COMPENSATION
Third Canadian Edition
Milkovich, Newman, Cole
12-1
© 2010 McGraw Hill Ryerson
THE PAY MODEL
STRATEGIC
POLICIES
ALIGNMENT
COMPETITIVENESS
TECHNIQUES
INTERNAL
STRUCTURE
PAY
STRUCTURE
INCENTIVE
CONTRIBUTORS
STRATEGIC
OBJECTIVES
EFFICIENCY
 Performance
 Quality
 Customers
 Stockholders
 Costs
PROGRAMS
FAIRNESS
MANAGEMENT
EVALUATION
COMPLIANCE
12-2
© 2010 McGraw Hill Ryerson
Government as Part of the
Employment Relationship
 government is a key stakeholder in
compensation decision making.
 governments’ usual interests are whether:
 procedures for determining pay are fair (pay
discrimination)
 safety nets for the unemployed and
disadvantaged are sufficient (minimum wage,
employment insurance)
 employees are protected from exploitation
(human rights, pay equity)
12-3
© 2010 McGraw Hill Ryerson
Employment Standards Acts







minimum wage
paid vacation
paid holidays
standard hours of work and overtime pay
pay on termination of employment
minimum age of employment
equal pay for equal work by men and
women
12-4
© 2010 McGraw Hill Ryerson
Human Rights Laws
 based on Charter of Human Rights and
Freedoms in Canadian Constitution
 equal treatment in employment and
opportunity for employment regardless of
race, colour, religion, sex…
 prohibit harassment in the workplace
12-5
© 2010 McGraw Hill Ryerson
Pay Equity
 issue relating to the gender wage gap
 gender wage gap is the amount by
which the average pay for female
workers is less than the average pay for
male workers
12-6
© 2010 McGraw Hill Ryerson
Reasons for Gender Wage Gap
 differences in occupational attainment;
women historically segregated in small
number of occupations e.g., sales, nursing
 differences in number of hours worked
 differences in industries and firms
 differences in union membership
 presence of discrimination
12-7
© 2010 McGraw Hill Ryerson
Pay Equity Legislation
 intended to redress the portion of the wage gap
assumed to be due to discrimination, through
comparison of male- and female-dominated jobs
 four job evaluation factors required:




Skill
Effort
Responsibility
working conditions
 compare male and female job classes:
 job to job method
 proportional value/wage line method
 proxy comparison method
12-8
© 2010 McGraw Hill Ryerson
The Impact of Unions in
Wage Determination
 impact on general wage and benefit
levels
 impact on the structure of wage
packages
 impact on non-union firms (spillover)
 impact on wage and salary policies and
practices in unionized firms
12-9
© 2010 McGraw Hill Ryerson
Union Impact on General
Wage Levels
 union workers earn about 10 percent
more than non-union workers
 size of the gap varies from year to year
 union impact higher during periods of
higher unemployment and slow economy
 union impact smaller during strong
economy
 union benefits 20 to 30 percent higher
than non-union
12-10
© 2010 McGraw Hill Ryerson
Union Impact on Structure
of Wage Packages
Division between wages and
benefits
Union benefits 20 to 30 percent
higher than non-union
Two-tier wage plans
Lower wages for lower seniority
workers
12-11
© 2010 McGraw Hill Ryerson
Union Impact:
The Spillover Effect
 employers seek to avoid unionization by
offering workers the wages, benefits, and
working conditions won in rival unionized
firms e.g., Dofasco
 non-union management continues to enjoy
the freedom from union “interference” in
decision making
 non-union workers receive the “spillover” of
rewards obtained by unionized counterparts
12-12
© 2010 McGraw Hill Ryerson
Role of Unions in Pay
Policies and Practices
 collective agreement/contract specifies:
 basis of pay (regular, overtime)
 occupation - wage differentials
 experience / merit differentials
 vacations and holidays
 wage adjustment provisions (COLA)
12-13
© 2010 McGraw Hill Ryerson
Unions and Alternative
Reward Systems
 some collective agreements include
alternative rewards:
lump sum awards
piece rates
gain-sharing
profit sharing
pay-for-knowledge (skill/competencybased pay)
12-14
© 2010 McGraw Hill Ryerson
Conclusion
 governments assess fairness and
legislate employment standards, human
rights, and pay equity rules that affect
compensation management
 unions affect compensation
management directly through collective
agreements, and are facing the need to
adjust compensation due to international
competition
12-15
© 2010 McGraw Hill Ryerson