freedom of choice for their individuals. These laws are enacted by states to protect and guarantee welfare and wellbeing of the people.

The first half of this academic research report illustrate the restrictions on management’s freedom, with respect to pay rate decisions, due to factors like product market, labour market, collective bargaining, internal labour market and technology. The second half elaborates the importance of handling dismissals in today’s society, which is governed by strict labour laws to protect exploitation of employees. The examples provided in the text further illustrate each topic under discussion.

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FACTORS INFLUENCING PAY RATE DECISIONS
The factors like product market, the labour market, collective bargaining, technology and the internal labour market exist in every economy to challenge management’s free will in deciding relative pay rates for the workforce needed to run the organization. Existing forces in economy themselves provide means to overcome such constraints for the pursuit of overall economic benefit.

THE LABOUR MARKET
In terms of economy, the term ‘labour’ is the sum of all people in employment and the number of vacancies waiting to be filled. The demand for labour is determined by the level of demand for the goods and service offered by the producers in the market. When sales or production are rising, demand for labours increases. (Beardwell et al, 2005)

Relative pay rates of employing human resource in a firm depend on overall demand and supply of the labour force required by the firm. The pay rate will increase for the scarce labour resources and vice versa, as potential labour force will have less available employment opportunities.

However, labour market is not the only factor that is affecting pay rate. In fact, pay rate is affected by various characteristics of labour market like; age, skills, knowledge, experience, demography, marital status and government regulation. Although pay rate is relative to demand and supply of labour market, but decisions of management in determining appropriate pay rate for their employees essentially needs considering characteristics of labour market. (Dessler; 2007) Example 1: Regional affects pay rate

In developing countries such as India and China, the pay rates of labour are fraction of pay rates in UK. This is because more people are competing for limited vacancies in developing countries like China, Pakistan etc. However, in
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developed countries like UK, the labour demand is high pushing relative pay rates up. Example 2: Knowledge affects pay rate

Software Engineer in Google earns between 54 thousands dollars, and an account strategist’s salary is about 38 thousands dollars. This is because of scarcity of labour with skills like Software Engineering. Example 3: Skills affects pay rate

In Prêt A Manger, one top manager of salary is £600 per week, and team member of salary is £120 per week. This difference is because of less availability of people with required qualification and skills. Example 4: Gender affects pay rate

Women hold over 90% of part-time jobs and nearly half of all female employees 44% work part time compared with just 8% of men. Part-time working is invariably low-paid and this is reflected in gender pay data that exists between woman working part time and men working full time. (Hakim, 1998) Labour market is not the only one condition which requires carefully considered by human resource managers before the satisfied pay rate is achieved. Furthermore, the arrangement of pay rate has to satisfy both employees and employers as both of them will be benefited.

Employers use pay and other reward methods to motivate workers to achieve success in terms of operating excellence in order to achieve company’s goals and objectives. Management steers to reduce costs but at the same time expect outstanding performances from employees. Employers can not select whatever pay rate they prefer unless carefully considering constrains.

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COLLECTIVE BARGAINING
Generally considered theory of associating pay increase as the rewards for the performance of the employees is not always effective especially in organization with considerably large scale human resource. The formalized trade unions across the industry have maintained a steady pressure on employer for negotiating pay rise and other work related issues. One of the aspects of pay increase that needs to be carefully considered before devising any such policy is dealing with trade unions in collective bargaining.

DEFI

ITIO OF COLLECTIO

BARGAI

I G

Collective bargaining is defined as a negotiation used by employees, in the form of worker’s unions, to work with management or their employers. In a typical collective bargaining process, workers' representatives formally approach the employer and negotiate a contract which both sides can agree with. (Kahn, 1998)

Generally issues negotiated in a labour contract are hours, wages, benefits, working conditions, and the rules of the workplace. Once both sides have reached an agreement, it is signed for a set period of time, usually three years. This final contract is called a Collective Bargaining Agreement. In modern society employers accept the constraints of collective bargain contract, albeit some grudgingly, upon their freedom decision making. (Beardwell & Holden, Claydon; 2004)

