Dealing with Employees/WAGES AND SALARY ADMINISTRATION
Sir please help to do this assignment.
1. A company has asked you to design a job evaluation system. How would you go about this task? Illustrate.
2. “If the employees believe that subjectivity and favouritism shape the pay system in an organization, then it does not matter that the system was properly designed and implemented” – Discuss.
3. What preparatory steps should be taken by unions and management for the success of collective bargaining? Substantiate your answer.
4. Several companies are moving in the direction of compensating the employees with non-monetary rewards in lieu of higher wages. Why do you thinking this is happening? Do you think this is a good thing for companies and employees? Explain.
2.5 WAGES AND SALARY ADMINISTRATION
1. A company has asked you to design a job evaluation system. How would you go
about this task? Illustrate.
What is job evaluation?
Job evaluation is a systematic process that you can use to determine the relative level, importance, complexity, and value of each job in your organization. With a successful job evaluation system, you can compare each job to other jobs within your organization.
It is best to perform job evaluation after work analysis. Job evaluation, in conjunction with work analysis, helps you develop a job description that is broad, descriptive, and flexible so that you can adapt the description to your organization's changing needs.
Assess employee contribution
Job evaluation helps you establish and qualify differences in employee contribution across jobs. These differences provide a foundation for employee compensation decisions. The job evaluation process measures the elements of a job and produces an overall score. In each case, you evaluate the job, not the employee who performs the job.
Assess job content and value
Typically, job evaluation assesses both the content of a job and the value of a jo b for your organization.
• Job content refers to the type of work performed and the skills and knowledge necessary to perform the work.
• Job value refers to the job's degree of contribution in meeting your organization's goals and the degree of difficulty in filling the job.
Factors in job evaluation
Job evaluators often assess jobs based on these factors:
• Training level or qualifications requirements
• Knowledge and skills requirements
• Complexity of tasks
• Interaction with various levels of the organization
• Problem-solving and independent judgment
• Accountability and responsibility
• Decision-making authority
• Degree of supervision required
• Cross-training requirements
• Working conditions
• Degree of difficulty in filling job
Steps in job evaluation
The standard steps in job evaluation include:
Introduce the concept of job evaluation.
Obtain management approval for the evaluation.
Train the job evaluation selection team.
Review and select the job evaluation method.
Gather information on all internal jobs.
Use information to fully expand job descriptions.
Use the selected job evaluation method to rank jobs hierarchically or in groups.
Link the ranked jobs with your compensation system or develop a new system.
Implement the job evaluation and compensation systems.
Periodically review your job evaluation system and the resulting compensation decisions.
Analyze job evaluation methods
Before implementing job evaluation in your organization, select the most appropriate job evaluation method. Hundreds of job evaluation systems exist. Research the job evaluation methods and resources available online. 4 job evaluation systems are most commonly used:
• Point evaluation
• Factor comparison
Ranking jobs is the easiest, fastest, and least expensive approach to job evaluation. It is also most effective in smaller organizations with few job classifications. To rank positions, order jobs from highest to lowest based on their relative value to your organization.
The process of job ranking typically assigns more value to jobs that require managerial or technical competencies. More value is also assigned to jobs that supervise, exercise decision-making authority, or rely on independent judgment. For example, a job-ranking system might rank the job of CEO as the most valued job within the organization and the job of product assembler as the least valued.
• Advantages Simplicity is the main advantage in using a ranking system. It is also easy to communicate the results to employees, and it is easy to understand.
• Disadvantages Ranking jobs is subjective. Jobs are evaluated, and their value and complexity are often assessed on the basis of opinion. Also, when creating a new job, existing jobs must be reranked to accommodate the the new position.
1.Ranking Method APPROACH
Perhaps the simplest method of job evaluation is the ranking method. According to this method, jobs are arranged from highest to lowest, in order of their value or merit to the organization. Jobs also can be arranged according to the relative difficulty in performing them. The jobs are examined as a whole rather than on the basis of important factors in the job; and the job at the top of the list has the highest value and obviously the job at the bottom of the list will have the lowest value.
Jobs are usually ranked in each department and then the department rankings are combined to develop an organizational ranking. The following table is a hypothetical illustration of ranking of jobs.
Table: Array of Jobs according to the Ranking Method
Rank Monthly salaries
1. Accountant Rs 3,000
2. Accounts clerk Rs 1,800
3. Purchase assistant Rs 1,700
4. Machine-operator Rs 1,400
5. Typist Rs 900
6. Office boy Rs 600
The variation in payment of salaries depends on the variation of the nature of the job performed by the employees. The ranking method is simple to understand and practice and it is best suited for a small organization. Its simplicity, however, works to its disadvantage in big organizations because rankings are difficult to develop in a large, complex organization. Moreover, this kind of ranking is highly subjective in nature and may offend many employees. Therefore, a more scientific and fruitful way of job evaluation is called for.
The general purpose of job classification is to create and maintain pay grades for comparable work across your organization.
To conduct a job classification: First, write descriptions for a category of jobs; next, develop standards for each job category by describing the key characteristics of those jobs in the category; finally, match all jobs to the categories based on the similarity of tasks, the decision-making exercised, and the job's contribution to the organization's overall goals.
Universities, government employers and agencies, and other large organizations with limited resources typically use job classification systems. These types of organizations have many types of jobs at diverse locations and must maintain equitable and fair standards across all work settings.
• Advantage Job classification is simple once you establish your categories. You can assign new jobs and jobs with changing responsibilities within the existing system.
