TI5038 Sistem Kompensasi

Bab 15

Union Role in Wages and

Salary Administration

Teguh Sanjaya 13411098 (teguh.sanjaya@students.itb.ac.id)

Program Studi Teknik dan Manajemen Industri
Fakultas Teknologi Industri
Institut Teknologi Bandung

The impact of Unions in Wage

Determination
1. Impact on general wage and benefit levels
-Unions do make a difference in wages
(based on studies, union worker earn between
8,9 to 12,4 % more than nonunion worker)
-The size of wage gap varies from year to
year (during high unemployment period the
gap is larger. During strong economic the gap is
smaller due to the union resistance to wage cuts
during recessions and relatively slow response
of unions to wage increases during inflationary
periods.)

2. Impact on the structure of wages

- division between direct wages and employee benefits
In unionized firms voluntary benefits amount to 36,9% of total
compensation package and 27,8% for nonunionized
employees.
The share devoted for benefits is bigger to in unionized firms.
- evolution of two-tier pay plans
differentiate pay based upon hiring date, a contract is
negotiated which specifies that employees hired after given
date will receive lower wages than their higer seniority peers.
- relationship between worker wages and what their
managers are paid in union and nonunion environment
the gap between manager and their worker is 23% less in
unionized firms. In fact in unionized firms worker wages go up
faster than managers wages.

3. Impact on nonunion firms (spillover)

Specifically, employers seek to avoid
unionization by offering workers the wages,
benefits, and working conditions better than
their rival unionized firms.
These strategy provide the nonunionized
management continues to enjoy their freedom
from union interference in decision making, and
their worker receives the spillover of rewards
already obtained by their rival unionized
counterparts.

4. Impact on wage and salary policies and

practices in unionized firms
- basis of pay
the vast majority of contracts specify that one or
more jobs are paid in hourly basis and the
overtime will be paid beyond a certain number
of hours.
Hourly Wage
-Occupation
occupation-wage
differentials
Clerk typist
$ 7,30
Computers operators

$10,05

Maintenance mechanics

$12,30

minus : do not recognize skill differentials.

4. Impact on wage and salary policies and

practices in unionized firms (continued)
- experience/merit differentials
Job Title

Years of Experience
None

12

Computer
operators

10,05

10,30

10,55

10,80

11,05

11,55

12,30

14,05

QC
inspectors

12,30

12,55

12,80

13,05

13,30

13,80

14,30

16,30

- other differentials
for examples : different pay for different
geographic region, part time and temporary
employee.
- Vacations and Holidays

4. Impact on wage and salary policies and

practices in unionized firms (continued)
- wage adjustment provisions
in multiyear contract some provision is made for
wage adjustment during the term of contract.
There are three major ways these adjustment
might be specified (1) deffered wage increases,
(2) reopener clauses, and (3) cost of living
adjustment (COLAs).

Unions and Alternative Reward

Systems
1. Lump-Sum Awards
One time cash payment to employees that are
not added to an employees base wage. These
awards are typically given in terms of merit
increases. Lump-sum awards can also be given
as an incentive to retire.
2. Employee Stock Ownership Plans (ESOPs)
alternative strategy in intense competition to
control base wages in exchange by giving
employee part ownership in the company.

3. Pay-for-Knowledge Plans
pay employees more for learning a variety of
different jobs or skills, making each individual
worker more valuable, and less expendable, to
the firm. This also lessen the probability that
work can be subcontracted out to nonunionized
organizations.
4. Gain-Sharing Plans
Designed to align workers and management in
efforts to streamline the operations and cut loss.
Any cost saving resulted from more efficient
works are split, according to some formula
between workers and company.

Top 9 reason for unions favoring gainsharing

Top 9 reason for unions oppose favoring

gain-sharing

1. Increased recognition

1. Management may try to subtitute it for wages

2. Better job security

2. Management cannot be trusted

3. Increased involvement with job activities

3. Peer pressure to perform may increase

4. More money

4. Bonus calculation are not trusted

5. Increased feeling of achievement

5. Union influence is undermined

6. Increased influence of union

6. Increased productivity may reduce need for jobs

7. Greater contribution to nation productivity

7. Grievances may go unprocessed

8. Compability with union goals

8. Gain sharing is incompatible with union goals

9. Fewer grievances

9. Employees really dont want more involvement

5. Profit-Sharing Plans
The goal of unions is to secure sound, stable income levels
for the membership. When this achieved, subsequent
introduction of a profit sharing plans allows union mmebers
to share the wealth with more profitable firms while still
maintaning employment levels in marginal organization.

Referensi
Milkovich, G. & Newman, J. (2008). Compensation
(Ninth Edition). New York: McGraw-Hill
International Edition