Collective Bargaining can have both positive and negative influence while determining pay increases of employees in organizations, depending on the prevailing labour market characteristics. Strong union representation for demand of pay rise and threat of strikes, in case of management’s resistance to agree to demands, can harm operational efficiency, customer relationship and employee satisfaction. (Armstrong, 2006)

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Example 5:

Summer of discontent in UK

Britain has faced a string of strikes this summer; the RMT union brought the capital to a halt with a 3-day strike on London Underground while more than 12,000 postal workers at the Royal Mail are set to begin another strike over job cuts and pay today. (Tmesonline, July 17, 2009) Example 6: Why not to blame economic recession

In Brantford, Canada: A group of unions representing more than 500 city workers mounted a coalition to fight a strategy by city hall to clamp down on wage and other demands as it tries to deliver a budget with no increase. Shortly before contract talks opened, the labour coalition contended it as unfair to use the ‘economic recession’ as a bargaining tool to reopen standing collective agreements and silence the bargaining on contract renewals.

(brantfordexpositor.ca; 18th July 2009) Example 7: Shell tankers dried petrol stations

Unions representing tanker drivers working for Shell reached a deal with employers in their pay dispute in June 2008, averting further strikes. The two days stoppage of oil supply led to hundreds of petrol stations across Britain running out of fuel. Shell’s 284 (about 50%) petrol station were affected. Union pushed management for a 13% pay rise. (BBC News online; 21st July 2009) Example 8: Management forced to agree to demands

More than 5,000 African Americans and Latina immigrant workers at the Smithfield Pork Processing Plant, New Carolina, USA, voted for the four-year contract with management after a 4 year long struggle. The contract, guarantees sick leave, time-and-a-half holiday pay, and a $1.50 pay raise to be phased in starting with an immediate 40 cents. (Raleigh News & Observer, July 3) Example 9: South Africa’s petroleum worker

Unions in the South Africa’s petroleum industry agreed to a two-year wage deal on July 20th 2009, which will see workers, receive a 9.5% raise this year. The
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new wage package was agreed following mediated talks between unions and companies in the National Bargaining Council for the Chemical Industry. (Wall Street Journal Online, 19th July 2009) Example 10: The “Crazy” train drivers Drivers working for East Midlands Trains are going on strike after rejecting the firm's latest pay offer. Managers at the company have described the strikes as "crazy" - saying some of the 400 drivers had been offered a pay increase of around 6%. Aslef said 75% of drivers had voted for strike action. East Midlands Trains said it had offered its drivers an above-inflation pay deal. The drivers on the London services have been offered a 3% increase, taking their pay to around £38,500 a year. (BBC Online’ 21st July 2009) Example 11: Cadbury’s Crunchie pay deal Cadbury’s, is facing a strike action as its workers begin a vote on industrial action over pay that could affect Cadbury’s plants supply. The Unite union claim that management dishonoured guaranteed 3 year pay deal in its final year, while managers and shareholders carved up a 30 per cent in profits, made by the hard work of the employees. (Times online; 21st July 2009)

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TECHNOLOGY
Technological advancement in 21st century has created favourable opportunities as well as challenges for management in deciding the relative pay rates for their employees. Increased dependence on technology has shifted the demand of labour from manual workers to more skilled human resource. On the other hand it is creating unemployment for technologically less advanced labour markets. (HR magazine, July 2009)

Technology advancement has both negative and positive impact on management’s decision in deciding relative pay rates of the employees. Depending on the nature of it, technology may increase managements freedom by shifting focus of the job from human skills to technology used. On the other hand technology may impose hostility on management because of its functionality requiring highly skilled labour. (Management Today)

Attributes of technology like cost efficiency, accuracy and reliability; lures organizations to confidently invest in acquiring technology and the skilled labour to use it. Technology creates new skills in labour market, reduce cost and facilitate accuracy and time saving reducing operating costs. (Management Today, June 2009) Example 12: Online recruitment Buckinghamshire county council planed to save £690,000 in the next year with a new online recruitment system that goes live this month. (HR Magazine, 24 July) The argument that new technology has relieved management from constrains of controlling pay rates have become more complicated when considered with the skills required for running technology deployed. (HR Magazine, August 2009) Example 13: Technology cost Vs Labour cost In 1983 the Upjohn Institute for Employment Research forecasted the existence
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of 50,000 to 100,000 industrial robots in the United States by 1990, resulting in a net loss of some 100,000 jobs. (International Management 38; July 1983) Example 14: ew technology, new challenges

