Introduction

            Tiered wage structures refer to a compensation system characterized by lower compensation levels and employee benefits for employees either changing positions or commencing employment at a given data, which is mostly the date when the union-management contract comes into effect. A prevalent outcome of the introduction of the tiered wage structures is that this group of employees will get lower compensations and benefits, although they perform equivalent duties as workers employed before that date. Another potential outcome of a tiered wage structure is that there will be a group of employees receiving lower benefits and wages than another for performing the same duties.[1] On the contrary, employers use the tiered wage structure for numerous reasons including better compensation of senior and experienced employees without incurring enormous wage costs, and the development of a merit pay or pay for performance payroll plan that rewards extra productive workers without incurring massive wage costs. Employers also use the tiered wage structure to reduce the wage costs by hiring new workers at lower compensation levels that the incumbent employees.[2] The goal of this paper is to provide a synopsis of the introduction of tiered wage structures in Canada. First, the paper discusses why the issue of tiered wage structures is significant for Canadian workers and how it affects them. Second, the paper discusses the role of unions on the introduction of tiered wage structures. Third, the paper discusses how collective action on the part of the workers may resolve the issue.

The Significance and Effects of introducing Tiered Wage Structures for Canadian Workers

The introduction of the tiered wage structure is a significant issue for Canadian employees because it creates wage dispersion, which refers to the variation in wages for employees performing the same job. The introduction of tiered wage structures will impose significant effects for Canadian workers hired after a given data; for instance, the tiered wage scheme will affect benefits and wages of employees within the same job category.[3] Introducing the tiered wage structure will also affect new job categories with equivalent duties as the current job classifications, and affect part time positions in comparison to full-time positions within the same job classification. It is evident that the introduction of the tiered wage structure will impose a myriad of effects on employees leading to wage dispersion; this makes the issue of relevant significance for employees.

The effects of introducing the tiered wage structures on Canadian workers vary according to the form of the tiered structure. For instance, implementing permanent tiered wage structures implies that new, low-tier workers will receive separate and lower wage rates than the high-tier workers. It is also evident that implementing permanent tiered wage implies compensation levels will never converge because separate tiers will never have equivalent seniority, unless there is a change in the labour contract. The case is similar for temporary tiers, wherein merging the tiers is subject to various factors leading to delay such as long progression to parity. In addition, if the merge date is set after the expiry of the labour contract, there is the likelihood that the merge date is subject to postponement and perhaps for an indefinite period.[4] With the implementation of wage tiers, workers employed after a given date receive lower wage rates than previously hired workers. In addition, a tiered employment situation will lead to a variation in the benefits awarded to employees, wherein new employees will receive fewer benefits than high-tier and incumbent employees. Another variation associated with the introduction of tiered wage structures is differences in pay among employees performing equivalent duties at different work locations. For instance, the location-tier wage scheme implies that newly hired employees placed in new work locations will get lower wage rates.[5] An inference from the above observation is that introducing the tiered wage structures will aggravate wage dispersions. Numerous studies on the effects of tiered pay scale divisions report that employee dissatisfactions, lower morale and productivity, and increased strikes are usually associated with the implementation of the tiered wage scheme.

The Role of Unions on the Introduction of Tiered Wage Structures

            Trade unions have the goal of eliminating wage dispersion in order to improve employee morale and reduce worker strikes. There is a growing trend among unions to provide employers with a tiered wage system as a bargaining concession with the primary objective of guaranteeing advantages for the existing union members. The tiered wage structure facilitates the hiring of new employees at relatively lower benefits and wages than the existing work force. Employers and unions perceive tiered wage structures as economically attractive since employers benefit from significant cost reductions associated with hiring new employees, whereas unions benefit from employers hiring additional workers. Union have a significant role in addressing the issue of tiered wage schemes through setting up collective agreements having catch-up provisions, which facilitate more rapid advancement of new and low-tier workers than the current employees on the wage scale. This is essential in ensuring low-tier employees attain wage parity after the specified duration. This is an effective strategy in reducing wage dispersion among Canadian workers.

Unions play an integral role in the labour relations process through advocacy for job security, especially when employers are asking for labour cost concessions. During bargaining, the goal of keeping job security involves preserving and increasing the number of existing jobs in the bargaining unit. The initial negotiation of tiered wage structures does not reduce the wage rates of existing employees; therefore, the union should advocate for an across-the-board cut, rather than a ratified one. In addition, the union should strive to maintain a balance between obtaining desired wage rates and job security.[6]

How Collective action on the workers’ Part May Resolve the Issue

            It is essential to acknowledge that workers are the principal participants in the labour relations and negotiations processes; this is because their desires have a significant influence on the content and the existence of specific work rules. In addition, workers are the most significant party because they usually the existence of the union, and have the capacity of rejecting and accepting negotiated labour contract provisions.[7] Workers can use their capacities during the collective bargaining process to achieve the objectives of job security and even compensation among all workers. It is evident that the feasibility of the labour contract provisions depends on workers, who can in turn exploit this position to achieve their goals and resolve the issues associated with the introduction of tiered wage schemes.[8]

Conclusion

            It is evident that the introduction of tiered structures may be beneficial to employers and unions. Employers can use tiered employment to reduce wage costs, whereas unions can achieve their goals of job security through concession bargaining. However, the inception of tiered wage structure imposes significant effects on Canadian workers; the effects include wage rate variations for equivalent job classifications and variations in the work rules when creating new job categories that are equivalent to existing job classifications. Overall, implementing tiered wage structures aggravate wage dispersion. The union can address this issue through setting up collective agreements having catch-up provisions that facilitate more rapid advancement of new and low-tier workers than the current employees on the wage scale. On the other hand, workers can exploit their position as principal participants in the labor relations process to resolve the problems imposed by the tiered wage structure.

 

 

 

 

 

 

References

Canadian Labour Reporter. “Reliance Home Comfort workers In Ontario Strike After Company  Imposes Terms.” labour-reporter.com. May 2, 2012. http://www.labour          reporter.com/articleview/12964-reliance-home-comfort-workers-in-ontario-strike-after            company-imposes-terms (accessed May 16, 2012).

CBC News. “Reliance Workers Strike over Contract Changes.” CBC News, Canada. May 3,        2012. http://www.cbc.ca/news/canada/thunder-bay/story/2012/05/03/tby-reliance strike.html (accessed March 16, 2012).

Dale, Mortensen. Wage Dispersion: Why Are Similar Workers Paid Differently? New York: MIT  Press, 2005.

Dickinson, Julie. “Employees’ Preferences for The Bases of Pay Differentials.” Employee  Relations 28, no. 2 (2006): 164 – 183.

Figart, Deborah. “Equal Pay for Equal Work: The Role of Job Evaluation in an Evolving Social    Norm.” Journal of Economic Issues, 2000: 102-112.

Holley, William, and Kenneth Wolters, Roger Jennings. The Labor Relations Process. Mason,      Ohio: South-Western Cengage Learning, 2009.

Townsend, Anthony, and Partridge Dane. “Revisiting multi-tier wage structures: Equity,   employment mobility, and tier effects.” Journal of Labor Research 20, no. 4 (1999): 605          619.