More Money Now - At What Cost Later?

To maximize profits and increase executive compensation, Corporate America has come up with a new plan to pay workers for their labor. These "alternative reward systems," usually connected to employee involvement programs, are sold by employers as necessary to save plants and jobs in the new global competitive marketplace.

These new pay schemes--lump sums, profit sharing, gainsharing, pay for knowledge, pay for skill, etc.--seek to divorce workers from the long-held and easily measured practice of paying workers for the time they are on the job.

Corporate Agendas

Alternative reward systems have two main hidden corporate agendas. First, they provide a reward for workers who are willing to compete against fellow employees in the same department, plant or industry. Second, they seek to pave the way in ending general wage increases based on collective power and replace them with lump sum payments based on individual or group performance standards. In plain English, alternative reward systems are planned union killers.

Let's look at traditional wage compensation which we all understand. Wage compensation is straightforward and an easily measured system of payment for workers. It is a system wherein the workers' wage and benefit packages can, with a fair degree of accuracy, be costed-out for present and future value. Unlike profit sharing, gainsharing or other pay for performance plans, a wage increase is "money in the bank."

Over the long haul, a nontraditional lump sum payment will never equal the economic value of a general wage increase. Wage increases produce a constantly growing income stream which is rolled up each and every year. Since many of our benefit plans are tied to our hourly wage, a real wage increase translates into a better deal on our pensions, saving plans, stock purchase plans, etc. Albert Einstein once said, "The most powerful force in the universe is compound interest." Wage increases, in reality, are compound interest for our paychecks.

Schemes

Listed below are a number of alternative reward payment schemes along with the threat they pose to unionized workers.

Profit Sharing has a great disadvantage for workers. Many factors that contribute to profitability are beyond the control of most employees. Management decisions and general economic conditions play a much larger role in bottom line profit or loss financial results. In addition to this uncertainty, in the present economy high profits are not always good for workers. Many companies post huge profits in large part due to plant closings and layoffs.

Gainsharing is rarely a good deal for workers. In many cases it leads to cutbacks in staffing levels as workers transfer their knowledge to their bosses to increase productivity. Remember, piece work is giving workers whips so they can beat themselves. Gainshairing is giving workers whips so they can beat each other.

Pay for Knowledge, in most company plans, is no more than cross-working, which is management's plan for increased worker flexibility and the breaking down of job classifications. These programs usually lead to reduced employment and increased job stress for the surviving workers as they hurry to become the "jacks of all trades and the masters of none.

Pay for Performance is just another name for merit pay systems. These systems breed favoritism and manipulation by management. Merit pay plans defeat the very principles of economic fairness upon which the union movement was founded.

Virtually all of these nontraditional pay schemes have a common denominator of a large initial pay-out with smaller and smaller cash rewards as time goes on. This is due to the fact that workers must continue to squeeze efficiencies out of a production or other goal-related system which has already been cut to the bone.

What To Do

When confronted with an alternative reward system proposal by your employer, always follow the guidelines set forth below.

1. Avoid accepting such schemes wherever possible. If not...
2. Educate the membership as to the pitfalls of the alterative pay system in question. Especially try to avoid lump sums, profit sharing and pay for performance (merit pay). Make the members aware of the dangers of pay for knowledge and gainsharing. Make certain they understand the typical pattern of such systems: Large payouts are front loaded. Expose the myth that such systems will guarantee their jobs.
3. Make certain that such alternatives are in addition to a negotiated wage rate increase and not in lieu of it.
4. Negotiate a guarantee that the alternative pay system does not diminish health and safety or job security. Negotiate a guarantee of the size of the bargaining unit complement as opposed to "no lay-offs because of the program." The latter allows for downsizing the staff by offering "early outs" and/or attrition which reduces union power and raises health and safety problems.
5. Make certain that the design of the alternative pay system is a total joint union/company effort. Be aware of how much control the union has over factors which affect the pay-out.
6. Assure that the pay-out affects all the members of the bargaining unit equally so as to avoid setting the members or groups of members into competition with each other.
7. Look out for and avoid negative effects upon other bargaining units in the same company, for the same reason. Be wary of negative effects upon mandatory bargaining policy.