A number of studies predict that new technology generates new products, new services and therefore new challenges for managements to decide relative pay rates. Less skilled may be required in some production process where specific tasks are taken over by technology. (The Times Online, 27th July 2009) Example 15: Using technology to control pay rates Use of ATM machines has change the way of customer services in banking industry. This technology has reduced the work load on cashiers in banks allowing management more freedom control pay rates of cashiers. Example 16: Suffice knowledge is Technology! An extract By; R. H. Mabry and A. D. Sharplin, A Policy Analysis Report: In everyday language, "technological advancement" means some change allowing the production of more goods and services. However, any better, faster, or more efficient way of producing is a technological advancement; better knowledge will suffice, even without a new tool or machine. (Mabry & Sharplin, 1986)

ADJUSTI

G TECH OLOGICAL CHA GES

Technological changes are directly effecting management decision with respect to pay rate. It will make its maximum contribution in changing working conditions, facilitating management processes and operational efficiency if appropriate public and private policies are adopted to support the adjustment to new technology.

Technological change is an essential component of dynamic and expending economy. It will not produce a massive unemployment rate, although individual has to face painful and costly adjustments. Expending economy where international trade plays a rapidly growing role, must adopt technological development in the manufacturing and nonmanufacturing sectors. (Wren, 1979)
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Example 17: Effect in office or admin pay rates Introduction of computers in office work space have diminished the use of typist, stenographers and payroll clerks giving management the strength to offer less pay for such jobs in organization. Example 18: Car park automation The car park attendant replaced by automatic ticket machines and barriers using access control technology have increased managements freedom in deciding pay rates for such jobs.

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PRODUCT MARKET
Another restriction on management action in deciding relative pay rates is the nature of the ‘product market’ in which it operates. The influence of the product market, in this regard, depends on how important labour costs are in deciding product costs and how important product cost are for customer of that particular product. (Torrington, 2004) Example 19: Less freedom to increase pay rate In a labour intensive and low-technology industry like catering, there will be such pressure on labour costs that the pay administrator has little freedom to increase pay rates in favour of labour. (Torrington, 2004) Example 20: Less freedom to reduce pay rates In an area like magazines printing, the need of the publisher to get the print on time is important that labour costs, however high, maybe little concern. In this situation the pay negotiations have much less freedom from managers prospective. (Torrington, 2004) The organizational management can not be ineffective to characteristics of the product market. Globalisation and revolution in information technology has further opened new avenues for organizations to face and navigate for success in their market.

CHARACTERISTICS OF PRODUCT MARKET
The understanding the characteristics of the products market provide a comprehensive insight into the factor effecting the managements decision regarding relative pay rates of the labour. Knowledge and technical expertise enables management to understand characteristics of both the products and the market. The product market decisions review current and potential product offerings in terms of suitability for the market or segment. (Keegan & Green, 2005)

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Example 21: Economic & product life cycle Across the industries there is huge difference in managements’ ability to influence the pay rates. Markets vary in nature and their characteristics during economic cycles of the both the product and economy as a whole, ultimately influencing the pay rates of the working to produce them. (Hildebrand, 1963, pp. 260-99) Organizations have to plan for these important strategic challenges in product market; What products will be offered (i.e., the breadth and depth of the product line) Who will be the target customers (i.e., the boundaries of the market segments to be served)? How will the products reach those (i.e., the distribution channel)? How much the products should be priced at? How to introduce the products (i.e., the way to promote the products)?

