HUMAN RESOURCE

MANAGEMENT
Establishing Strategic Pay Plans
Labor relations & Collective
Bargaining

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 is only through unity
that they can protect themselves from unilateral management whims.
Low morale, fear of job loss & arbitrary management actions help foster unionization. Besides money,
employer unfairness and the unions power are important
Unions have two sets of aims. (i) Union Security (ii) improved wages, hours, working conditions and
benefits for their members
Union Security
Union seek security for themselves. They fight hard to uphold their right to represent a firms workers and to be
the exclusive bargaining agent for all employees in the unit

Types of Union Security

Closed Shop Form of union security in which the company can hire only union members, which is illegal
under the Right to Work Act* (used to describe statutory or constitutional provisions banning the
requirement of union membership for employment, it doesnt outlaw unions but does outlaw any form
of union security)
Union Shop a form of union security in which the company can hire non union people, but they must join the
union after a prescribed period of time and pay dues or they may get fired
Agency Shop A form of union security in which employees who do not belong to the union must still pay union
dues on the assumption that union efforts benefit all workers

Preferential Shop Union members get preference in hiring but the employer can still hire union members
Maintenance of membership arrangement Employees do not have to belong to the union but must must
maintain membership in the union for the contract period. These account for about 4% of union agreements

The Collective Bargaining Process

When and if the union becomes your employees representative, a day is set for management and labor to
meet & negotiate a labor agreement. This agreement will contain specific provisions covering, wages, hours
and working condition. Both management and labor are required by law to negotiate all these provisions in
good faith
Good Faith bargaining is when both parties are making every reasonable effort to arrive at agreement;
proposals are being matched with counter proposals. Good Faith does not mean that negotiating cannot
come to halt

The process of negotiating starts with both employer and unions sending a negotiating team. Multiple phases
of negotiating occurs where both sides put their positions across and then go back, discuss with the key
stakeholders of their respective teams and try and come to compromise which is mutually acceptable. Both
sides work with ample sets of data to bring their points to the table

The Collective Bargaining Process Types 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 are introduced by
the other party viz. pay

Voluntary Items are those which can be introduced for a discussion only when there is joint agreement for a
discussion
Illegal Items are those that are forbidden by law viz. Closed Shop type of union security is against the laws
of Right to work, wherein only union members have to be hired exclusively which is depriving non union
members from a statutory right

The Collective Bargaining Process Bargaining Stages

Actual bargaining goes through different stages and each stage there could be stumbling blocks. Some of the
different types of challenges arising in the bargaining process are shared below.
Impasse A collective bargaining situation that occurs when the parties are not able to move further towards
settlement, usually because one party is demanding more than the other will offer

Mediation Intervention in which a neutral third party tries to assist the principals in reaching agreement
Fact Finder A neutral party who studies the issues in a dispute and makes a public recommendation for a
reasonable settlement
Arbitration The most definitive type of third party intervention, in which the arbitrator usually has the power
to determine and dictate the settlement terms. Unlike Mediation, arbitration can guarantee a solution to an
impasse.

STrikes
A strike is a withdrawal of labor and there are 4 main types of strikes viz. economic, wildcat, sympathy,
Picketing
Economic A strike that results from a failure to agree on the terms of the contract that involve wages,
benefits and other conditions of employment i.e. the second and most basic aim for formation of unions.
Unfair Labor Practice Strike a strike aimed at protesting illegal conduct by the employer
Wildcat Strike An unauthorized strike occurring during the term of a contract. Often, such strikes are on
account of an unprecedented instance or incident which triggers a protest from employee unions
Sympathy Strike A strike that takes place when one union strikes in support of the strike of another. Viz.
Bank strikes in India where the SBI union goes on strike when the all India banking federation (which is the
parent union for all other nationalized banks go on strike, a sign of solidarity and a form of pressure tactic.
Boycott Combined refusal by employees and other interested parties to buy or use the employers products
Inside Games Union efforts to convince employees to impede or disrupt production viz slowing the work
pace

Grievances
The actual contract agreement may be a 20 or 30 pager document or longer which spells out all the
conditionality's and possible situations in which different types of resolutions have been agreed upon.
Hammering out an agreement is not the last step in collective bargaining. No labor contract can cover all
contingencies, hence having a grievance handling procedure in place brings about an orderly system for
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 sustainability of the
contract. Viz. Absenteeism, Insubordination, Plant rules.
All these types of grievances may actually be a symptom to a larger underlying problem and hence defining
the scope of these grievances and the extent at which grievances will have to be resolved with penalties are
the kind of discussion which Unions and Employers need to work upon to help in upholding a contract for a
long period.