• Disadvantages Job classification is subjective, so jobs mightfall into several categories. Decisions rely on the judgment of the job evaluator. Job evaluators must evaluate jobs carefully because similar titles might describe different jobs from different work sites.
2.Classification Method APPROACH
According to this method, a predetermined number of job groups or job classes are established and jobs are assigned to these classifications. This method places groups of jobs into job classes or job grades. Separate classes may include office, clerical, managerial, personnel, etc. Following is a brief description of such a classification in an office.
(a) Class I - Executives: Further classification under this category may be Office manager, Deputy office manager, Office superintendent, Departmental supervisor, etc.
(b) Class II - Skilled workers: Under this category may come the Purchasing assistant, Cashier, Receipts clerk, etc.
(c) Class III - Semiskilled workers: Under this category may come Stenotypists, Machine-operators, Switchboard operators, etc.
(d) Class IV - Semiskilled workers: This category comprises Daftaris, File clerks, Office boys, etc.
The job classification method is less subjective when compared to the earlier ranking method. The system is very easy to understand and acceptable to almost all employees without hesitation. One strong point in favor of the method is that it takes into account all the factors that a job comprises. This system can be effectively used for a variety of jobs.
The weaknesses of the job classification method are:
• Even when the requirements of different jobs differ, they may be combined into a single category, depending on the status a job carries.
• It is difficult to write all-inclusive descriptions of a grade.
• The method oversimplifies sharp differences between different jobs and different grades.
• When individual job descriptions and grade descriptions do not match well, the evaluators have the tendency to classify the job using their subjective judgments.
Point evaluation is the most widely used job evaluation method. In a point evaluation system, you express the value of a particular job in monetary terms. You first identify compensable factors that a group of jobs possess. Based on these factors, you assign points that numerically represent the description and range of the job.
Examples of compensable factors are skills required, level of decision-making authority, number of reporting staff members, and working conditions.
• Advantage This method is often viewed as less biased than other methods because the job evaluator assigns each job's total points before the compensable factors become part of the equation.
• Disadvantages Subjective decisions about compensable factors and the associated points assigned might be dominate. The job evaluator must be aware of biases and ensure that they are not represented in points assigned to jobs that are traditionally held by minority and female employees.
3.Point method APPROACH
This method is widely used currently. Here, jobs are expressed in terms of key factors. Points are assigned to each factor after prioritizing each factor in the order of importance. The points are summed up to determine the wage rate for the job. Jobs with similar point totals are placed in similar pay grades. The procedure involved may be explained thus:
(a) Select key jobs. Identify the factors common to all the identified jobs such as skill, effort, responsibility, etc.
(b) Divide each major factor into a number of sub factors. Each sub factor is defined and expressed clearly in the order of importance, preferably along a scale.
The most frequent factors employed in point systems are:
I. Skill (key factor): Education and training required, Breadth/depth of experience required, Social skills required, Problem-solving skills, Degree of discretion/use of judgment, Creative thinking;
II. Responsibility/Accountability: Breadth of responsibility, Specialized responsibility, Complexity of the work, Degree of freedom to act, Number and nature of subordinate staff, Extent of accountability for equipment/plant, Extent of accountability for product/materials;
III. Effort: Mental demands of a job, Physical demands of a job, Degree of potential stress.
The educational requirements (sub factor) under the skill (key factor) may be expressed thus in the order of importance.
1. Able to carry out simple calculations; High School educated
2. Does all the clerical operations; computer literate; graduate
3 Handles mail, develops contacts, takes initiative and does work independently; post graduate
Assign point values to degrees after fixing a relative value for each key factor.
Point Values to Factors along a Scale
Point values for Degrees Total
Factor 1 -2- 3- 4- 5
Skill 10- 20- 30 -40 -50 = 150
Physical effort 8 -16 -24 -32- 40 =120
Mental effort 5 -10 -15 -20 -25 =75
Responsibility 7 -14 -21 -28 -35 =105
Working conditions 6- 12 -18- 24- 30= 90
Maximum total points of all factors depending on their importance to job = 540
4 Find the maximum number of points assigned to each job (after adding up the point values of all sub-factors of such a job). This would help in finding the relative worth of a job. For instance, the maximum points assigned to an officer’s job in a bank come to 540. The manager’s job, after adding up key factors + sub factors’ points, may be getting a point value of, say 650 from the job evaluation committee. This job is now priced at a higher level.
5 Once the worth of a job in terms of total points is expressed, the points are converted into money values keeping in view the hourly/daily wage rates. A wage survey, usually, is undertaken to collect wage rates of certain key jobs in the organization. Let’s explain this:
Conversion of Job Grade Points into Money Value
Point range Daily wage rate (Rs) Job grades of key bank officials
500-600 300-400 1 Officer
600-700 400-500 2 Accountant
700-800 500-600 3 Manager I Scale
800-900 600-700 4 Manager II Scale
900-1,000 700-800 5 Manager III Scale
Merits and Demerits
The point method is a superior and widely used method of evaluating jobs. It forces raters to look into all keys factors and sub-factors of a job. Point values are assigned to all factors in a systematic way, eliminating bias at every stage. It is reliable because raters using similar criteria would get more or less similar answers. “The methodology underlying the approach contributes to a minimum of rating error” . It accounts for differences in wage rates for various jobs on the strength of job factors. Jobs may change over time, but the rating scales established under the point method remain unaffected.