• •

• • •

Example 22: Inter-industry pay difference during current Recession Private sector have seen pay increases differing between industrial sectors, reflecting the uneven impact of the recession. The largest contrast is between the engineering industry, where pay freezes have affected about 50 per cent of firms, and the finance and banking sector, where increases of 3 and 4 per cent have been seen. Indeed, the average increase among the big five banks this year is 3.9 per cent. (People Management magazine, 16 July 2009) Example 23: External relativity of pay rates Over 75 percent of the employers look to the external market when determining pay rates for senior managers, but only 55 percent say they do so when setting rates for the manual staff. (CIPD 2004, p 21) Following factors needs consideration in setting up pay rate system; Involve all workers, full time and part time. Focus what objectives the company needs, e.g. increased productivity. Think about how workers might be able to earn increases to their basic pay, through annual increases, bonuses, or other payments based on performance assessment.
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• • •

INTERNAL LABOUR MARKET
The internal labour market (ILM) is an administrative organization where the remuneration for the labour and distribution of labour resources are regulated by a body of administrative rules and procedures (Makovskay, 2008). Conceptually, internal labour market means to promote the employees within the organization which ultimately enhance the confidence and motivation of employees regarding job security and wage raise. ILM is usually associated to large organizations with unique skills of employees not readily available in the market.

ADVA

TAGES FOR THE EMPLOYERS

The advancement of the workforce inside the enterprise diminishes the costs of employment and selection of the employees, and decreases the risk of making a mistake when filling up vacant places (Makovskay, 2008). Grooming the ILM allows management to invest more in internal labour’s pay rate instead of rely on external labour market for vacancies.

ADVA
• • •

TAGES FOR THE EMPLOYEES

employees get guarantees of employment and permanent income; possibility of promotion; the search for a new working place outside the enterprise takes much time and is quite expensive; provision of social guarantees and social defense

The design of pay systems in ILM relates primarily to a socio economics relationship in witch employee, getting above mentioned benefits, compromise with employer on wage rate .In normal circumstances an enterprise level of wages can only be bullish, not bearish, or it will cause dissatisfaction in employees; the last is an external equity, that is, the pay structure of enterprises with compared to industry professionals with similar consistency. (Berman et al, 2001)

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Example 24: A socio-economic relationship Does it mean that employees are happy even at relatively low pay arte? Internal labour market exists in an environment of socio-labour relations. The management in such organizations retain their employees, by providing them training and progress within organization. Inter-firm competition between employees is one of the most important processes in this regards. The incentive for such competition can be either qualification (i.e. a higher skill-category) or economic (i.e. a higher salary, or bonus), or career growth (i.e. quicker promotion). Example 25: Civil Services and HS In UK civil service is an excellent example of the internal labour market. The employees are trained and promoted in a pre-designed arrangement. Civil service in UK overwhelmingly prepare employees for their organization through a comprehensive training programme, starting from basic low skilled roles to senior level post. The pay structure is well defined and kept in accordance with employee’s capabilities. Example 26: Train and Progress NADRA (National Databases & Registration Authority, Pakistan) employ work force for its distinct nature of services and then train and promote to achieve the desired our put. In this case the employer do not have to rely heavily on external labour market to search and recruit suitable candidates. Example 27: Maintaining Organizational Culture One of the advantages of retaining internal labour even at relatively high pay rates is to reduce the cost of recruiting and maintaining organizational culture intact. Entry into the contemporary large organisation may require intermittent periods of employment as a temporary agency worker, rather than direct recruitment on to a permanent contract subject to a pre-defined period of probation.

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Example 28: Limited Ports of entry The classical model of an ILM refers to the pricing and allocation of employees within the organization rather than through the labour market (Makovskay, 2008). This ideal type is characterised by limited ports of entry for recruitment, regulated job ladders for each group of workers, internal training and rules regarding job security. In response to complex configurations of changing conditions in the internal and external labour markets, for low-skilled workers entering today’s ILM structures, the transformation in career path and opportunities for skills development is dramatic.

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HANDLING DISMISSALS DISMISSALS IN A HIGHLY LITIGIOUS SOCIETY
Laws governing employment related issues are devised to protect people from means of exploitation by public and private business organizations employing them. These laws create a balance in society by providing set standards of procedures to be followed in most critical issues, like hiring and dismissing employees. The employment relationship is considered by management scientist and economist as process of socio-economic exchange with open ended contractual relationship. In employment, unlike other contacts, both parties intend to continue until one party indicates to terminate the contract. (Beardwell, Holden, Calydon, 2004)

