Compensation is the place where the rubber meets the road in employer-employee relations.
Naturally, employees are motivated to earn as much money as they can in exchange for their employment with the company. Although employers are typically interested in keeping compensation levels as low as possible, there are occasions when it makes good business sense to give a pay raise to a valued employee.
Unfortunately, employers may not be permitted to reward exceptional performance in a union workplace. It is often in the union's best interest to enforce contract prohibitions against merit-based pay increases, even though it means denying income to individual members. Employers argue that they should have the ability to use merit-based pay increases as a way to retain good workers and motivate the rest of the workforce even though merit raises are expressly forbidden in many union shops.
The debate over pay increases for union employees is far from settled. Passionate arguments exist on both sides of the conversation. To understand what's at stake, small business employers need to familiarize themselves with the issues and arguments.
Unions protect the interests of their members and advocate for equitable employment practices. When employers are allowed to grant pay raises on a case-by-case basis, it undermines the union's authority as the exclusive bargaining agent for its membership. Union representatives argue that an equitable employment scenario is one in which all workers benefit from the company's success, rather than just a few that are chosen at the discretion of the employer. In a worse case scenario, unions believe employers use undeserved raises to weaken the union and create disunity in the ranks.
Employers argue that merit raises are a necessity in competitive labor markets. If an employer is unable to reward excellence with pay incentives, retention will suffer because talented employees will leave the company for greener pastures. Employers resent union contracts that require them to compensate all employees similarly, even if some employees fail to meet the employer's performance expectations. From the employer's perspective, collective bargaining eliminates a motivation for excellence and results in a workforce that lacks incentives to perform at the highest levels. More cynical employers view union prohibitions against pay raises as mechanisms for union leaders to maintain power and control over their members.