On the negative side, the point method is complex. Preparing a manual for various jobs, fixing values for key and sub-factors, establishing wage rates for different grades, etc., is a time consuming process. According to Decenzo and Robbins, “the key criteria must be carefully and clearly identified, degrees of factors have to be agreed upon in terms that mean the same to all rates, the weight of each criterion has to be established and point values must be assigned to degrees”. This may be too taxing, especially while evaluating managerial jobs where the nature of work (varied, complex, novel) is such that it cannot be expressed in quantifiable numbers.
Job evaluators rank jobs that have similar responsibilities and tasks according to points assigned to compensable factors. The evaluators then analyze jobs in the external labor market to establish the market rate for such factors. Jobs across the organization are then compared to the benchmark jobs according to the market rate of each job's compensable factors to determine job salaries.
• Advantage This method results in customized job-ranking.
• Disadvantage Compensable factor comparison is a time-consuming and subjective process.
4.Factor Comparison Method APPROACH
A more systematic and scientific method of job evaluation is the factor comparison method. Though it is the most complex method of all, it is consistent and appreciable. Under this method, instead of ranking complete jobs, each job is ranked according to a series of factors. These factors include mental effort, physical effort, skill needed, supervisory responsibility, working conditions and other relevant factors (for instance, know-how, problem solving abilities, accountability, etc.). Pay will be assigned in this method by comparing the weights of the factors required for each job, i.e., the present wages paid for key jobs may be divided among the factors weighed by importance (the most important factor, for instance, mental effort, receives the highest weight). In other words, wages are assigned to the job in comparison to its ranking on each job factor.
The steps involved in factor comparison method may be briefly stated thus:
• Select key jobs (say 15 to 20), representing wage/salary levels across the organization. The selected jobs must represent as many departments as possible.
• Find the factors in terms of which the jobs are evaluated (such as skill, mental effort, responsibility, physical effort, working conditions, etc.).
• Rank the selected jobs under each factor (by each and every member of the job evaluation committee) independently.
• Assign money value to each factor and determine the wage rates for each key job.
• The wage rate for a job is apportioned along the identified factors.
• All other jobs are compared with the list of key jobs and wage rates are determined.
An example of how the factor comparison method works is given below:
Merits and Demerits of Factor Comparison Method
• Analytical and objective.
• Reliable and valid as each job is compared with all other jobs in terms of key factors.
• Money values are assigned in a fair way based on an agreed rank order fixed by the job evaluation committee.
*Flexible as there is no upper limitation on the rating of a factor
• Difficult to understand, explain and operate.
• Its use of the same criteria to assess all jobs is questionable as jobs differ across and within organizations.
*Time consuming and costly.
The System is an evaluation method that is widely used . Training in the use of the system takes several days, followed by several months organizational experience to become proficient in its evaluation style. All jobs are evaluated not only by the interpretation of the factor descriptions but within the context of all other jobs in the organization.
Knowledge, Problem Solving, Accountability and Working Conditions. The system works on an integration of all the factors. A job is evaluated by looking at the knowledge required to do the job (whether practical or intellectual), the kind of thinking required to solve the problems which the job commonly faces, the responsibilities (accountabilities) assigned, and the work environment in which the work is performed.
In each of the following factors there are a series of descriptions and variables with points assigned to each.
‘Know How’ is defined as the "sum total of every kind of knowledge and skill, however, acquired, needed for acceptable job performance."
There are three dimensions in know how:
Practical procedures, specialized techniques and knowledge within occupational fields, commercial functions, and professional and scientific disciplines.
Planning, organizing, coordinating, integrating, staffing, directing and or controlling the activities and resources associated with the function of the unit, position, section, etc.
Face to face skills needed for various relationships with other people.
‘Problem Solving’ is "the amount and nature of the thinking required in the job in the form of analyzing, reasoning, evaluating, creating, using judgment, forming hypotheses, drawing inferences, arriving at conclusions, etc."
There are two dimensions in problem solving:
The environment in which the thinking takes place.
The challenge of the thinking to be done; the novelty and complexity of the thinking required.
Problem Solving is always expressed as a percentage of Know How since it directly relates to how one uses the knowledge which he or she must have in the job to solve the problems which are encountered as part of that job.
‘Accountability’ is "the answerability for action and its consequences. The measured effect of the job on end results in the organization."
There are three dimensions in accountability:
"Freedom to Act" which is the extent of personal, procedural or systematic guidance and control on the job.
"Job Impact on End Results" which is the degree to which the job affects or brings about the results expected of the unit or function being considered.
"Magnitude" is the size of the function or unit measured in the most appropriate fashion.
‘Working Conditions’ assess the environment in which the job is performed.
Working Conditions are made up of four dimensions:
"Physical Effort" - jobs, which may require levels of physical activity, which may produce physical, stress or fatigue.
"Physical Environment" - jobs which may include exposure to unavoidable physical and environmental factors which increase the risk of accident, ill health or discomfort to the employee.
"Sensory Attention" - jobs which may require concentrated levels of sensory attention (i.e. seeing, hearing, smelling, tasting, touching) during the work process.
"Mental Stress" - refers to exposure to factors inherent in the work process or environment, which increase the risk of such things as tension or anxiety.
Each of these four dimensions is measured according to duration, intensity and frequency.
All of these factors are evaluated in each job evaluation and the cumulative total is a total point factor for the position. Because jobs have so many different variables it is possible that a job without a high score in Know How but with severe Working Conditions could result in the same number of points with a job that has the opposite components.
JOB EVALUATION HELPS TO DETERMINE THE REWARD RANGE.