TYPES OF DISMISSALS
On the basis of the outcome of the dismissal we can categorise them as being fair, unfair, constructive and wrongful dismissal. A fair or unfair dismissal depends on ‘reasons of dismissal’ and employer’s ‘procedural action’ during dismissal process. On the other hand, Constructive dismissal occurs where an employee resigns as a result of behaviour of employer organization, like; cutting wage, unlawfully demotion, harassment, changing the location etc. Wrongful dismissal is where a contractual term is broken in the dismissal process, e.g. dismissal without giving proper notice. (Torrington, Hall & Taylor, 2004) Example 29: Terminating Employment Contracts Employment contracts can be terminated in variety of ways for example resignations, death of employee, redundancy and by sacking an employee i.e. the ‘dismissal’. Dismissals could be categorised as fair, unfair, wrongful, and constructive depending on the reasons laid down in terminations. It is the ‘unfair dismissal’ that needs to be carefully examined to avoid any legal action against

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the decision of management. Employment tribunal justifies the fairness or unfairness of the dismissal of an employee(s) if management’s action is challenged before tribunal judge.

IMPACT OF DISMISSALS
Dismissing an employee can be complicated and has to be done carefully with consideration to prevailing rules. Organizations can not afford be inconsiderate to legal implication of dismissal and unsure about the consequences. Handling dismissals carefully is also important to minimize its impact on behaviours of the person who will be leaving and rest of the employees of organization. A poorly managed dismissal can break the trust and loyalty of employees. Just as any management task it needs to be done well. Although it is an emotionally charged job a competent manager can carry out this onerous duty whilst maintaining integrity and being seen as fair. The process must be clear and legitimate to ensure that procedural justice is seen to be carried out. (Storey, 2000)

Employers need to ensure that they have good reasons for using length of service in redundancy situations and, to be on the safe side, that they only use it as part of any selection criteria and not the sole criteria such as in the case of ‘last in, first out'. Example 30: Last in, First Out The Court of Appeal handed down its decision in the Rolls-Royce Plc v Unite (Trade Union) case in which it was claimed that by taking length of service into account in their redundancy criteria, Rolls Royce had acted in an agediscriminatory manner against younger workers (who were less likely to have accrued long service). It agreed with the High Court's decision that taking long service into account is discriminatory, but that it can be a proportionate means of achieving the legitimate aim of carrying out redundancies "peaceably". In other words, it could be justified.

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Example 31: Dismissal without Following Procedures A sweeper in Edinburgh took employer to an employment tribunal complaining against unfair dismissal, when made redundant without warning or notice. In 2006 January Sweeper Mr Whiteside was told the downturn in the economy meant the firm had to dismiss him with immediate effect. Employment judge concluded the dismissal was automatically unfairly as no procedure was followed. The employment tribunal awarded Mr. Whiteside, a total of £40,075 as compensation for unfair dismissal, breach of contract, redundancy payment and mishandling procedures. (The Herald; 21st July 2009)

DOCUME

TATIO

&I

VESTIGATIO OF ACTIO S

Management needs to prepare document trail just in case it end up in an unfair dismissal process. The help of legal advisor in such cases is essential. A clear policy covering expected conduct, rules, dismissal procedures and performance requirements are a must, no matter how small the company is. (Beardwell, Holden, Calydon, 2004)

