EStablishing Strategic Pay Plans & Labor Relations

8/9/2019 EStablishing Strategic Pay Plans & Labor Relations

1/20

HUMAN RESO

MANAGEME

Establishing Strategic Pay Plans

Labor relations & CollectiveBargaining


2/20

Why do Workers Organize; what do unions want

The urge to unionize often boils down to the belief on the part of the employees that it i

that they can protect themselves from unilateral management whims.

Low morale, fear of job loss & arbitrary management actions help foster unionizatio

employer unfairness and the unionspower are important

Unions have two sets of aims. (i) Union Security (ii) improved wages, hours, work

benefits for their members

Union Security

Union seek security for themselves. They fight hard to uphold their right to represent a firm

the exclusive bargaining agent for all employees in the unit


3/20

Types of Union Security

Closed Shop

Form of union security in which the company can hire only union membeunder the Right to Work Act* (used to describe statutory or constitutional provisrequirement of union membership for employment, it doesnt outlaw unions but does

of union security)

Agency ShopA form of union security in which employees who do not belong to the unio

dues on the assumption that union efforts benefit all workers

Preferential ShopUnion members get preference in hiring but the employer can still hire

Union Shopa form of union security in which the company can hire non union people, bu

union after a prescribed period of time and pay dues or they may get fired

Maintenance of membership arrangement Employees do not have to belong to the

maintain membership in the union for the contract period. These account for about 4% of u


4/20

The Collective Bargaining Process

When and if the union becomes your employees representative, a day is set for managem

meet & negotiate a labor agreement. This agreement will contain specific provisions cove

and working condition. Both management and labor are required by law to negotiate all

good faith

Good Faith bargaining is when both parties are making every reasonable effort to arri

proposals are being matched with counter proposals. Good Faith does not mean that n

come to halt

The process of negotiating starts with both employer and unions sending a negotiating teaof negotiating occurs where both sides put their positions across and then go back, di

stakeholders of their respective teams and try and come to compromise which is mutually

sides work with ample sets of data to bring their points to the table


5/20

The Collective Bargaining ProcessTypes of bargaining

items

Bargaining items are of three kinds viz. Mandatory, Voluntary and illegal items

Mandatory Items in collective bargaining are those that a party must bargain over if they

the other party viz. pay

Voluntary Items are those which can be introduced for a discussion only when there is joi

discussion

Illegal Items are those that are forbidden by law viz. Closed Shop type of union security

of Right to work, wherein only union members have to be hired exclusively which is demembers from a statutory right


6/20

The Collective Bargaining ProcessBargaining Stages

Actual bargaining goes through different stages and each stage there could be stumbling

different types of challenges arising in the bargaining process are shared below.

ImpasseA collective bargaining situation that occurs when the parties are not able to mo

settlement, usually because one party is demanding more than the other will offer

MediationIntervention in which a neutral third party tries to assist the principals in reachi

Fact FinderA neutral party who studies the issues in a dispute and makes a public recoreasonable settlement

ArbitrationThe most definitive type of third party intervention, in which the arbitrator usu

to determine and dictate the settlement terms. Unlike Mediation, arbitration can guarant

impasse.


7/20

STrikes

A strike is a withdrawal of labor and there are 4 main types of strikes viz. economic, w

Picketing

Economic A strike that results from a failure to agree on the terms of the contract th

benefits and other conditions of employment i.e. the second and most basic aim for formati

Unfair Labor Practice Strikea strike aimed at protesting illegal conduct by the employer

Wildcat StrikeAn unauthorized strike occurring during the term of a contract. Often,

account of an unprecedented instance or incident which triggers a protest from employee u

Sympathy StrikeA strike that takes place when one union strikes in support of the stri

Bank strikes in India where the SBI union goes on strike when the all India banking fede

parent union for all other nationalized banks go on strike, a sign of solidarity and a form o

BoycottCombined refusal by employees and other interested parties to buy or use the e

Inside Games Union efforts to convince employees to impede or disrupt production vi

pace


8/20

Grievances

The actual contract agreement may be a 20 or 30 pager document or longer which

conditionality's and possible situations in which different types of resolutions have been ag

Hammering out an agreement is not the last step in collective bargaining. No labor con

contingencies, hence having a grievance handling procedure in place brings about an

reprisal. A grievance procedure helps in implementing the contract on a day to day basis.

Some types of grievances can turn out to be subjective and may put pressure on the sustain

contract. Viz. Absenteeism, Insubordination, Plant rules.

All these types of grievances may actually be a symptom to a larger underlying problem a

the scope of these grievances and the extent at which grievances will have to be resolved w

the kind of discussion which Unions and Employers need to work upon to help in upholding along period.


9/20

Unions Today & Tomorrow

To understand union and its impact, its necessary to understand the interplay between un

brief labor law has gone through periods of strong encouragement of unions, to modcoupled with regulation and finally to detailed regulation of internal union affairs

The Indian labor movement is more than 150 years old. However after the first wave oliberalization in 1990, the rigid approach of unions started to change. Emerging IT / IT

firms where labor unions are absent.

In many ways today, Human Resource functions are playing an active role and at times aunion to circumvent and obstruct unions from forming, by fostering good values, st

productivity and objective based appraisal mechanisms.