IT ALSO PROVIDES OTHER KEY POINTS
* It can be beneficial when the existing grading structure is in need of review
* It can help establish or maintain the credibility and acceptability of a grading system
* Job evaluation facilitates the accommodation of new or revised jobs into the grading structure
* It can be used by organisations as a basis for job matching and external pay comparisons
Job evaluation is used for all types of jobs both blue collar as well white collar . The concern for unit labour costs makes it vitally important for organisations, operating in highly competitive markets, to ensure that the grading level of their employees accurately reflects the relative importance of their jobs to the organisation.
Properly introduced and maintained, job evaluation can help lay the foundation of fair and orderly pay structures and thus improve relationships. Job evaluation may therefore be appropriate in the circumstances.
Anomalies in the pay system/need for a pay structure
Job evaluation can help remove any anomalies or inequities in an organisation's payment system where the existing grading structure is thought to place jobs in an arbitrary order with no justifiable or logical reason. Job evaluation would help remedy this by providing a more structured basis for deciding grading levels. However, job evaluation should not be introduced if the main reason is unrelated to the basic grading structure, for example because a bonus and incentive scheme has fallen into disrepute.
Changes in the job content
Work restructuring within organisations may result in companies having fewer manual employees often with a greater range of duties. In addition, new 'high tech' machinery may have altered traditional roles and blurred the differences between 'operating' and 'craft' skills. All this may have the following effects on existing grading systems:
• they may not be able to cope with the introduction of new jobs or new skills, with a likely increase in the number of grievances about grading
• they may not be able to cope with any 'grade drift', with lower grades having less to do, while other jobs may have drifted upwards, and
• there may be leap-frogging to catch up with pay rates elsewhere in the company, or outside.
Frequent grievances or disputes over grading or pay may indicate that the existing grading structure is no longer appropriate. If unresolved, such dissatisfaction could result in consequential pay claims, the gradual erosion of differentials between grades, increased costs and deteriorating morale and employment relations. A job evaluation scheme, properly designed and installed with an appeals procedure, can help maintain the credibility and acceptability of a grading structure.
Technological and organisational change
It is important to ensure that the grading system is appropriate to the needs of an organisation particularly following technological and organisational change. Changes arising from new technology may affect jobs in the following ways:
• employees may no longer have control over the quality and quantity of their output where the machine dictates the pace
• mental effort may replace physical effort as an important factor for improving output
• working conditions may change to reflect the new technological process
• employees may be required to do a number of activities previously carried out by others, and
• innovative and creative skills may be required which hitherto were not within the culture of the organisation.
The introduction of flexibility, multi-skilling, team working and new operational methods also have important consequences for job design and the way jobs are organised, and will clearly affect traditional work groupings and pay structures. A further, important advantage of some job evaluation schemes is that new jobs can be more easily fitted into the existing structure.
The Equal Pay Act and the Equal Pay (Amendment) Regulations, make it especially important to maintain a fair and orderly grading structure. Job evaluation may be helpful as a means of ensuring that a grading structure is fair and equitable.
Some job evaluation techniques require the analysis and description of jobs leading to a more detailed and accurate knowledge of their content. This in turn may prompt:
• an opportunity to review roles and policies on selection and training
• improved Human Resource Management through a greater understanding of the skills and training needed for particular jobs, and
• a review of the organisation's structure and working methods, better designed jobs and the identification of poor working conditions and job hazards.
Furthermore, when both employer, employees and their representatives have been jointly involved in a job evaluation exercise, this usually leads to improved understanding, greater trust and better industrial relations.
* It can be beneficial when the existing grading structure is in need of review
* It can help establish or maintain the credibility and acceptability of a grading system
* Job evaluation facilitates the accommodation of new or revised jobs into the grading structure
* It can be used by organisations as a basis for job matching and external pay comparisons
Job evaluation helps many other aspects in the organization, but reward management
is the major areas.
2. “If the employees believe that subjectivity and favouritism shape the pay system
in an organization, then it does not matter that the system was properly
designed and implemented” – Discuss.
It is true that in india, a significant amount of managers show subjectivity and favouritism in running the business operation.
But the pay system should be properly
designed and implemented .
What is a good wage administration system
1. WAGES AND SALARY ADMINISTRATION
Development of A Pay System
Review of JoDescription
Conduct Job Evaluation
Gather Wage Survey Information Pay Structure Administer Individual Pay Adjustments Monitor & Upgrade Pay System
Wage / Salary Levels• Remuneration in comparable industries• Firm’s ability to pay• Relating to price index• Productivity• Cost of Living• Union Pressures & Strategies• Government Legislations
DEFINITION WAGES & SALARY• Base wages and salaries are defined as the hourly, weekly and monthly pay that employees receive for their work in an Organization.• Can term it as compensation management.• Thus, Wage & Salary Administration is the group of activities involved in the development, implementation& maintenance of a pay system.