The following example illustrates that fact that the management leapt at the opportunity to dismiss the employee, without carrying out a full and proper investigation. The dismissal was held to be unfair, notwithstanding the false expense claim by the employee. Example 32: Investigation before Dismissal Brick Services Limited accused their employee, namely Thomson, of submitting a false expenses claim, following which he was dismissed. It was established at the Employment Tribunal that for sometime the Company had been putting pressure on the employee to agree to a change to less favourable terms and conditions of employment. The employee steadfastly refused to agree to the change. The Tribunal concluded that they could not have dismissed him fairly on the grounds that he refused to agree to the new terms but that this was the real motivation for the dismissal. (Thomas Eggar LLP; 21st July 2009)
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It is important for employers who find themselves in a situation where they unsure of the circumstances surrounding work life to ensure that a thorough investigation is carried out and they are proceeding with consistency and in a fair and proper manner when they wish to dismiss their employees. The legal actions illustrate that Employment Tribunals also look behind the apparent reasons for dismissals and probe deeper to establish the real reasons. Employers who find themselves in such situations must ensure that a thorough investigation is carried out, that they are seen to be acting consistently in a fair and proper manner when they wish to dismiss. Example 33: Tribunal found real motive behind dismissal East Lancashire Coach Builders dismissed Mr. Hilton. The Employment Appeal Tribunal concluded that the real reason for Mr Hilton's dismissal was not misconduct, but, rather was the management buy-out situation and his relationship with the other Directors. (Winston Solicitors, 19th July 2009) Example 34: Constructive dismissal upheld R F Hill Ltd v. Mooney 191, the employment appeals tribunal upheld a claim of constructive dismissal where the employers unilaterally altered the pay structure in an organization and cut the wages of the employees without consulting them. (Winston Solicitors, 19th July 2009) Wrongful dismissal is different from unfair and constructive dismissal. The reasonableness or otherwise of the employer’s actions in a case of wrongful dismissal is immaterial. All that court has to consider is whether the employment contract has been breached. If it has, and dismissal is the result, then it is wrongful although it is not necessarily unfair. (Kelvin & Cheatle; 2001) Example 35: Fair grounds but without procedures In Gunton vs. Richmond-upon-Thames, London Borough Council 1980, G was employed under a contract which included a provision for one month’s notice and also prescribed a procedure for the dismissal of employees on disciplinary
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grounds. The employer’s dismissed him for disciplinary reasons with one month’s notice but did not follow the right procedure. The Court of Appeal held that G had been wrongfully dismissed. G was awarded damages for the amount of notice he was not provided with. (Winston Solicitors, 19th July 2009)

FAIRLY DISMISSING AN EMPLOYEES
After careful examination of the situation surrounding dismissals, an employer can fairly dismiss an employee on several grounds. To understand the ability of management with respect to dismissal a brief insight into the managerial prerogative is described. A dismissal could be carried out on the basis of following reason.

CO

DUCT

Conduct of the employee with customers, colleagues, management or any person even in private life of the employee could be considered as basis of dismissal. Example 36: Gate Gourmet workers Six Gate Gourmet workers, sacked after taking part in a 2005 dispute at Heathrow airport, lost their appeals against unfair dismissal. The Employment Appeal Tribunal (EAT), in its ruling clarified that employer's rights to dismiss unofficial strikers was justifiable as six appellant acted in misconduct by staging a wild cat industrial action at Heathrow. (Personnel Today; 20th July 2009)

CAPABILITY
Insufficient qualification to perform a job although this must be carefully managed clear guidelines must be set out in a draft policy. Example 37: Setting targets for employees In a typical sales environment it is often best practice to set out performance criteria right at the start of the employment. Monitoring the progress of the
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employee against such criteria and discussions to improve will reduce friction as a resulting from decision to terminate employment.

LEGALITY
An employee can be dismissed if the one of the legal requirement of performing a job is breached or not anymore producible from employee. This could be the result of employee’s personal action or due to new government regulations imposed on the business. Example 38: Drivers losing License In case of losing a driving licence due to some traffic law violation, the drivers working in delivery or any such company where driving is a substantial element of the job will not be able to perform their jobs as required. Similarly, security guards who could not obtain SIA licence will not be able to continue employment.

REDU

DA CY

Redundancy occurs when the work for which the person was employed has dried up or has been outsourced. It could also be the result of significant change in the nature of job.

OTHER SUBSTA

TIAL REASO S

Any other reason not covered by the above could be considered as the lawful reasons for dismissal, like retirement, strikes. It is also a minefield as it has to be grounded in some substantive issue related to the job. Example 39: Whistle blowing ruling An IT teacher, Mr. Evans, resigned and claimed constructive dismissal following a formal warning issued after he had used a pupil's PC to disable
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school accounts and demonstrate flaws in the school's computer network security. The Court of Appeal rejected Mr. Evans's argument that the circumstances should be viewed as part of whistle blowing. (Thomas Eggar LLP, 17th July 2009) Example 40: Proselytizing in the workplace In the case of Chondol v Liverpool City Council, the Employment Appeal Tribunal decided that dismissing someone on grounds of inappropriate proselytisation did not amount to unlawful discrimination on grounds of religion or belief. Mr Chondol, a committed Christian, was dismissed following proper disciplinary proceedings, on grounds of promoted his religious beliefs at work place. (Thomas Eggar LLP, 17th July 2009)

