Human resource management practices

While many firms have recognized the importance of recruiting and hiring diverse job applicants, they should also pay attention to the challenges newly hired diverse candidates may face after entering the company. It is possible that they are being assessed by unequal or unequitable standards compared to their colleagues, and they may not have sufficient access to opportunities and resources that would benefit them. These disparities could affect the career trajectory, performance, satisfaction, and retention of minority employees. Potential solutions include randomizing task assignments and creating inclusive networking and support opportunities.

It is not possible for a formal employment contract to detail everything an employee should do and when. Informal relationships, in particular trust, allow managers to arrange a business in a more productive way; high-trust firms are both more profitable and faster growing. For example, if they are trusted, managers can delegate decisions to employees with confidence that employees will believe the promised rewards. This is important because employees are often better informed than their bosses. Consequently, firms that rely solely on formal contracts will miss profitable opportunities.

Alternative dispute resolution procedures such as arbitration and mediation are the most common methods for resolving wage, contract, and grievance disputes, but they lead to varying levels of success and acceptability of the outcome depending on their design. Some innovative procedures, not yet implemented in the real world, are predicted to improve on existing procedures in some ways. Controlled tests of several procedures show that the simple addition of a nonbinding stage prior to binding dispute resolution can produce the best results in terms of cost (monetary and “uncertainty” costs) and acceptability.

Apprenticeship training programs typically last several years and require substantial investments by training firms, largely due to the associated labor costs for participants and instructors. Nevertheless, apprentices also add significant value in the workplace. One tool to measure the costs and benefits of training for firms is employer surveys, which were first introduced in the 1970s in Germany. Such cost–benefit surveys (CBS) help to better understand a firm's demand for apprentices and to identify market failures. Therefore, CBS are an important tool for designing effective training policies.

Environmental regulations are typically considered to be a drag on the economy. However, improved environmental quality may actually enhance productivity by creating a healthier workforce. Evidence suggests that improvements in air quality lead to improvements in worker productivity at the micro level across a range of sectors, including agriculture, manufacturing, and the service sectors, as well as at more aggregate macro levels. These effects also arise at levels of air quality that are below pollution thresholds in countries with the highest levels of environmental regulation. The findings suggest a new approach for understanding the consequences of environmental regulations.

Work-from-home possibilities are lower in developing than in developed countries. Within countries, not all workers have equal chances of transitioning from the usual workplace to work-from-home. Moreover, infrastructure limitations and lack of access to certain services can limit the chances of effectively working from home. Having a home-based job can affect, positively or negatively, work–life balance, levels of job satisfaction and stress, and productivity. The differential chances of working from home may end up increasing the levels of income inequality between workers who can and those who cannot work from home.

Remote work and digital collaborations are prevalent in the business world and many employees use digital communication tools routinely in their jobs. Communication shifts from face-to-face meetings to asynchronous formats using text, audio, or video messages. This shift leads to a reduction of information and signals leaders can send and receive. Do classical leadership and communication techniques such as transformational or charismatic leadership signaling still work in those online settings or do leaders have to rely on transactional leadership techniques such as contingent reward and punishment tools in the remote setting?

Many workers admit that at times they show up for work even though they feel sick. This behavior, termed “presenteeism,” is puzzling since most workers do not incur financial losses when staying home sick. The various reasons behind presenteeism are person-related (e.g. individuals’ health or job attitude) or work-related (e.g. job demands and constraints on absence from work). Working when sick can have positive and negative consequences for workers’ performance and health, but it also affects co-workers’ well-being and firms’ productivity. There are various strategies as to how firms can address presenteeism.

A growing number of firms offer compensation packages that link pay to performance. The aim is to motivate workers to be more efficient while also increasing their attachment to the company, thereby reducing turnover and absenteeism. The effects of performance-related pay on productivity depend on the scheme type and design, with individual incentives showing the largest effect. Governments often offer tax breaks and financial incentives to promote performance-related pay, though their desirability has been questioned due to large deadweight losses involved. The diffusion of remote work will increase the relevance of performance-related pay.

Higher inequality reduces capital accumulation and increases the informal economy, which creates additional employment opportunities for low-skilled and deprived people. As a result, informal employment leads to beneficial effects on income distribution by providing sources of income for unemployed and marginalized workers. Despite this positive feedback, informality raises problems for public finances and biases official statistics, reducing the effectiveness of redistributive policies. Policymakers should consider the links between inequality and informality because badly designed informality-reducing policies may increase inequality.