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One of the major forces that will influence compensation and benefits over the next few years is the imbalance between demand and supply of talent. Demographic analysis show a reducing active workforce primarily due to continued aging of workforce population. Other HR issues like dearth of leadership pipeline and capabilities, attraction and retention of key talent, increased need to plan for retirement, new pension rules and legislation, as well as rapidly growing economy such as the threatening rise in oil prices will continue to impact compensation and benefits over the next few years.

In view of this, the companies should keep a watchful eye on market trends and continue innovating on C&B / total reward in order to be competitive in the market, for examples:

- designing new benefits;

- providing aggressive and innovative reward / incentive programs for top staff as well as selective functions such as sales and marketing;

- tailoring training and development programs.

Some of the impact of the changing business envinronment on employers’ compensation and benefits practices including:

- performance related pay / incentive pay in order to protect the organisation in an economic downturn environment.

- business process outsourcing in order to reduce costs, increase efficiency as well as to focus more on strategic initiatives.

- companies will increasingly customise benefits to meet each employee’s need to the maximum extent possible, for example cost sharing and co-payment at the claims level.

- both government and private sectors are to re-examine the current status of pension / retirement plans.

Therefore, HR should play a more strategic role in business in order to be in a stronger position to influence the business, to prepare the businesses for the future.

In the 21st century business context, great companies are focusing to:

1. becoming the employer of choice — great companies understand that corporate culture is a dramatic force behind every employer of choice. Therefore, great companies create a great culture for the workplace, where people want to work and remain working. When the company grows and its mission evolves, workforce changes and company value changes, they redefine the culture.

2. winning the war for talent — great companies react to current and future workforce size and demographic (generation-X, Y and baby boomer) in the labour market in order to retain key employees in their companies. They know how to retain over-50 baby boomers, who are loyal and sacrifice; those at 40’s, who believe hard work will take them to the top; those at 30’s, who seek a balance between work and home; those at 20’s who believe in technology.

 3. leveraging an indispensable player: technology — in this "e-generation", great companies are using company website to add momentum to their branding effort. Portal technology provides information internally and it makes HR process more transparent. It establishes image and culture of a company. Meanwhile, self-service and collaboration increase the workforce empowerment and autonomy, at the same time lighten HR administration load.

Therefore, in the 21st century, HR is expect to define the business case for change, communicate a vision of the desired future state, engaging others, shape a sound implementation plan and follow through to achieve sustained results.

New HR functional skills and competencies:

1. from "doing" to "designing and measuring" — HR executives must create operating models that deliver human resource services through efficient, flexible processes, at the necessary service levels, either within the company or through outsourced relationship. HR leaders must develop fast analytical skills, be able to manage relationships that extend outside the company with skills of persuasion and negotiation, and possess the financial descipline to assume an "audit" function of operating model performance.

2. from "reactive activity" to thoughtful "what if" — the workforce is changing to become more diversified - race, gender, age, religion and cultural identity. HR executives must be able to create a long-term workforce strategy that addresses uncertainties related to future business needs. Skill in contemporary strategy formulation, scenario planning, and option analysis will be essential to guiding the firm through the uncertainies and risks ahead.

3. from "employee satisfaction" to "customer impact of employee engagement" — the HR executives must be able to raise the employee engagement with work, creativity and passion, which is the single most powerful lever to improve productivity, create a powerful customer satisfaction and bottom line performance. HR executives need to understand these links and articulate them clearly in strategic discussions. And they need world-class skills for capturing both "hearts and minds"- through targeting, and communication.

4. from "equality, treating everyone the same" to "fair, but customised" — HR leaders must create more flexible "deals", recognising individual strengths, needs, preferences, and values, as individuals have widely differing values and assumptions about work. HR executives must have strong "marketing" capabilities - in survey research, segmentation, targeting, in order to understand and customise for the employees the Company wants and needs.

The HR profession is undergoing a dramastic transformation. Last but not least, HR executives must possess skills in managing large scale transformation and able to maintain a global perspective.

According to Dave Ulrich in his book Human Resource Champions: The Next Agenda for Adding Value and Delivering Results, there are 4 major roles played by the HR Department in respective HR management functions:

1. Technical Expert

2. Employee Champion

3. Change Consultant

4. Strategic Partner

HR as a Technical Expert

HR applies expertise in full range of HR arena to support organisation’s mission and needs. It uses surveys and other tools to provide information to help create an efficient and effective work environment. It adapts information technology to HR management.

HR as an Employee Champion

HR focus on develop other’s talent to maximise human potential. It mentors individuals to develop talent. It assesses and balances competing values e.g. policies and mission needs. It builds trust relationship.

HR as a Change Consultant

HR applies organisational development strategies. It innovative strategies including identifying and recommending solutions to various personnel and HR issues. It works in a team and communicates well.

HR as a Strategic Partner

HR contributes to problem solving and decision making of the organisation. It develop relevant policies and programmes according to the organisation’s vision. It designs and/or carries out HR service incorporate business system applications.

HR should defined not by what it does but by what it delivers.

Traditionally, Human Resource is an agent to conduct transaction at the request of the employees and managers.

In the new model of Human Resource Management, Human Resource plays a role in the organisational’s strategic activities as a part of solid foundation for organisational succeed. Human Resource Management is defined as the design of formal system in an organisation to ensure the effective and efficient use of human resource talent to accomplish organisational goals.

Human Resource Management is usually organised into broad management practices with their associated activities, as follows:

Recruitment and Selection

- Maintain the right mix of people with the knowledge, skills, and abilities to accomplish the jobs of the organisation.

- Create meaningful jobs that link to the organisation’s vision / mission.

- Provide a good mechanism to take a hard look at how the organisation is perceived.

- Help to retain effective employees.

Compensation and Benefits

- Provide fair and consistent treatment for employees.

- Provide employees with on-going feedback about their performance and reward them with a fair reward and recognition system.

Training and Development

- Provide employees with the knowledge and skills necessary to perform their current jobs.

- Prepare employees for future job responsibilities.

Industrial Relations and Employee Relations

- Provide a structure that helps employees be effective at their work.

- Nurture an organisation culture that supports and motivates employees.