Changes in Canadian Labour Compensation - Research Paper Example

Changes in Canadian Labour Compensation Introduction Canadian labour compensation has undergone various changes that include the adoption of contingent compensation strategy to balance employment with the actual productivity and profitability of the firm. The feasibility of such changes have been questioned by labour unions for reasons like transparency of financial information and equality in the distribution of profits to workers in all levels of the company. Further, there is gender divide and inequity in the payment of compensation to women and disabled workers respectively. Various legislations have been passed through bills to regulate labour compensation that has been kept moderate with a downward growth that leads the compensation of public sector to deteriorate to a lesser level of compensation as offered by private sector. Replacement of fixed wage system with profit sharing or contingent payment process The intensified market competition for products has led companies to moderate the growth of wages and employment costs. This is in the wake of increased imports in labour intensive industries in nations like Canada. Employment and wages correlatedly decrease with increase in imports and the wages have been bargained to keep the employment rate afloat. A decline in wage premium is therefore induced by centralised bargaining leading to a conclusion that market competition leads to decentralisation of compensation bargaining by enterprises. This kind of wage decline is prevalent in Canada from 1982. The downward adjustment of wage does not give importance to cost of living clauses, additional wage freezes, less pattern bargaining and bonuses. The moderation of wages from the pattern and centralised bargaining is expected to continue in Canada. This is in view of the government strategy to reduce the labor cost pressure by shifting from the fixed wage policies or the policies that change with macro economic circumstances to several bonuses or contingent payment process. There has been policy shifts in Canada from fixed payment system and wage standardisation to lump sum bonuses that do not form a part of the normal wage structure. In addition, there has been a considerable growth in the consititution of compensation schemes that relate wage adjustments to work unit related changes in productivity or profits, establishment, firm and the individual performance of the worker. For instance, a research on Canadian establishments (Gladstone & Wheeler 1992 p.190) reveal that profit sharing is a strategy in twenty five percent of the sample establishment, gain sharing in ten percent and eight percent of the sample pay for knowledge plans. These compensation structures are distributed widely and have favourable effects on the micro as well as macro economic performance. In short, contingent compensation policies assists employment expansion and controls inflation. Response from Employee Unions Union leaders are skeptical about the profit sharing policies because they are willing to consider it only as a supplement and not as a replacement of fixed wages on the basis of labour or intra-industry market. Union leaders in Canada strongly oppose profit sharing policies in the place of fixed wages and demand fixed wage structure inspite of the attractive economic benefits. Disadvantage of replacing fixed wage system with profit sharing strategy Firstly, contingent compensation system involves the sharing of information regarding prevailing financial conditions and future business prospects of the firm which in turn paves way for the workers to question the information and raises the issue of their representation in the managerial functions of the firm. When it become unpractical for the management to disclose all the information transparently, union leaders and workers prefer to receive fixed wage and contractual compensations. Secondly, contigent compensation policy increases the issues of internal equity, specifically over the difference in the treatment of top management and the salaried employees(Gladstone & Wheeler 1992 p.191). Due to the changes in labour compensation there has been considerable fall in the real earnings of Canadians. Real compensation for an hour declined during the period 1981 to 1987 and majority of union compensation settlements were less than the inflation rate (Card & Freeman 1993 p.48). Gender inequity under Public Sector Equitable Compensation Act The Conservative minority government introduced the Public Sector Equitable Compensation Act on February 6, 2009 under the Bill C-10 of the Budget Implementation Bill. The Act redefines the word which assesses the value of work. The Act continues to define the traditional factors that gives importance to “the composite of the skill, effort and responsibility required in the performance of the work and the conditions under which the work is performed”. The new Act has introduced the theory that the work of women in public sector may be valued on the basis of existing market conditions in private sector where there is no union. The Real pay equity bill is legislated to eliminate systemic discrimination of wages that arise from unaudited market forces. But, the introduction of market forces as a tool for comparison eliminates the possibility to match the compensation of woman with men. Though the legislation calls for a policy that paves way for upward harmonisation of working conditions and wages, the legislation is designed to move the federal public sector compensation downward towards the low levels of compensation offered by the private sector. Pay Inequity revealed through the Act The Public Sector Equitable Compensation Act indicates that women should be paid according to market conditions existing in the private sector. This clearly informs the false assertion of equivalence between the union and management by leaving the union to take responsibility for negotiating equitable compensation with the management that enjoys unlimited freedom to plan job classification, hire employees, issue payments and control information. The Act is inequitable because the employer has to pay a fine of just $10,000 while firing a worker who has placed a complaint but the union that takes up the issue of the worker is required to pay an exorbitant amount of $50,000 as fine. This rule further indicates that workers will not have the right to question gender bias in wages as per Human Rights Law. The changes in compensation as per the Act does not follow the recommendations laid down in “the Federal Pay Equity Task Force Report” that requires inclusive, proactive and timely legislation that ensures the involvement of union and allows the support of a new pay equity group. The changes in Canadian labour compensation through The Public Sector Equitable Compensation Act is a step planned by the government to eliminate the involvement of union and dissuade it from supporting the cause of women working in the public sector (Pay Inequity 2009). Compensation for injured, disabled and slain workers The decision of the Canadian government to permanently eliminate the pension offered to disabled person was challenged by injured workers. The government has set the proposal aside not considering the suffering and pain of workers injured at work place. Injured workers are also not receiving services and care as per workers compensation plan. There are wide discrepancies in the amount of compensation paid by territories and provinces and the Workers Compensation Board is vulnerable to corporate pressure and does not offer beneficial compensation to injured workers. The challenges of injured workers is becoming worse and numerous due to the economic crisis and makes it hard for them to survive. In the wake of the above issues, the Canadian Labour Congress has initiated supporting efforts to bring about change and improvement to compensation paid to injured workers througout Canada. The changes recommended in worker’s compensation comprise various factors other than monetary increment. The congress obligates the government to ensure respect, dignity and justice as the basis for the renewed injured workers compensation process. All the territories and province are required to ensure that they comply with workers compensation act with the implicated purpose, to compensate and assist injured workers, disabled and workers fallen sick at work. The changes in compensation has also required every territory and province to institute an act that clearly emphasises to support workers with permanent disability. Workers who contact lifetime disability at workplace are to be compensated with pension for life and the injured workers are to be supported with complete cost of living. Injured workers are to be given full compensation or job security (Workers’ Compensation Needs to Work). Conclusion It may be concluded that the changes in Canadian Labour compensation is not satisfactory to the worker’s union due to the vague calculation methods as in contingent compensation system and the legislation passed in 2009 restricts the union from challenging the lesser amount of salary offered to women employees. The compensation offered to disabled workers are also facing opposition due to lack of equity and consideration from the government. The various worker unions in Canada have called for reconsideration of the compensation strategies due to the above mentioned reasons. Reference Card, D.E. & Freeman, R.B. 1993 Small differences that matter: labor markets and income maintenance in Canada and the United States Chicago: Chicago Press Gladstone, A. & Wheeler, H.N. 1992 Labour relations in a changing environment Berlin: Walter de Gruyter Pay Inequity: Canadian Labour Congress Analysis of the Public Sector Equitable Compensation Act. Canadian Labour Congress March 3, 2009 Available: http://canadianlabour.ca/pay-inequity-canadian-labour-congress-analysis-public-sector-equitable-compensation-act. Accessed on June 8, 2009 Workers’ Compensation Needs to Work for Workers. Canadian Labour Congress June 1, 2009 Available:http://canadianlabour.ca/en/workers-compensation-needs-work-workers-june-1st-injured-workers-day-canada. Accessed on June 8, 2009 Read More