Difference in Wages, Salary & Compensation Terms WAGES SALARY COMPENSATION Paid to BLUE Collared Paid to WHITE collared Employees Comparative FormOn Daily, weekly, Monthly Paid at specified Intervals All Basic , gross amount ,Can be measured in terms allowances + Benefits of money Paid to Employees whose contribution cannot be measured
Principles Governing Compensation AdministrationMaintaining EquityMaintaining CompetitivenessMatching Employee ExpectationsReinforcing positive employee behaviorEliminating any discrepancyOptimization of management and employee interestsMaintaining good IR and harmony
Purpose of Wage & SalaryAttracting talented resourcesRetaining and motivating employeesFinancial ManagementLegal Requirements
Medical Reimbursem ent Special AllowancesBasic Salary DIRECT Bonus COMPENSATIONHouse RentAllowance Leave Travel Allowance Conveyance
Overtime Allowance Hospitalizati on Leave Policy Insurance
FlexibleTimings Leave Travel Holiday Homes Retirement Benefits
Types of Incentive Plans
• SHORT TERM PLANS: Halsey Plan, Rowan, Barth, Point Rating System, Progressive Bonus• LONG TERM PLANS: Annual Bonus, Profit SharingDirect Compensation Indirect TOTAL(Base Pay, Incentives) (Benefits) COMPENSATION
Concepts of Different Wages
MINIMUM WAGES: Minimum amount of remuneration paid to workes. Under Minimum Wages Act 1948.
FAIR WAGES: Workers performing work of equal skills, difficulty or unpleasantness should receive equal or fair wages Match the prevailing wage rates
LIVING WAGES: Living wages should enable the male earner to provide for himself and his family, not only the bare essentials of food, clothing and shelter, but also a measure of frugal comfort including: Education for the children , Protection against ill-health ,Requirements of essential social needs , A Measure of insurance against the more important misfortunes including old age
Wage Boards / Pay CommissionsWage Policies are formulated by following Institutions in India1. Collective Bargaining & Adjudication2. Wage Boards3. Pay Commissions
Reports & Documentation • Payroll Journal Voucher• Salary and Payroll Payslips (print / PDF / email Processing / online) Statutory Payroll Reports Salary Statements Leave Management Dynamic report writer tool Employee Self Service PF & ESI reports (monthly, Payroll Reconciliation Tools annual) Reimbursements & Loans Monthly Profession Tax Payroll Processors & reports Outsourcers Income tax statement Arrears & final settlement Form 16 PDFs Head count summary Quarterly eTDS filing ()
Payroll SoftwareManual System PAYROLL PROCESSING Accountant Payroll Outsourcing
Evolution of Strategic Compensation Traditional Modern Change in Compensation Compensation Compensation System System Systems
Trainings• This program focuses on building a broad understanding of compensation, and covers:• HR’s role in compensation• Components of total compensation• Laws and regulations affecting compensation programs• Independent contractors• Indirect compensation (benefits) programs• Legally required programs• Who Should Attend? This fundamental program is designed for HR practitioners just entering the field, established HR employees with little or no formal training, other employees who have responsibilities that fall under the HR umbrella, and business owners and managers without HR departments.
• Compensation is a hot potato for the Human Resource Department. The motivation level of the employees to great extent lies in monetary rewards. In the current state of affairs it is indispensable to restructure the pay models. Similar to changes bought about in the other departments the HR should also emphasize on restructuring the costs so as to bring the variable cost close to zilch.• The major challenges what manager’s face today is retention of the man power and the major cause of it is that they are paid better in the other organizations.
3. What preparatory steps should be taken by unions and management for the
success of collective bargaining? Substantiate your answer.
Process of negotiation between representatives of workers (usually labour union officials) and management to determine the conditions of employment. The agreement reached may cover not only wages but hiring practices, layoffs, promotions, working conditions and hours, and benefit programs.
Collective bargaining is "a process of negotiation between management and union representatives for the purpose of arriving at mutually acceptable wages and working conditions for employees". Various methods may be used in the bargaining process, but the desired outcome is always mutual acceptance by labor and management of a collective bargaining agreement or contract.
The Bargaining Process
The collective bargaining process begins when the majority of workers of an organization vote to be represented by a specific union. The National Labor Relations Board , then certifies the union. At this point, the management of the organization must recognize the union as the collective bargaining agent for all the employees of that organization. Once this part of the process is completed, collective bargaining can begin.
Bargaining always takes place between labor and management, but negotiations can include more than one group of workers and more than one employer. Single-plant, single-employer agreements are the most common. However, if an employer has more than one plant or work site, multiplant, single-employer agreements can be bargained. Several different union groups representing the workers of the same employer can use coalition bargaining. Industry wide bargaining involves one national union bargaining with several employers of a specific industry.
Many different negotiation styles can be used when union and labor representatives sit down at the bargaining table. The two basic modes of bargaining are traditional bargaining and partnership bargaining, though there are many variations of each style.
The traditional style of bargaining has been used since collective bargaining began between management and the early labor unions . It is an adversarial style of negotiating, pitting one side against the other with little or no understanding of, or education about, the other on the part of either party. Each side places its demands and proposals on the table, and the other side responds to them with counterproposals. The process is negative and involves a struggle of give-and-take on most issues. Even with its negative connotations, however, the traditional style of negotiating is still used effectively in bargaining many union contracts.
The partnership style of bargaining is the more modern approach to negotiations. It strives for mutual understanding and common education on the part of both labor and management, and it focuses on goals and concerns common to both parties. Because of its emphasis on each side's being aware of the issues concerning the other side, partnership-style bargaining is also known as interest-based bargaining. In this process, labor and management each list and explain their needs, and the ensuing discussion revolves around ways to meet those needs that will be not only acceptable but also beneficial to both parties. This style of bargaining is very positive and imparts a much more congenial atmosphere to the negotiating process. Many modern union-management contracts are bargained very successfully using the partnership style.
