Employment Relation Issues - Essay Example

Employment Relation Issues: Employee Underpayment Name Institution Abstract One of the most critical factors within the workplace is the relationship that occurs between the employees and employers within an industrial set up: employee relations. The workers always have specified rights over their working conditions and other matters involving the pays, redundancies, overtime, promotion, and other issues. The law specifies such rights and sometimes negotiated through the trade and workers unions with an aim of influencing some of the decisions from the employers. Every country specifies the workforce rights differently with some offering the workers higher protection bounds from exploitation by the employers. With the current rate of competition within the market and changing needs of the customers, organizations are seeking for employees that would assist in meeting the required objectives. Therefore, most companies base their payment methods on the level of performance of each employee with those registering high performances getting high pays than those with little performance. Besides, payments determine the level of motivation for every employee. Most literatures associate the highest level of satisfaction with the pay equity while the inequity pay especially the underpayment resulting into lower satisfaction and deliverance of unexpected outcomes like increment in absenteeism and turnover rates. Determination of the equitability for employees is difficult for both the managers and researchers. This paper will focus on investigation the literatures on employee relation issues specifically the underpayment and determination of whether the equitably paid workers and the underpaid differ based on their satisfaction and change aspirations in pay. Employment Relation Issues: Employee Underpayment Introduction Well paid employee in every organization are highly motivated. Moreover, highly motivated workers are organizational assets considering their level of productivity, willing take extra responsibilities, and pleasure of working. However, each institution has poorly and unmotivated employees. To guarantee organizational success, the human resource management (HRM) needs to deal with such obstacle through identification of the unmotivated workers and turning them around to enhance their level of performance with respect to ensuring the achievement of the desired results. Nonetheless, such might not be an easy process considering it is difficult to motivate people if they do not consider it important (Briscoe, Schuler, & Tarique, 2012). To solve such problems, the HRM need to identify first some of the factors contributing to de-motivation of the workers then create an environment that encourages such employees to improve their performances. To maximize the income from the product production or provision of services, most employers always level such with the level of output per employee. That is, the higher productive employee are, the higher the payment that they receiver. Consequently, some employees receive poor payments due to the lower productivity. However, in some cases, the employers takes advantage of the employees considering the increasing amount of pool of labour seeking job opportunities on the job markets absorbing few people. As a result, most of the workers consider limited pay over retrenchment or remaining unemployed. Underpayment is one of the employee relation issues that most laws and trade unions tend to prevent. According to Turnbull et al., (2004), underpaid workers are de-motivated; consequently, the companies experience decline in productivity, increment in employee absenteeism, poor rates of interactions, employees show little interest in solving spotted organizational problems, employee attitude change, increment in the amount of errors, and stress reactions such as short tempers and difficulty in getting along. Concept of Underpayment Employees payment levels is necessary but not sufficient factor to determine the level at which the workers are satisfied with the payment. The meta-analysis from the antecedents of the pay satisfactions reveal that the most determinant is the pay equity whose evaluation could be made through making comparisons of a person’s pay to his/her payment history; to that of the reference group; or the expectations of people’s pay. Currently, most job seekers are leveraging payments based on their level of education and experiences (Fong, 2009). However, the employers base the payments of the level of performance of each employee, which makes it challenging to balance between the employees and the employers. Irrespective of the comparisons to single or multiple factors, the results derived from the comparisons could assist in providing a robust explanation on the pay satisfaction among the employees. Several methods have been used in determining the overall equity among the employees; nonetheless, with Adam’s equity theory, most researchers have been able to conduct effectively the theoretical review of employee underpayment as employee relation issue. Equity theory plays a significant role in determining the pay levels of the workers as it ensures provision of the behavioural approaches of comparing an individual’s input and outcomes against the or relative other’s inputs and outcomes of the others. However, the theoretical value of Adam’s theory in determining the level of pay for the employee still remain questionable owing to its two limitations. Firstly, the proper identification of the relative others such as individual or group or internal or external still remain an open question. Secondly, even as the theory purports to be one of the motivational theories predicting behaviours, it fails to specify which of the wide behaviorial and attitudinal responses of an employee might choose in resolving the inequity. In 1961, Jaques developed a compensation model, which avoided the two deficiencies associated with Adam’s motivational theory. Jaques theory is based on a single comparison of the pay of the employee with the shared norm for fair payment within the work group. Moreover, the attitudinal and behavioral consequences associated with such comparisons are specified within the theory based on the pay/inequity pay level and type. Although the pay equity determinants appear to be straightforward, it is significant step in assessing the overall equity, which is evaluated through comparison of the relation among the three variables, defined within the theory (Ogloblin & Brock, 2005). The outlined variable include the time-span of discretion (Work or W); pay (Pay or P); and time-span capacity (Capacity or C) the different P:W:C relations often provide numerous comparisons that define equity. The most evident types of inequities are overpayment inequity and underpayment equity. Overpayment inequity is such moment when the workers perceive that their outcome input ratio is higher than a referent ratio while the underpayment equity occurs whenever the workers perceive that their output input ration is less compared to that of the referent. For example, Victor and Hogo work in fast foods restaurant and are referents of each other; however, Victor is hardworking and arrives to work on time while Hogo is lazy and a frequent latecomer. Unfortunately, the two employees earn similar amount of salary and bonuses which makes Victor to perceive an underpaid employee considering the contribution more than Hugo does. On the other hand, Hugo perceives overpayment as the contribution is lower compared to Victor’s but they earn similar income. However, it is important to note there is a possibility of changing such situations. Consequently, the employees could change