Chap015
Transcript of Chap015
McGraw-Hill/IrwinMcGraw-Hill/Irwin Copyright © 2008 by The McGraw-Hill Companies, Inc. All rights reserved.Copyright © 2008 by The McGraw-Hill Companies, Inc. All rights reserved.
Milkovich/Newman: Compensation, Ninth EditionMilkovich/Newman: Compensation, Ninth Edition
Chapter 15Chapter 15Union Role in Union Role in
Wage and Salary Wage and Salary AdministrationAdministration
15-15-22
Chapter TopicsChapter Topics The Impact of Unions in Wage DeterminationThe Impact of Unions in Wage Determination
Unions and Alternative Reward SystemsUnions and Alternative Reward Systems
Your Turn: General TechnologyYour Turn: General Technology
15-15-33
Impact of Unions in Wage Impact of Unions in Wage DeterminationDetermination
Impact on general wage and benefit levelsImpact on general wage and benefit levels
Impact on structure of wagesImpact on structure of wages
Impact on non-union firms, spillover effectImpact on non-union firms, spillover effect
Impact on wage and salary policiesImpact on wage and salary policiesand practices in unionized firmsand practices in unionized firms
15-15-44
Union Impact on General Wage LevelsUnion Impact on General Wage Levels
Unions do make a difference in wagesUnions do make a difference in wages– Union workers earn between 8.9% andUnion workers earn between 8.9% and
12.4% more than nonunion workers12.4% more than nonunion workers Size of gap varies from year to yearSize of gap varies from year to year
– During periods of higher unemployment, impact of During periods of higher unemployment, impact of unions is largerunions is larger
– During strong economies, union-nonunion gap is During strong economies, union-nonunion gap is smallersmaller
15-15-55
Union Impact on General Wage Levels Union Impact on General Wage Levels (cont.)(cont.)
Union-nonunion wage differentials in public Union-nonunion wage differentials in public sectorsector– Union employees earn about 22%Union employees earn about 22%
more than their nonunion counterpartsmore than their nonunion counterparts
15-15-66
Structure of Wage PackagesStructure of Wage Packages Three dimensions related to wage structureThree dimensions related to wage structure
– Division between direct wagesDivision between direct wagesand employee benefitsand employee benefits
– Evolution of two-tier pay plansEvolution of two-tier pay plans
– Relationship between worker wages and pay of Relationship between worker wages and pay of managers in union and nonunion environmentsmanagers in union and nonunion environments
15-15-77
Wage Structure: Division Between Wage Structure: Division Between Direct Wages and Employee BenefitsDirect Wages and Employee Benefits
Presence of unions adds 20-30% to employee Presence of unions adds 20-30% to employee benefitsbenefits
Greater percentage of total wage bill allocated Greater percentage of total wage bill allocated to employee benefitsto employee benefits– Union workers: 36.9% of total compensation Union workers: 36.9% of total compensation
packagepackage
– Nonunion workers: 27.8%Nonunion workers: 27.8%
– Higher costs due to – higher pension expenditures, Higher costs due to – higher pension expenditures, and higher insurance benefitsand higher insurance benefits
15-15-88
Wage Structure: Two-Tier Pay PlansWage Structure: Two-Tier Pay PlansTwo-tier pay structures are a phenomenon of Two-tier pay structures are a phenomenon of
union sectorunion sector– Contract differentiates pay based upon hire dateContract differentiates pay based upon hire date
– Employees hired after a target date will receive Employees hired after a target date will receive lower wages than their higher-seniority peers in lower wages than their higher-seniority peers in similar jobssimilar jobs
From management’s view, wage tiers are a From management’s view, wage tiers are a viable alternative pay strategyviable alternative pay strategy– Cost control strategy to allow expansion or Cost control strategy to allow expansion or
investmentinvestment
– Cost-cutting device to allow economic survivalCost-cutting device to allow economic survival
15-15-99
Wage Structure: Two-Tier Pay Plans Wage Structure: Two-Tier Pay Plans (cont.)(cont.)