A blending of the traditional and partnership styles is widely used in labor-management negotiations. The combination approach is used for many reasons, including the fact that many union and management leaders are more familiar with the traditional style. However, with today's more participatory relationship between labor and management in the workplace, the partnership style is becoming more accepted and is being used more frequently. The negotiating process may also include both styles of bargaining because of the variety of issues being negotiated. The partnership style may be used to negotiate certain issues, while the traditional style may be invoked when bargaining other terms.
Collective Bargaining Issues
Labor unions were formed to help workers achieve common goals in the areas of wages, hours, working conditions, and job security. These issues still are the focus of the collective bargaining process, though some new concepts have become the subjects of negotiations.
The Settlement Process
Union contracts are usually bargained to remain in effect for two to three years but may cover longer or shorter periods of time. The process of negotiating a union contract, however, may take an extended period of time. Once the management and union members of the negotiating team come to agreement on the terms of the contract, the union members must accept or reject the agreement by a majority vote. If the agreement is accepted, the contract is ratified and becomes a legally binding agreement remaining in effect for the specified period of time.
If the union membership rejects the terms of the agreement, the negotiating teams from labor and management return to the bargaining table and continue to negotiate. This cycle can be repeated several times. If no agreement can be reached between the two teams, negotiations are said to have "broken down," and several options become available.
Mediation is usually the first alternative when negotiations are at a stalemate. The two parties agree voluntarily to have an impartial third party listen to the proposals of both sides. It is the mediator's job to get the two sides to agree to a settlement. Once the mediator understands where each side stands, he or she makes recommendations for settling their differences. The mediator merely makes suggestions, gives advice, and tries to get labor and management to compromise on a solution. Agreement is still voluntary at this point. The mediator has no power to force either of the parties to settle the contract, though often labor and management do come to agreement by using mediation.
If mediation fails to bring about a settlement, the next step can be arbitration, which can be either compulsory or voluntary. Compulsory arbitration is not often used in labor-management negotiations in the United States. Occasionally, however, the federal government requires union and management to submit to compulsory arbitration. In voluntary arbitration, both sides agree to use the arbitration process and agree that it will be binding. As in mediation, an impartial third party serves in the arbitration process. The arbitrator acts as a judge, listening to both sides and then making a decision on the terms of the settlement, which becomes legally binding on labor and management. Ninety percent of all union contracts use arbitration if the union and management can't come to agreement .
Sources of Power
If the collective bargaining process is not working as a way to settle the differences between labor and management, both sides have weapons they can use to bolster their positions. One of the most effective union tactics is the strike or walkout. While on strike, employees do not report to work and, of course, are not paid. Strikes usually shut down operations, thus pressuring management to give in to the union's demands. Some employees, even though allowed to belong to unions, are not allowed to strike. Federal employees fall into this category. The law also prohibits some state and municipal employees from striking.
During a strike, workers often picket at the entrance to their place of employment. This involves marching, carrying signs, and talking to the media about their demands. The right to picket is protected by law . Problems sometimes arise during strikes and picketing when management hires replacement workers, called scabs or strikebreakers, who
need to cross the picket line in order to do the jobs of the striking workers.
Collective Bargaining Issues
Wages Hours Working Conditions Job Security
Regular Compensation Regular Work Hours Rest Periods Seniority
Overtime Compensation Overtime Work Hours Grievance Procedures Evaluation
Incentives Vacations Union Membership Promotion
Insurance Holidays Dues Collection Layoffs
The boycott is another union strategy to put pressure on management to give in to the union's demands. During a primary boycott , not only union members but also members of the general public are encouraged to refuse to conduct business with the firm in dispute with the union.
Though it is rarely done, management may use the lockout as a tactic to obtain its bargaining objectives. In this situation, management closes down the business, thus keeping union members from working. This puts pressure on the union to settle the contract so employees can get back to their jobs and receive their wages.
Management sometimes uses the injunction as a strategy to put pressure on the union to give in to its demands. An injunction is a court order prohibiting something from being done, such as picketing, or requiring something to be done, such as workers being ordered to return to work.
Once a collective bargaining agreement is settled and a union contract is signed, it is binding on both the union and management. However, disagreements with contract implementation can arise and violations of the contract terms can occur. In these cases, a grievance, or complaint, can be filed. The differences that must be resolved are usually handled through a step-by-step process that is outlined in the collective bargaining agreement. The grievance procedure begins with a complaint to the worker's immediate supervisor and, if unresolved at that level, moves upward, step by step, to higher levels of management. If no resolution is found at any of these levels, the two parties can agree to have the grievance submitted to an impartial outside arbitrator for a decision binding to the union and management.
Collective bargaining is a successful way for workers to reach their goals concerning accept able wages, hours, and working conditions. It al lows workers to bargain as a team to satisfy their needs. Collective bargaining also allows management to negotiate efficiently with workers by bar gaining with them as a group instead of with each one individually. Though traditional bargaining can be negative and adversarial, it does produce collective bargaining agreements between labor and management. Partnership bargaining can lead to increased understanding and trust between labor and management. It is a positive, cooperative approach to collective bargaining that also culminates in contracts between labor and management.
Collective bargaining is still practiced in the twenty-first century, but among many of its union advocates it is no longer the most hopeful road toward either high wages or an updated industrial democracy. Key service-sector trade unions have sought to fulfill these goals through a set of increasingly political initiatives. In the janitorial, hotel, and health care sectors of the economy, firm centered collective bargaining has been linked, and in some cases subordinated, to political and social mobilizations designed to advance the well-being of all workers, regardless of their union status.