Unions Today & Tomorrow

To understand union and its impact, its necessary to understand the interplay between unions and the law. In
brief labor law has gone through periods of strong encouragement of unions, to modified engagement
coupled 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 of partial economic
liberalization in 1990, the rigid approach of unions started to change. Emerging IT / ITES sector is seeing
firms where labor unions are absent.
In many ways today, Human Resource functions are playing an active role and at times a parallel role to an
union to circumvent and obstruct unions from forming, by fostering good values, stressing on quality,
productivity and objective based appraisal mechanisms.
In future Unions may become influential and stronger but the aggression may be replaced by stress on policy
reforms and working in collaboration with employers instead of using the confrontationist approach

Establishing Strategic Pay Plans

To establish strategic pay plans, Managers need to understand basic factors in

determining pay rates. Some factors determining design of any pay plan are legal,
union, company strategy and policy, equity
Components of Employee
Compensation

Direct Financial Payments

(wages, Salaries, incentives,
commissions & bonuses)

Based on time

Based on performance

Indirect Financial Payments

(Employer paid insurances , LTA
etc)

Employee Compensation systems around the world operate within the framework of
legislations. In India, non managerial level of employees and workers in the informal
sector are only covered by the wage legislations. Indian Legislations enumerated below
Minimum Wages Act of 1948

The Payment of Wages Act of 1936

The Equal Remuneration Act of 1976
Pay Commissions for Government Employees
Payment of Bonus Act
Payment of Gratuity Act
ESIC & EPF
The Companies Act, 1956

Employee Stock Options & Employee Stock Purchase

Scheme (Governed by SEBI)

The Working Journalists & Other Newspaper

Employees & Miscellaneous Provisions Act, 1955
(Statutory wage board to fix salaries of Journalists &
News paper employees

Equity Theory of Motivation

The theory postulates that people are strongly motivated to balance between what they
perceive as their inputs or contributions to their rewards. If a person perceives inequity, a
tension or drive will develop in the mind and the person will be motivated to reduce or
eliminate the tension

Different Forms of Equity & Methods used to

address this Equity
External refers to how a jobs pay rate in one
Individual refers to the fairness of an individuals
company compares to the jobs pay rate in other
pay as compare with what his/her coworkers are
companies
earning for the same or comparable jobs within the
Method: Salary Survey of other companies in the
company
industry
Method: Performance Appraisal & Incentive Pay
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

Procedural - refers to the perceived fairness of the

processes and procedures used to make decisions
regarding the allocation of pay.
Method: Communications, Grievance Mechanisms
and employee participation to bring transparency

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
Job Evaluation is a systematic comparison
done in order to determine the worth of one
job relative to another

Benchmark Job: A job that is used to anchor

the employers pay scale and around which
other jobs are arranged in order of relative
worth

Compensable Factors are factors which are

common for all kinds of jobs. Viz. Skills,
effort, responsibility and working conditions

Employees perception of Equity/ Inequity motivates him/her to perform well at the workplace. There are 4 types of equity viz.
External, Internal, Individual & Procedural. Methods to address each of these equities range from Salary Survey, Job Evaluation
& Analysis, Performance Appraisal & Incentive Pay to Communications and Grievance Mechanisms to Employee Participation. All
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 Jobs into Pay Grads, Price
each pay grade through Wave Curves and finally fine tune pay rates. Salary Surveys have already been explained.
Job Evaluation Methods
Ranking Method Simplest form of Job Evaluation that
involves ranking each job relative to all other jobs usually
based on overall difficulty
Point Method Method 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
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 or
classes

Factor Comparison Method A widely used method of

ranking jobs according to a variety of skill & Difficulty factors,
then adding up these rankings to arrive at an overall
numerical rating for each given job
Grades A job classification system like the class system,
although grades often contain dissimilar jobs such as
secretaries, mechanics and fire fighters. Grade descriptions
are written based on compensable factors listed in
classification systems

Pay Rates are established using a 5 stage process viz. Salary Surveys, to Job Evaluation, Grouping Jobs into Pay Grades, Price
each pay grade through Wave Curves and finally fine tune pay rates. Salary Surveys have already been explained.

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

Pay Rates are established using a 5 stage process viz. Salary Surveys, to Job Evaluation, Grouping Jobs into Pay Grades, Price
each pay grade through Wave Curves and finally fine tune pay rates. Salary Surveys have already been explained.
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 job
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 executive benefits and
particularly at the top levels doesnt lend itself to job evaluation but rather to understanding the jobs complexity, the
employers ability 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 based on the competencies
the job requires. The main reason for doing so is to encourage employees to develop the competencies they need to move
seamlessly from job to job.

What is Competency Based Pay?

Where the company pays for the employees range, depth and types of skills and knowledge rather than for the job title he or
she holds.
Difference between Traditional Pay Plans and Competency Based pay plans are that traditional pay plans base the workers
pay to the worth of the job based on the job description pay here is more job oriented; whereas competence based pay ties
the workers pay to his or her competencies- pay is more person oriented. Employees are paid based on what they know or can
do- even if, at the moment, they dont have to do it
Evolving Nature of
Compensation Planning

Current

Past
Seniority
Less Emphasis on Job Duties, Narrowly
Defined pay ranges & jobs

Performance
More Emphasis on Skills & Competencies,
broader jobs and pay ranges, board oversight
and regulation on pay

Some Key concepts in Compensation Planning

Broad banding Consolidating salary grades and ranges into just a few wide levels or bands each of which
contains a relatively wide range of jobs and salary levels, encouraging employees to learn new skills required for
managing their changing roles efficiently
Comparable Worth The concept by which women who are usually paid less than man can claim that men in
comparable roles rather then in strictly equal jobs are paid more
Board Oversight With many stockholders concerned with excessive executive remuneration, board oversight of
executive pay has become an important issue, and boards of directors need to make sure they are qualified
advisors and exercise diligence and independence in formulating executive pay plans

THANK YOU