Variable pay succeeding in union shops

Despite opposition, new study shows 30 per cent of unionized workplaces have variable pay plans in place

Union opposition to variable pay hasn’t stopped it from being used in unionized organizations, according to a new Conference Board of Canada study.

More than 30 per cent of unionized workplaces have variable pay plans in place, according to the study, Variable pay in unionized environments.

“Variable pay is working in unionized settings,” said Prem Benimadhu, vice-president, organizational performance for the Conference Board. “It is resulting in increased productivity, a safer work environment, a better understanding of the business by employees, and little risk of employees losing base pay.”

A variable pay plan offers employees additional compensation if the company meets profit and performance goals. Unions have traditionally been opposed to variable pay because of the belief it will lead to a reduction in base pay. According to the study, this is rarely the case. The variable pay is used as a bonus to the employees’ base salary.

Where it’s working

The Conference Board gave a couple of examples where variable pay plans were working in unionized environments.

Inco Limited revised its profit-sharing plan in 2000 from paying a bonus when the price of nickel rose above a designated threshold to paying when the company records net operating earnings in the previous quarter. This adjustments, according to the Conference Board, has made a better link between pay and performance for staff, increased engagement in the company and paid out about 10 per cent of base pay in recent quarters.

Canadian Pacific Railway and its seven unions have variable compensation plans based on safety, service and productivity. Each plan measures specific performance indicators related to different business units. Over a three-year period, $62 million was saved and $21 million was paid out to employees, according to Conference Board figures.

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