EMPLOYME

T LAWS A D ACAS CODE OF PRACTICE

Recent changes in Employment Laws In deciding whether the employer acted reasonably in dismissing the employee the tribunal will take account, amongst other factors, of whether he or she followed appropriate disciplinary procedures. From October 2004 statutory dismissal and disciplinary procedures came in to force to further formalize the procedures adopted by management in terminating the employment contract (Winston Solicitors, 19th July 2009). ACAS code of Practice On April 2009, the legislation on dismissals and grievance procedure are replaced by new ACAS Code of practice. Here are some features of the ACAS code of practice. Issues be dealt with promptly and consistently,

Employers carry out necessary investigation, Employers inform employees of the basis of the problem and given them an opportunity to put their case in response, Employers inform employees of their right to be accompanied at disciplinary and
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grievance meetings,

Employees are given the opportunity to appeal against any formal decision made.

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CONCLUSION
Highly competitive markets have strained the organizational management to evolve their strategies focusing reduced operational costs while maintaining production efficiency at the same time. Decisions of management in determining pay rates and reward systems for employing human resources have evolved underlying issues to be addressed for overall triumph of the organizations. This has increased the importance of considering all those factors which can effects the profitability of the organization and performance of its human resource.

Internal labour market factor appears to be leaning towards the freedom of management, as far as pay rate decisions are concerned. Labour market, technology, product market and collective bargaining can influence management’s freedom of action according to their characteristics and relativity to industry. Effects of these factors can help management in overcoming the constraints as well as severely restricting the managerial prerogative. Foe example, technology provide opportunity to control labour cost but at the time it requires scarcely available labour with particular skills.

Dismissing an employee is a task a manager will have to do at some time in his/her career, although it is a difficult and emotional decision, it can be managed as long as a clear process is in place. It is very likely to fall trap of “macho management” but it can potentially hold organisation liable for huge financial loses and negative publicity. Besides letting people go in a nonthreatening and honourable way, enabling them to leave with dignity, and allowing them to rationalize the process is good management style and a sign of stewardship for the people who work for you.

