Two-Tier Wage System The article I found was in the European Industrial relation On-line website. However this is the only article I was able to find on-line. The compensation topic I will discuss is the Two-tier wage system. I feel two-tier wage system is a growing concern for many organizations as well as many individuals entering into the labor force today. Organizations are competiting globally against one another and trying to reduce labor cost anyway the can. We are starting to realize the organizations are paying employees two different rates for individual who are doing the same work.
On 30 April 1997, Volkswagen a German based car manufacture announced the creation of several hundred temporary jobs. According to an agreement between the company and the IG Metal trade union, the new temporary staff, although being hired on the terms of the current company agreements, will be paid 10% less than core employees.
This agreement establishes a two-tier wage system at Volkswagen in Germany.
In the 1997 collective bargaining round, Volkswagen aims to cut costs and increase workforce flexibility so it can compete globally against other car manufactures. The German economic crises has slowed down car manufacturing so Volkswagen is trying to implement a two-tier wage system so it can compete in North American Markets.
In April 1997, Volkswagen failed to create an internal temporary employment agency with employees who would have received compensation according to the current metalworking agreement, and below the rate of the current company agreement. The IG Metal Union demanded the creation of new jobs, backed by the threat of boycotting overtime.
On 9 May, Volkswagen announced the creation of several hundred jobs at its regional subsidiary Volkswagen Sachsen, Germany.
Bargaining issues currently under negotiation at Volkswagen are working time flexibility, employment guarantees, sick pay, pay for part-time work for older workers, general pay increases, and a new collective agreement for internal services.
I think the strategy was very well thought out; however the system was not implemented correctly. When Volkswagen and the IG Metal Union agreed upon a two-tier wage system it was a great idea because it will provided jobs to people and allowed the company to compete against other car manufactures. Volkswagen failed to create an internal temporary employment agency with employees who would have received compensation according to current metal working agreement and below the IG agreement. Thus leading to the fulltime employees boycotting overtime work.
If I was a Human Resources Director when Volkswagen and the IG Metal Union worked this agreement out, I would of done things differently. I would offer some of the temporary workers back for part time jobs then eventually hiring them to full time jobs. Then I would implement a pay system where employees would eventually have an increase of pay due to the hours individuals worked and how well the organization would be doing in sales.
I would also have done a wage and salary survey. This would have allowed me to be more aware of how disgruntled my employees would have been. A simple survey conducted by JD Power and Associates and it would allow me to recognize this situation.
Pay grade system for compensation would become set up. Pay Grade is where it classes particular groups of jobs which are similar in tasks and knowledge with the same compensation or similar compensation ranges. This type of compensation will allow individuals to feel like they are a part of a team.
Skill based pay is more common in research labs, warehouse, assembly line, factories, and engineering labs. This type of compensation set up would also allow for individuals to further develop their own skills and education because they would want to be paid more based on their own skills and knowledge and abilities to perform there own jobs. If a skill based pay would be set up this motivates individuals to enhance their KSA'S so they can be paid more.