Compensation Principles of a Fair Compensation System n

Compensation

Principles of a Fair Compensation System n A fair day’s pay for a fair day’s work n An equitable share of the revenue and profits the employer receives n Quality benefits including medical and retirement benefits n Opportunity to move into higher skill jobs at higher pay, with experience.

Human Resources View n Compensation systems further the goals of the employer: q Recruit and retain employees q Increase or maintain morale q Reward or encourage peak performance q Reduce turnover and encourage loyalty n Compensation will be perceived as fair if its components are developed to maintain internal and external equity.

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Types of Pay Systems n Hourly Pay n Variable Pay Plans n Commission Plans n Merit Pay/Pay for Performance

Merit Pay/Pay for Performance n Rationale: q q n n pay should be based on performance better performance should get higher pay Reward good work and motivate more Periodic appraisals done by supervisors Morale, productivity, retain valued ‘ees Arguments against q q Poor design can backfire, reward wrong behavior Bias and favoritism. Fear and distrust

Commission Sales Plans n Sales q q q n n n Retail stores, Customer service jobs Plans change regularly Employer controls plans and targets Good service drives profit and growth Worker earnings flow directly from service Arguments against q q Is the “earnings opportunity” real? How to insure pay for time not worked Union needs to understand police the rules Probably cannot negotiate what the rules will be

Variable Pay n Incentive Plans q q n Group Plans q q n Individual bonus Engineered rates Group Incentives Gainsharing Team Awards q Tied to overall corporate performance

Dealing with Variable Pay n Union Goals q q q n n Fair targets Fairly applied Changes regulated Contract language to govern plan Union Oversight q q q Time Study Steward Gainsharing committee Access to company financial information

Hourly Pay, Progression Schedules n n Driven by seniority Predictable and Dependable Backload, Frontload, Even dollars at each step Our preference: An even percentage of increase at each step q q n n “Exponentialized Schedules” Calculator on the Intranet Slotting Red Circles and Lump Sums

For Practice n n n Bargaining with The Gotham Co, a business outsourcer, has 250 workers. Three titles: Clerks, Customer Service Reps and Technical Service Reps No established wage schedules, just wage ranges for each title Employer sees that a schedule could reduce turnover A maximum 8% increase over the term of a three year agreement

Titles and Wages n n Clerks q 30 employees, lowest wage $8. 25, highest wage $14. 00 q But 2 people make $15. 00 and one makes $16. 50 Customer Service Reps q q n Technical Service Reps q q n 200 employees, $10. 00 and $17. 50 6 people $18. 50, 2 make $19. 75 and 2 make $21. 00 20 employees, $15. 00 and $22. 00 2 people make $24. 00 and 1 makes $25. 00 Exponentializing Calculator