2 thoughts on “ Two-tier system – what does it mean – thanks to Wikipedia ”
Graham Giles on October 11, 2011 at 5:26 pm said:
Two-tier system – copied from Wikipedia with the footnotes omitted but which can be viewed by clicking on the link shown above.
From Wikipedia, the free encyclopedia
A two-tier system is a type of payroll system in which one group of workers receives lower wages and/or employee benefits than another.
The two-tier system of wages is usually established for one of three reasons:
1) The employer wishes to better compensate more senior, ostensibly more experienced and productive workers without increasing overall wage costs;
2) The employer wishes to establish a pay for performance or merit pay wage scheme that compensates more productive employees without increasing overall wage costs; or
3) The employer wishes to reduce overall wage costs by hiring new employees at a wage less than incumbent workers.
A much less common system is the two-tier benefit system, which extends certain benefits to new employees only if their receive a promotion or are hired into the incumbent wage structure. This is distinguishable from traditional benefit structures, which often do not permit an employee to access a benefit (such a retirement pension or sabbatical leave) without having first achieved certain time-in-position levels.
Two-tier systems became more common in most industrialized economies in the late 1980s.
They are particularly attractive to companies which have high rates of turnover among new hires (such as retail) or companies which have large numbers of high-wage, high-skilled older workers due to retire soon.
Trade unions generally seek to reduce wage dispersion (the differences in wages between workers doing the same job). Not all unions are successful at this. A 2008 study of collective bargaining agreements in the United States found that 25 percent of union contracts surveyed included a two-tier wage system. Such two-tier wage systems are often economically attractive to both employers and unions. Employers see immediate reductions in the cost of hiring new workers. Existing union members will see no wage reduction, and the number of new union members with lower wages is a substantial minority within the union and subsequently unable to negatively affect ratification votes.
Unions also find two-tier wage systems attractive because they encourage the employer to hire more workers. Some collective bargaining agreements contain “catch-up” provisions which allow newer hires to advance more rapidly on the wage scale than
existing workers so that they reach wage and benefit parity after a specified number of years, or which provide wage and benefit increases to new hires to bring them up to party with existing workers if the company meets specified financial goals.
Some studies have found problems with two-tier systems. Some negative effects which have been found include: Higher turnover among newer, lower-paid employees; a demoralized workforce. Given enough time, a two-tier wage system can permanently lower wages in an entire industry. Lowering productivity expectations for new hires seems to alleviate some of these problems.
Graham Giles on October 11, 2011 at 5:51 pm said:
Alistair Anderson wrote the following article – Metal employers’ body seeks 50% starter-wage cut – which was published for the first time in Business Day today.
View or download the complete article by clicking on the link or go to Business Day itself. Extracts are included here with kind permission of Business Day.
“Call for a wage cut for entry-level jobs is a bid to revive a key industry which has lost nearly 100000 jobs since the recession.
THE National Employers Association of SA (Neasa) yesterday called for a 50% cut in the minimum wage for entry-level jobs in the metal and engineering sector, in a bid to revive a key industry which has lost nearly 100000 jobs since the recession.
This comes after the South African Clothing and Textile Workers Union and textile industry employers concluded a landmark deal last week to offer new employees wages of 30% less in a bid to boost employment and turn around SA’s ailing clothing industry sector”.
“Neasa CEO Gerhard Papenfus said yesterday during the 2008-09 recession, the metal and engineering sector lost 100000 of its 450000-strong labour force with only a few thousand jobs added in the subsequent recovery.
He expected a further 10% reduction in the workforce by the end of next year if the current labour relations agreement for the sector, negotiated by the Steel and Engineering Industries Federation of SA (Seifsa) implemented on July 1, continues.
Mr Papenfus said if Labour Minister Nelisiwe Oliphant withdrew the existing agreement and implemented a new wage and benefits agreement which included the 50% wage cut for entry-level workers, people could be employed again in his industry. ‘We are more expensive than the clothing and textiles industry but a wage cut would help. An entry-level cleaner costs R6500 a month and employers cannot afford that,’ he said”.