The organisation I am referring to
The organization, I am familiar with is a
-a large manufacturer/ marketer of safety products
-the products are used as [personal protection safety] [ industrial safety]
-the products are distributed through the distributors as well as sold directly
-the products are sold to various industries like mining/fireservices/defence/
as well as to various manufacturing companies.
-the company employs about 235 people.
-the company has the following functional departments
the organization has negotiated the following
with the trade union
Wages Hours Working Conditions Job Security
Regular Compensation Regular Work Hours Rest Periods
Overtime Compensation Overtime Work Hours Grievance Procedures Evaluation
Vacations Union Membership
Insurance Holidays Dues Collection Layoffs
4. Several companies are moving in the direction of compensating the employees
with non-monetary rewards in lieu of higher wages. Why do you thinking this is
happening? Do you think this is a good thing for companies and employees?
Strategic reward management is about the development and implementation of reward strategies and the philosophies and guiding principles that underpin them.
It provides answers to two basic questions:
1) where do we want our reward practices
to be in a few years’ time? and
2) how do we intend to get there? It therefore deals with both ends and means. As an end it describes a vision of what reward processes will look like in a few years’ time.
REWARD STRATEGY DEFINED
Reward strategy is a declaration of intent that defines what the organization wants to do in the longer term to develop and implement reward policies, practices and
processes that will further the achievement of its business goals and meet the needs of its stakeholders.
Reward strategy provides a sense of purpose and direction and a framework for developing reward policies, practices and process. It is based on an understanding of
the needs of the organization and its employees and how they can best be satisfied. It is also concerned with developing the values of the organization on how people
should be rewarded and formulating guiding principles that will ensure that these values are enacted.
Reward strategy is underpinned by a reward philosophy that expresses what the organization believes should be the basis upon which people are valued and rewarded. Reward philosophies are often articulated as guiding principles.
THE STRUCTURE OF REWARD STRATEGY
Reward strategy should be based on a detailed analysis of the present arrangements for reward, which would include a statement of their strengths and weaknesses.
compares what is believed should be happening with what is happening and indicates which ‘gaps’ need to be filled. A format for the analysis .
A diagnosis should be made of the reasons for any gaps or problems so that decisions can be made on what needs to be done to overcome them. It can then be structured
under the headings set out below:
1. A statement of intentions – the reward initiatives that it is proposed should be taken.
2. A rationale – the reasons why the proposals are being made. The rationale should make out the business case for the proposals, indicate how they will meet business
needs and set out the costs and the benefits. It should also refer to any people issues that need to be addressed and how the strategy will deal with
3. A plan – how, when and by whom the reward initiatives will be implemented.
The plan should indicate what steps will need to be taken and should take account of resource constraints and the need for communications, involvement
and training. The priorities attached to each element of the strategy should be indicated and a timetable for implementation should be drawn up. The plan
should state who will be responsible for the development and implementation of the strategy.
4. A definition of guiding principles – the values that it is believed should be adopted
in formulating and implementing the strategy.
THE CONTENT OF REWARD STRATEGY
Reward strategy may be a broad-brush affair simply indicating the general direction in which it is thought reward management should go. Additionally or alternatively,
reward strategy may set out a list of specific intentions dealing with particular aspects of reward management.
Broad-brush reward strategy
Abroad-brush reward strategy may commit the organization to the pursuit of a total rewards policy. The basic aim might be to achieve an appropriate balance between
financial and non-financial rewards. A further aim could be to use other approaches
to the development of the employment relationship and the work environment,
which will enhance commitment and engagement and provide more opportunities
for the contribution of people to be valued and recognized.
What should be happening What is happening What needs to be done
1. A total reward approach is adopted
which emphasises the significance of
both financial and non-financial
2. Reward policies and practices are
developed within the framework of a
well-articulated strategy which is
designed to support the achievement
of business objectives and meet the
needs of stakeholders.
3. A job evaluation scheme is used which
properly reflects the values of the
organisation, is up-to-date with regard
to the jobs it covers and is nondiscriminatory.
4. Equal pay issues are given serious
attention. This includes the conduct
of equal pay reviews which lead to
5. Market rates are tracked carefully so
that a competitive pay structure exists
which contributes to the attraction and
retention of high quality people.
6. Grade and pay structures are based
on job evaluation and market rate
analysis, appropriate to the
characteristics and needs of the
organization and its employees,
facilitate the management of
relativities, provide scope for rewarding
contribution, clarify reward and career
opportunities, constructed logically,
operate transparently and are easy to
manage and maintain.
7. Contingent pay schemes reward
contribution fairly and consistently,
support the motivation of staff and the
development of a performance culture,
deliver the right messages about the
values of the organization, contain a
clear ‘line of sight’ between
contribution and reward and are costeffective.
8. Performance management processes
contribute to performance
improvement, people development and
the management of expectations,
operate effectively throughout the
organization and are supported by line
managers and staff.
9. Employee benefits and pension
schemes meet the needs of
stakeholders and are cost-effective.
10. A flexible benefits approach is
11. Reward management procedures exist
which ensure that reward processes
are managed effectively and that costs
12. Appropriate use is made of computers
(software and spreadsheets) to
assist in the process of reward
13. Reward management aims and
arrangements are transparent and
communicated well to staff.
14. Surveys are used to assess the
opinions of staff about reward and
action is taken on the outcomes.
15. An appropriate amount of
responsibility for reward is devolved to
16. Line managers are capable of carrying
out their devolved responsibilities well.
17. Steps are taken to train line managers
and provide them with support and
guidance as required.
