Collective Bargaining

Starasr
Chpt7.ppt

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Chapter 7

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Industrial Wage Differentials

  • What Wages and Benefits Represent

A standard of living for employees

A cost to be controlled for employers

  • Reasons for Wage Differentials

The degree of competition or monopoly in the product market

The value added by workers in a particular industry

The percentage of total product or service cost represented by labor costs

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Evaluating Jobs within the Organization

  • Job Analysis—What Is the Job?

Job description

A listing of job factors (tasks, duties, and responsibilities) required to perform the job

Job specification

A listing of the knowledge, skills, abilities, and other factors (KSAOs) required to be possessed by holders of the job

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Evaluating Jobs…(cont’d)

  • Methods of Job Evaluation—What is the Job Worth to the Organization?

Ranking

Compares each job to every other job to create a hierarchy of jobs.

Classification

Groups similarly valued jobs into classes.

Point system

Assigns points to each job based on the degree to which job (compensable) factors are present in the job.

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© 2017 Cengage Learning®. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

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Preferences for Determining Wage Structures during Collective Bargaining

External
Factors

Internal
Factors

Wage Structures

Union Preferences

Company Preferences

Include if favorable

Wage Surveys

Job Evaluation

Grievances

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Exhibit 7.1 Typical Wage Structure for a Manufacturing Firm

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Surveying Firms’ Wage Structures

  • Sources of Wage Surveys

U.S. Department of Labor

National Compensation Survey (NCS)

Occupational Pay Relatives (OPR)

Trade and professional groups

Employer-initiated surveys

Union-initiated surveys

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Exhibit 7.2 Typical Results from a Wage Survey

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Production Standards and Wage Incentives

  • Production Standards

Expected employee output consistent with the working capacities of normal (typical) operators.

Determined by time studies of effort and motion

Used as the basis for calculating standard and incentive wages

  • Goals for Wage-Incentive Plans

Increase employee productivity

Attract prospective employees

Reward employees monetarily

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Incentive Plans

  • Employee Reward-Incentive Plans

Lump-sum bonuses

Profit sharing plans

Skill-based pay (SBP)

  • Group Gain-sharing Incentive Plans

Scanlon Plan

Sharing of savings from the reduction of total labor costs

Rucker Plan

Ratio of labor costs to dollar value added

Improshare Plan

Reduction in labor costs over base-period labor costs

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Arguments Used by Management and Union Officials in Wage Determination

  • General Factors in Wage Outcomes

Differential features of
the job

Wage comparability

Organization’s ability to pay

Productivity

Cost of living

Legal requirements

  • Competitive Factors

Operating efficiency

Cost-cutting

Productivity improvement

  • Internal Factors

Firm-specific labor costs

Expected profits

Labor market conditions

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Differential Features of the Work:
Job Evaluation and the Wage Spread

  • Wage Spread

Represents the internal distribution of the proposed or negotiated wage increase to the bargaining unit employees

  • Importance of Spread to Management

Retaining skilled employees

Motivating lesser-skilled employees

  • Union Focus

Equal pay for equal work = single rate pay

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Exhibit 7.3 Three Examples of Internal Wage Spreads

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Exhibit 7.4 Examples of Two-Tier Pay Scales

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Wage Determination Arguments

  • Wage Comparability

Wage rates are equal or related among comparable bargaining units.

  • Degree of Labor Intensiveness

Wages are less important and easier to bargain for when they are a low percentage of total costs.

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Wage Determination Arguments (cont’d)

  • Ability to Pay

Ability to pay has limited usefulness; focus is on firm performance, not on employee performance.

Unions expect a firm in good financial condition to pay higher wages, but not reduce wages when the condition of the firm declines.

  • Productivity

Conceptually, workers’ wages should vary with changes in their productivity (output to costs).

Productivity increases can occur for reasons unrelated to workers increasing their efficiency.

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Exhibit 7.5 Average Annual Rates of Change in Manufacturing Output per Hour for the United States and Selected Countries

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Wage Determination Arguments (cont’d)

  • Cost of Living

Unions demand higher wages to maintain real wage purchasing power when the cost of living rises.

  • Consumer Price Index (CPI)

An index that measures the monthly change in the prices of goods and services for a typical household.

  • Comparable Worth

The concept that different jobs that make comparable contributions to the organization should have the same pay rates.

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Wage Adjustments during the Term or Duration of the Labor Agreement

  • Methods for Adjusting Wages

COLA provisions—scheduled wage increases based on the degree of change in the chosen index

Selection of an index (generally, CPI-W) and base point

Frequency and timing of COLAs

Adoption of a formula (e.g., one cent increase in wages for each three-point rise in CPI)

Effects of COLA in increasing the costs of other compensation elements

Caps or upper limit on the COLA

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Wage Adjustments during the Term or Duration of the Labor Agreement (cont’d)

  • Methods for Adjusting Wages (cont’d)

Deferring wage increases in multiyear labor contracts

Back-loaded: larger wage increases occur later in the contract period.

Front-loaded: smaller wage increases occur later in the contract period.

Even-loaded: wage increases are equal in all years of the contract.

Lump-sum pay adjustments

Lump-sum does not become part of regular compensation.

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Exhibit 7.6 Employer Costs per Hour Worked by Bargaining Status, December 2014

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Health-Care Cost Containment

  • Cost Shifting to Employees

Co-payments, deductibles, and increased premium contributions by employees

  • Fee-for-Service Plans

Preferred Provider Organization (PPO)

Agree to a fixed/lower rate schedule of fees for their services to company employees.

Health Maintenance Organization (HMO)

Contracts with the employer to deliver services to company employees for a fixed contract amount.

