Two tiered wage

system
SUBJECT: COMPENSATE MANAGEMENT.

SUBMITTED TO: SIR ZARAK.

SUBMITTED BY: ZAINAB, NOOR & NIMRA.

What is meant by two tier systems?
As businesses look to maximize efficiency and minimize cost, as well as stave off the
impact of globalization.
Some businesses with active unions now take a new tack: a two-tiered wage system.
This approach provides businesses with advantages ranging from basic cost reduction.
In the short and long-term to higher profit margins and a more divided employee base.
Two-tiered wage systems constitute an employee salary plan in which senior workers earn
money than new workers.
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These payment schemes commonly exist in fields with unions, which negotiate
pay rates for each level of employee.
Employers implement two-tier wage systems to save money and gain a
competitive edge.
Advantages of two-tier wage system:
Employee Division:
Two-tiered wage systems also provide the business with the advantage of a
more divided work face.
While workers receiving wages and benefits under the old agreement probably
remain more or less satisfied
New workers receiving reduced pay and benefits for equivalent work often
resent their better paid coworkers.
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Long-Term Cost Reductions:
The business also stands to see long-term labor cost reductions.
As older higher-paid union members retire.
The business can replace them with less-expensive workers.
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Short-Term Cost Reduction:
One of the advantages of a two-tier wage system is that the business enjoys a
short-term cost reduction for all new workers that join the union.
The total budget for wages and benefits the business must allocate goes down,
while production remains consistent.
Lower unit costs allow the business to enjoy a larger profit margin on products
by maintaining current pricing or to reduce prices to improve their
competitiveness.