18. HR has the knowledge and skills to
provide the required reward
management advice and services and
to guide and support line managers.
19. Overall, reward management
developments are conscious of the
need to achieve affordability and to
demonstrate that they are cost
20. Steps are taken to evaluate the
effectiveness of reward management
processes and to ensure that they
reflect changing needs.
Specific reward initiatives
The selection of reward initiatives and the priorities attached to them will be based on an analysis of the present circumstances of the organization and an assessment
of the needs of the business and its employees. The following are examples of possible specific reward initiatives, one or more of which might feature in a reward
● the replacement of present methods of contingent pay with a pay for contribution scheme;
● the introduction of a new grade and pay structure, eg a broad-graded or career family structure;
● the replacement of an existing decayed job evaluation scheme with a computerized
scheme that more clearly reflects organizational values;
● the improvement of performance management processes so that they provide better support for the development of a performance culture and more clearly
identify development needs;
● the introduction of a formal recognition scheme;
● the development of a flexible benefits system;
● the conduct of equal pay reviews with the objective of ensuring that work of
equal value is paid equally;
● communication programmes designed to inform everyone of the reward policies
and practices of the organization;
● training, coaching and guidance programmes designed to increase line management
capability (see also the last section of this chapter).
Reward guiding principles may refer to concerns such as:
● developing reward policies and practices that support the achievement of business
● providing rewards that attract, retain and motivate staff and help to develop a high performance culture;
● maintaining competitive rates of pay;
● rewarding people according to their contribution;
● recognizing the value of all staff who are making an effective contribution, not
just the exceptional performers;
● allowing a reasonable degree of flexibility in the operation of reward processes
and in the choice of benefits by employees;
● devolving more responsibility for reward decisions to line managers.
Reward management adopts a ‘total reward’ approach, which emphasizes the importance of considering all aspects of reward as a coherent whole that is integrated
with other HR initiatives designed to achieve the motivation, commitment, engagement and development of employees. This requires the integration of reward strategies
with other HRM strategies, especially those concerning human resource development. Reward management is an integral part of an HRM approach to managing people.
The philosophy will be affected by the business and HR strategies of the organization, the significance attached to reward matters by top management, and the internal
and external environment of the organization. The external environment includes the levels of pay in the labour market (market rates) and it is helpful to be aware of the
economic theories that explain how these levels are determined.
THE ELEMENTS OF REWARD MANAGEMENT
The elements of reward management are described below.
A reward system consists of:
● Policies that provide guidelines on approaches to managing rewards.
● Practices that provide financial and non-financial rewards.
● Processes concerned with evaluating the relative size of jobs (job evaluation) and
assessing individual performance (performance management).
● Procedures operated in order to maintain the system and to ensure that it operates
efficiently and flexibly and provides value for money.
Reward strategy sets out what the organization intends to do in the longer term to develop and implement reward policies, practices and processes that will further the
achievement of its business goals.
Reward policies address the following broad issues:
● the level of rewards, taking into account ‘market stance’, ie how internal rates of
pay should compare with market rates, for example aligned to the median or the
upper quartile rate;
● achieving equal pay;
● the relative importance attached to external competitiveness and internal equity;
● the approach to total reward;
● the scope for the use of contingent rewards related to performance, competence,
contribution or skill;
● the role of line managers;
● transparency – the publication of information on reward structures and processes
Total reward is the combination of financial and non-financial rewards available to
Total remuneration is the value of all cash payments (total earnings) and benefits
received by employees.
Job evaluation is a systematic process for defining the relative worth or size of jobs
within an organization in order to establish internal relativities and provide the basis
for designing an equitable grade structure, grading jobs in the structure and
managing relativities. It does not determine the level of pay directly. Job evaluation
can be analytical or non-analytical. It is based on the analysis of jobs or roles, which
leads to the production of job descriptions or role profiles. Job evaluation
Market rate analysis
Market rate analysis is the process of identifying the rates of pay in the labour market
for comparable jobs to inform decisions on levels of pay within the organization. A
policy decision may be made on how internal rates of pay should compare with
external rates – an organization’s market stance.
Grade and pay structures
Jobs may be placed in a graded structure according to their relative size. Pay levels in
the structure are influenced by market rates. The pay structure may consist of pay ranges attached to grades, which provide scope for pay progression based on performance,
competence, contribution or service. Alternatively, a ‘spot rate’ structure may be used for all or some jobs in which no provision is made for pay progression in a
Additional financial rewards may be provided that are related to performance,
competence, contribution, skill or experience. These are referred to as ‘contingent
pay’. Contingent payments may be added to base pay, ie ‘consolidated’. If such payments are not consolidated (ie paid as cash bonuses) they are described as ‘variable
Employee benefits include pensions, sick pay, insurance cover, company cars and a
number of other ‘perks’ as described in Chapter 48. They comprise elements of remuneration
additional to the various forms of cash pay and also include provisions for
employees that are not strictly remuneration, such as annual holidays.
Performance management processes define individual performance
and contribution expectations, assess performance against those expectations,
provide for regular constructive feedback and result in agreed plans for performance
improvement, learning and personal development. They are a means of providing
non-financial motivation and may also inform contingent pay decisions.
These are rewards that do not involve any direct payments and often arise from the
work itself, for example, achievement, autonomy, recognition, scope to use and
develop skills, training, career development opportunities and high quality leadership.
Total reward embraces everything that employees value in the employment relationship.’
Grade and pay structure
Market rate analysis