From a union’s perspective, wage tiers are From a union’s perspective, wage tiers are viewed as less painful thanviewed as less painful than– Wage freezesWage freezes
– Staff cuts among existing employeesStaff cuts among existing employees
However, tradeoff bargained away equivalent However, tradeoff bargained away equivalent wage treatment for future employees wage treatment for future employees
15-15-1010
Wage Structure: Wages of Workers vs. Wage Structure: Wages of Workers vs. Pay of ManagersPay of Managers
Evidence indicates gap between workers and Evidence indicates gap between workers and their managers is 23% smaller in unionized their managers is 23% smaller in unionized firmsfirms
Managers in union firms receive higher wages Managers in union firms receive higher wages than nonunion managersthan nonunion managers
Narrowing of gap arises because worker wages Narrowing of gap arises because worker wages increase faster than managerial wages in increase faster than managerial wages in unionized firmsunionized firms
15-15-1111
Union Impact: The Spillover EffectUnion Impact: The Spillover Effect Employers seek to avoid unionization by Employers seek to avoid unionization by
offering workers wages, benefits, and working offering workers wages, benefits, and working conditions won in rival unionized firmsconditions won in rival unionized firms
OutcomesOutcomes
– Nonunion management continues to enjoy freedom Nonunion management continues to enjoy freedom from union “interference” in decision makingfrom union “interference” in decision making
– Workers receive “spillover” of rewards obtained by Workers receive “spillover” of rewards obtained by unionized counterpartsunionized counterparts
15-15-1212
Role of Unions in Wage and Salary Role of Unions in Wage and Salary Policies and PracticesPolicies and Practices
Role of unions in administering compensation Role of unions in administering compensation is outlined in contractis outlined in contract
Basis of payBasis of pay– Regular payRegular pay– Overtime payOvertime pay– Pay for nonstandard shiftsPay for nonstandard shifts– Incentive payIncentive pay
Occupation-wage differentialsOccupation-wage differentials Experience/merit differentialsExperience/merit differentials
– Automatic progression based on seniorityAutomatic progression based on seniority– MeritMerit– Combination of automatic and merit progressionCombination of automatic and merit progression
15-15-1313
Role of Unions in Wage and Salary Role of Unions in Wage and Salary Policies and Practices (cont.)Policies and Practices (cont.)
Other differentialsOther differentials– Pay to unionized employees employed by firm in Pay to unionized employees employed by firm in
different geographic areasdifferent geographic areas– Part-time and temporary employeesPart-time and temporary employees
Vacations and holidaysVacations and holidays Wage adjustment provisionsWage adjustment provisions
– Deferred wage increasesDeferred wage increases– Re-opener clausesRe-opener clauses– Cost-of-living adjustments (COLAs) or escalator Cost-of-living adjustments (COLAs) or escalator
clausesclauses
15-15-1414
Unions and Alternative Reward SystemsUnions and Alternative Reward Systems When employers face extreme competitive When employers face extreme competitive
pressures, unions are receptive to alternative pressures, unions are receptive to alternative reward systems linking pay to performancereward systems linking pay to performance
Union stipulationsUnion stipulations– Equity issue involves use of group-based measures Equity issue involves use of group-based measures
with equal payoutswith equal payouts– Minimize biasMinimize bias
Use of objective performance measures in unionized firmsUse of objective performance measures in unionized firms Use of measures based on past performanceUse of measures based on past performance
20 percent of all U.S. collective bargaining 20 percent of all U.S. collective bargaining agreements permit some alternative reward agreements permit some alternative reward systemsystem
15-15-1515
Types of Alternative Reward SystemsTypes of Alternative Reward Systems
Lump-sum awardsLump-sum awards– Given in lieu of merit increasesGiven in lieu of merit increases
Employee stock ownership plans (ESOPs)Employee stock ownership plans (ESOPs)– Give employees part ownership in companyGive employees part ownership in company
Pay-for-knowledge plansPay-for-knowledge plans– Pay employees more for learning a variety of Pay employees more for learning a variety of
different jobs or skillsdifferent jobs or skills
15-15-1616
Types of Alternative Reward Systems Types of Alternative Reward Systems (cont.)(cont.)
Gain-sharing plansGain-sharing plans– Align workers and management in efforts to Align workers and management in efforts to
streamline operations and cut costsstreamline operations and cut costs Profit sharing plansProfit sharing plans
– Allows union members to share wealth with more Allows union members to share wealth with more profitable firmsprofitable firms
15-15-1717
Exhibit 15.2: Union Perceptions of Gain Exhibit 15.2: Union Perceptions of Gain SharingSharing