In future Unions may become influential and stronger but the aggression may be replacedreforms and working in collaboration with employers instead of using the confrontationist a


10/20

Establishing Strategic Pay Plans


11/20

To establish strategic pay plans, Managers need to understand ba

determining pay rates. Some factors determining design of any pay p

union, company strategy and policy, equity

Components of Employee

Compensation

Direct Financial Payments(wages, Salaries, incentives,

commissions & bonuses)

Indirect Financial Pa

(Employer paid insura

etc)

Based on time Based on performance


12/20

Employee Compensation systems around the world operate within the

legislations. In India, non managerial level of employees and workers in

sector are only covered by the wage legislations. Indian Legislations enume

Pay Commissions for Government Employees

Minimum Wages Act of 1948

The Payment of Wages Act of 1936

The Equal Remuneration Act of 1976

The Companies Act, 1956

ESIC & EPF

Payment of Gratuity Act

Payment of Bonus Act

The Working Journalists &

Employees & Miscellaneous

(Statutory wage board to fix s

News paper employees

Employee Stock Options & Em

Scheme (Governed by SEBI)


13/20

Equity Theory of Motivation

The theory postulates that people are strongly motivated to balance bet

perceive as their inputs or contributions to their rewards. If a person perce

tension or drive will develop in the mind and the person will be motivateeliminate the tension

Different Forms of Equity & Methods used to

address this Equity

External refers to how a jobs pay rate in one

company compares to the jobs pay rate in other

companies

Method: Salary Survey of other companies in theindustry

Internal refers to how fair the jobs pay rate is

when compared to other jobs within the company

viz. salaries of Sale Managers to Operations

/Productions Manager

Method: Job Analysis & Job Evaluation

Individual refers to the fairness

pay as compare with what his/her

earning for the same or comparab

companyMethod: Performance Appraisal &

Procedural -refers to the perceived

processes and procedures used to m

regarding the allocation of pay.

Method: Communications, Grievan

and employee participation to brin


14/20

How are Pay Rates Established?

Conduct Salary Surveys for comparable jobs

Determine the Worth of each job through job evaluation

Group Similar Jobs into pay grades

Price each pay grade by using Wave Curves Fine Tune Pay Rates

Salary Survey is aimed at determining

prevailing wage rates. Formal

questionnaires, telephone surveys and

newspaper ads are different sources of

information

Benchmark Job: A job

the employers pay sc

other jobs are arrange

worth

Job Evaluation is a systematic comparison

done in order to determine the worth of one

job relative to another

Compensable Factors

common for all kinds

effort, responsibility an


15/20

Employees perception of Equity/ Inequity motivates him/her to perform well at the workplace. There are

External, Internal, Individual & Procedural. Methods to address each of these equities range from Salary

& Analysis, Performance Appraisal & Incentive Pay to Communications and Grievance Mechanisms to Emp

these methods are used to establish the optimum level of Pay Rates

Pay Rates are established using a 5 stage process viz. Salary Surveys, to Job Evaluation, Grouping Job

each pay grade through Wave Curves and finally fine tune pay rates. Salary Surveys have already been

Job Evaluation Methods

Ranking MethodSimplest form of Job Evaluation that

involves ranking each job relative to all other jobs usually

based on overall difficulty

Point MethodMethod in which a number of compensable

factors are identified and then the degree to which each

of these factors is present on the job is determined

Factor Comparison Method A wid

ranking jobs according to a variety of sk

then adding up these rankings to numerical rating for each given job

Grades A job classification system

although grades often contain diss

secretaries, mechanics and fire fighter

are written based on compensab

classification systems

Grade Definitions- Written description of the level of say

responsibility & knowledge required by jobs in each

grade. Similar jobs can then be combined into grades orclasses


16/20

Pay Rates are established using a 5 stage process viz. Salary Surveys, to Job Evaluation,Grouping Job

each pay grade through Wave Curvesand finally fine tune pay rates. Salary Surveys have already be

Pay GradesA pay grade is comprised of jobs of approximately equal difficulty

Wage CurvesShows the relationship between the value of the job and the average wage pa

Pay RangesA series of steps or levels within a pay grade usually based upon years of


17/20

Pay Rates are established using a 5 stage process viz. Salary Surveys, to Job Evaluation, Grouping Job

each pay grade through Wave Curvesand finally fine tune pay rates. Salary Surveys have already be

Pay Grades

A pay grade is comprised of jobs of approximately equal difficulty

Wage Curves Shows the relationship between the value of the job and the average wage paid for this

Pay Ranges A series of steps or levels within a pay grade usually based upon years of service

Pricing Managerial and Professional Jobs

Managerial pay typically consists of base pay, short term incentives, long-term incentives and e

particularly at the top levels doesnt lend itself to job evaluation but rather to understanding the

employersability to pay and the need to be competitive in attracting top talent

More employers are moving from paying jobs based on their intrinsic duties towards paying jobs base

the job requires. The main reason for doing so is to encourage employees to develop the competenc

seamlessly from job to job.


18/20

Where the company pays for the employeesrange, depth and types of skills and knowledge rather th

she holds.

What is Competency Based Pay?

Difference between Traditional Pay Plans and Competency Based pay plans are that traditional paypay to the worth of the job based on the job description pay here is more job oriented; whereas com

the workerspay to his or her competencies- pay is more person oriented. Employees are paid based o

do- even if, at the moment, they donthave to do it

Evolving Nature of

Compensation Planning

Seniority Performance

Less Emphasis on Job Duties, Narrowly

Defined pay ranges & jobsMore Emphasis on Skill

broader jobs and pay ran

and regulatio

Past


19/20

Broad banding Consolidating salary grades and ranges into just a few wide levels or

contains a relatively wide range of jobs and salary levels, encouraging employees to learn n

managing their changing roles efficiently

Some Key concepts in Compensation Planning

Comparable Worth The concept by which women who are usually paid less than man

comparable roles rather then in strictly equal jobs are paid more

Board Oversight With many stockholders concerned with excessive executive remuneratio

executive pay has become an important issue, and boards of directors need to make suradvisors and exercise diligence and independence in formulating executive pay plans


20/20

THANK YOU

Documents

EStablishing Strategic Pay Plans & Labor Relations