High Deductible Health Care Plans (HDHCP)

Involves a high deductible insurance policy combined with a health savings account.

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Income Maintenance

  • Severance Pay

Provides employee with a lump-sum payment at the time of an employee’s termination.

  • Supplemental Unemployment Benefit Plan (SUB)

Pays an additional amount to an employee during the time when the employee is temporarily unemployed.

  • Work Sharing

In order to avoid a layoff, the parties agree to a less-than-40-hour work week.

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Premium Pay—Overtime

  • Overtime Pay

Time-and-a-half rate for all hours worked beyond an 8-hour day

Fair Labor Standards Act requires overtime pay only after 40 regular hours of work in a week.

Double-time rate for Sundays and holidays

Equalization of overtime hours among workers, typically by seniority

Mandatory overtime requirements within a required minimum advance notice

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Premium Pay—Other Supplements

  • Shift Differential

Hourly premium paid for working undesirable shifts

  • Reporting Pay

Minimum guaranteed pay when employee is sent home due to no available work on a workday

  • Call-In Pay

Payment for working nonscheduled hours

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Payment for Time Not Worked—Holidays, Vacations, and Rest Periods

  • Incidental Nonwork Benefits

Bereavement leave

Jury duty leave

Sick leave

Military leave

Personal leave

Voting leave

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Payment for No Work—Holidays, Vacations, and Rest Periods

  • Major Paid-Leave Benefits

Holidays

Eligibility for pay

Typically, there is a required length of service before qualifying for holiday pay.

Must work scheduled work day before and scheduled work day after holiday to qualify for holiday pay.

Vacations

An employee’s amount of annual vacation time increases with the employee’s length of service.

Scheduling of vacations is based on an employee’s seniority.

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Pensions

  • Age Discrimination in Employment Act (ADEA)

Prohibits mandatory retirement age requirements.

  • Pension Plans

Defined benefit plan

Plan pays retired employees a specific amount each month.

The employer must invest sufficient funds such that it can pay its obligations to the retired employees.

Defined contribution plan

An employer contributes a specific amount each month to the retirement account of each employee.

Payout is based on the financial performance of the invested contributions.

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Pensions—Other

  • Union Effect on Pension Plans

Increased pension coverage and larger benefits

Benefits skewed toward senior employees

Pensions equalized among bargaining unit employees

Higher increases in benefits after retirement

Earlier employee retirement age

  • 401(k) Savings Plans

An employer may match the contributions of employees to their tax-deferred retirement accounts.

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Pensions—Other (cont’d)

  • Employee Stock Ownership Plan (ESOP)

Employees hold stock in their company.

Company stock is basis for employee retirement benefits.

The value of the stock can have a dramatic effect on the retirement prospects of employees.

Unions oppose ESOPs.

  • Cash Balance Pension Plans

A tax-deferred employee account to which the employee and employer contribute.

Employees have the option of receiving an annuity payment or a lump-sum payment.

Benefit-neutral to length of employee service.

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Pensions—Other (cont’d)

  • Vesting

Is sufficient service to acquire rights to retirement benefits

Is required by Employee Retirement Income Security Act.

Cliff vesting schedule

After five years of service, employee is considered fully vested.

Graded vesting schedule

Employees are vested in stages over a period of time.

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Family and Other Benefits

  • Family and Medical Leave Act of 1993

Requires private employers to provide eligible employees with up to 12 weeks of unpaid leave.

Employee must have been employed for at least one year and worked at least 1,250 hours within the previous 12 months.

  • Other Benefits

Prepaid legal services

Employee assistance plans

Education tuition aid

Transportation subsidy

Child-care assistance

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Exhibit 7.7 Union versus Nonunion Employee Median Weekly Earnings, 2014

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Key Terms

  • Degree of labor intensiveness
  • Job evaluation
  • Job factors
  • Job analysis
  • Job description
  • Job specification
  • Production standards
  • Piece-rate
  • Profit-sharing plans
  • Gain-sharing plan
  • Scanlon plan
  • Rucker plan
  • Improshare plan
  • Skill-based pay (SBP)
  • Wage spread
  • Skill pay differential
  • Two-tier wage plan
  • Wage comparability
  • Me-too clause
  • Ability to pay
  • Labor productivity
  • Consumer price index (CPI)
  • Cost-of-living adjustment (COLA)
  • Deferred wage increase
  • Wage re-opener
  • Back-loaded
  • Front-loaded
  • Even-loaded

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Key Terms (cont’d)

  • Lump-sum pay
  • Patient Protection and Affordable Care Act
  • Preferred provider organization (PPO)
  • Health maintenance organization (HMO)
  • High deductible health care plans
  • Severance pay
  • Supplemental unemployment benefit plan (SUB)
  • Work sharing
  • Premium pay
  • Overtime premium pay rate
  • Shift differentials
  • Reporting pay
  • Call-in pay
  • Defined benefit pension plan
  • Defined contribution pension plan
  • 401(k) plan
  • Employee stock ownership plan (ESOP)
  • Defined contribution pension plan
  • Pension Protection Act of 2006
  • Cash balance plan
  • Early retirement options
  • vesting

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Key Terms (cont’d)

  • Employee Retirement Income Security Act (ERISA) of 1974
  • “Cliff” vesting schedule
  • “Graded” vesting schedule
  • Elective deferrals
  • Matching contributions
  • Family and Medical Leave Act (FMLA) of 1993
  • Prepaid legal service plans
  • Employee assistance plan (EAP)
  • Wellness programs
  • Education tuition aid
  • Transportation subsidy
  • Child-care assistance
  • Home computer
  • Spillover effect

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