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REFERENCES

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Storey J., Wright, Patrick, M., & Ulrich, D., 2008, The Rutledge Companion to Strategic Human Resource Management (Hardcover) 1 edition, Rutledge Torrington, D., Hall, L., & Taylor, S., 2004; Human Resource Management, 6th ed; Financial Times/ Prentice Hall Huselid, Mark A., 1995; ‘The Impact of Human Resource Management Practices on Turnover, Productivity and Corporate Financial Performance’, by the Academy of Management Journal, Vol. 38, No. 3 (Jun., 1995), Academy of Management Pfeffer, J. & Langton, N.; 1993, ‘The Effect of Wage Dispersion on Satisfaction, Productivity, and Working Collaboratively’; Administrative Science Quarterly, Vol. 38, No. 3 (Sep., 1993), Johnson Graduate School of Management, Cornell University. Kahn, Lawrence M., 1998; ‘Collective Bargaining and the Inter-industry Wage Structure. International Evidence’; Economica, New Series, Vol. 65, No. 260 (Nov., 1998), Published by: Blackwell Publishing on behalf of The London School of Economics and Political Science and The Suntory and Toyota International Centres for Economics and Related Disciplines. Armstrong, Michael 2006; A Handbook of Human Resource Management Practice 10th Ed, London: Kogan Page. Wren, Daniel A.; 1979, The Evolution of Management Thought, 2nd ed. John Wiley & Sons, New York. Keegan W. J. & Green M.C, 2005, Global Marketing, 4th edition, Pearson, Prentice Hall, pp 247-249. Allen .K, & Balakrishnan A; 2007, UK Businesses feel the pinch as sterling hits 26-year high, Berman, Evan M., James S. Bowman, Jonathan P. West and Montgomery Van Wart. 2001. Human Resource Management in Public Service: Paradoxes, Processes and Problems. Thousand Oaks, Sage Publications, Inc.
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Makovskay, Natasha. 2008, ‘The Internal Labour Market & Development’ Publisher; Facta Universitatis, Economics and Organization, Vol. 5, No 2, pp. 151 – 160. Grimshaw D., Vincent, S., Willmot, H., 2002, Going privately: partnership and outsourcing in UK public services, Wiley Wilson. R and Gilligan. C, 2005, Strategic Marketing Management – Planning, Implementation & Control, third edition, Elsevier Butterworth-Heninemann, UK CIPD 2004, Reward management, A survey of policy and practice, London, CIPD Thompson, A.G., 1986; ‘Work Incentives and the Efficiency of Internal Labour Markets’, Journal of Industrial Relations, Vol. 28, No. 1, pp 40-56 Storey, John; Human Resource Management: A Critical Text, 3rd Edition (2000); Thomson Learning Hildebrand, G. H., 1963 ‘External Influence and the Determination of the Internal Wage Structure, in Internal Wage Structure’, North-Holland Publishing Company, Amsterdam: pp. 260-99. Mabry, R. H. and Sharplin, A. D.; “Does more technology create unemployment? Policy Analysis number 68, March 18, 1986, [Accessed: 4 AM, 27th July 2009]. Royston E Morgan, Dismissing an Employee - The Seven Steps of Good Management Practice, The Economist Nov 8, 2008 http://www.guardian.co.uk/business/2007/oct/31/money.ukeconomy. www.businesslink.gov.uk/bdotg/action/detail?type=RESOURCES&itemId=1073 793715(23.07.09). news.bbc.co.uk/1/hi/business/6914561.stm) 22.07.09 news.bbc.co.uk/1/hi/england/london/8090376.stm) 22.7.09 www.wisegeek.com/what-is-collective-bargaining.htm The Times Online, 27th July 2009) www.thetimes100.co.uk/theory/theory-unemployment--335.php, [Accessed: 27th July 2009] www.businesslink.gov.uk/bdotg/action/detail?r.lc=en&type=RESOURCES&item Id=1074406752&r.s=sl http://www.brantfordexpositor.ca/ArticleDisplay.aspx?e=1654332 (Accessed on 19/07/2009 03:08:49 Raleigh News & Observer, July 3; www.newsobserver.com/news/story/1593749.html 15:08:57 (accessed; 21/07/2009

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Collective Bargaining and the Inter-industry Wage Structure. International Evidence’; Kahn, Lawrence M., 1998; ‘Economica, New Series, Vol. 65, No. 260 (Nov., 1998), Published by: Blackwell Publishing on behalf of The London School of Economics and Political Science and The Suntory and Toyota International Centres for Economics and Related Disciplines. Handbook of Human Resource Management Armstrong, Michael 2006Practice 10th Ed, London: Kogan Page. The Evolution of Management Thought, 2nd ed. Wren, Daniel A.; 1979, John Wiley & Sons, New York. Global Marketing, 4th edition, Keegan W. J. & Green M.C, 2005, Pearson, Prentice Hall, pp 247-249. UK Businesses feel the pinch as sterling hits 26-year high, Balakrishnan A; 2007, Allen .K, &

Human Resource Management in Public Service: Paradoxes, Processes and Problems. Berman, Evan M., James S. Bowman, Jonathan P. West and Montgomery Van Wart. 2001. Thousand Oaks, Sage Publications, Inc. The Internal Labour Market & Development’ Makovskay, Natasha. 2008, ‘Publisher; Facta Universitatis, Economics and Organization, Vol. 5, No 2, pp. 151 – 160. Going privately: partnership and outsourcing in UK public services, Grimshaw D., Vincent, S., Willmot, H., 2002, Wiley Strategic Marketing Management – Planning, Implementation & Control, third edition, Wilson. R and Gilligan. C, 2005, Elsevier Butterworth-Heninemann, UK Reward management, A survey of policy and practice, CIPD 2004, London, CIPD Work Incentives and the Efficiency of Internal Labour Markets, Thompson, A.G., 1986; Journal of Industrial Relations, Vol. 28, No. 1, pp 40-56 Resource Management: A Critical Text, Storey, John; Human 3rd Edition (2000); Thomson Learning www.guardian.co.uk/business www.businesslink.gov.uk. www.bbc.co.uk
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