their outputs and incomes, that of their referent, and leave the organization or force their referents to leave (Hollingshead, 2010). Recently, the scandal that emerged in 7-Eleven on the underpayment of the wages revealed the manner in which the employers exploit their human resources. In most industries, the employees are susceptible to exploitation or intimidation owing to their age, immigration status, and various associated factors such as racism and gender. However, not every underpayment is deliberate and systematic since the employers are seeking for experienced and knowledgeable workers within their areas of duties. From the Australian context, the meaning of underpayment is unclear to most workers. Furthermore, the Australian legal system, award, and agreements is complex which could lead to employers especially within the small businesses to unintentionally underpay their employees which might have significant consequence (Butterwort et al., 2006). From the employees’ point of view, underpayment refers to living on unfairly low wages, which means serious penalties for the employers. Economic Impacts of Employee Underpayment The economic theory is clear on setting the minimum wage standards. Underpayment is common in most countries; however, it is important to consider the size of the firm while establishing the minimum wages. Employees need to earn depending on their contribution to the organization. Setting the minimum wages above the market equilibrium might decline demand for the low-wage labour on part of various firms. Such effects could occur as the companies substitute the others inputs for the higher priced low wage employees as they reduce their higher cost of labour. Therefore, considering the equality of all else, increment in the minimum wages could have adverse effect on the rate of employment. The workers within the lower end of the distribution would be affected while the employees with minimum wage could lose their jobs since the employers are seeking reduction in the demand for labour (Hao & Li-rong, 2007). With the growing economy, such cases are likely to occur in form of decline in the new job opportunities instead of outright retrenchment. With the global economic recession, most employers are considering retrenching the employees to meet their cost of operation. Besides, few organizations offer employment to the unskilled and semi skilled as old employees continue to work without retiring and leaving room for new employee. The tough economic situations are pushing the employees to stick with their current employers irrespective of the level of exploitation. Furthermore, underpayment affects the skilled and experienced employees as well. Economic recession and competition is causing most businesses to fail while those with investment interest failing to put their dreams into action. As a result, few jobs are created. Globalization and development is another factor increasing the level of underpayment in most countries. With free trade across most countries, there is availability of pools of labour. Some countries are enacting laws that give the locals the first opportunity when it comes to offering employment opportunities (Edwards, 2003). The industrials relations could be used in changing the prevailing conditions through effective execution of the guidelines, regulations, and strategies. Confidence within the working environment is critical to guarantee efficient and reliable relationship between the employer and the employee. However, in some cases, the effect associated with underpayment is adverse as the workers resort to steal organizational resources to supplement on their sources of income. Some organizations fail due to such practices. Employee Relations Approaches The current needs of the employees are increasing within the current tough economic times. It is important to note that economic problems have no boundaries as it affects both the employers and performances. Moreover, some organizations do not pay the employees based on their skills, experiences, and input to the companies but based on the prevailing economic situations. If the business is performing well within the market, then the employees are offered better payments, bonuses, and commissions (Ogloblin & Brock, 2005). However, in cases of poor economic conditions, the workers are underpaid to prevent retrenchment of some workers. Some companies often retrench some people to reduce their cost of labour with the tough economic conditions. With such problems associated with underpayment, the solutions lies within establishment of an effective, efficient, and reliable employee relation. Currently, there are two major approaches to employee relations: individualistic and collective approach. Consequently, the employers choose their style of management depending on suitability and needs. The individualistic approach outlines the manner in which the employers prefer with an aim of keeping separate management style and negotiations that is open with the individual employees while collective negotiations means with the full workforce at large. Employees are the greatest organizational assets that at all circumstance the management have to ensure consideration of their welfare at all cost. Coordination and management of the relationship between the employers and employees often become complicated all year round especially with the ever-changing needs of the customers which forces companies to align their management style with the objectives. Therefore, it is critical to manage all the employees concerns with reference to various associated issues such as relocation of the industry, compensation, violent behavior, harassment, redundancy, and most importantly the issue on underpayment (Lewis & Sergeant, 2009). Therefore, it is important that every employer assess the performance of their employees and pay them depending on their efforts to assist the organization meet its objectives. Every employee needs to have a progressive attitude towards the relationship with his or her employers. If such relationships become weak, then it is clear the organization would suffer largely thus hindering such performances. From the two approaches, individual approach requires individual employees to work closely with their employers. The employer negotiates the contract terms and conditions with individual employee that pertain to particular employees. In some cases, the employers often opt to breach the payment contract by reducing owing to the tough economic conditions. There are advantages associated with individualistic approach while managing employee relations. The approach only focuses on the interest an employee, which makes it prevent the conflict between the two parties. In some case, the employees often take the opinion of multiple employees with differing views and interests. Moreover, in every organization, there are those that work more than others within a department and paying the equality would not reflect the commitment by the organization to resolve the underpayment issue. Therefore, it becomes difficult to resolve the needs of all the employees considering the tradeoff have to be made to serve the interest of the majority of the workers, which could leave some of the workers unhappy. For example, an employee might view the wage rate as low while another could feel that the company should provide more fringe benefits to the employees, and another employee could be worried about the downsizing operations of the company. Solving the problems of the employees simultaneously might be difficult; consequently, the needs of some employees are left unattended in such regard. With individual bargaining, the needs of the individuals are catered for in the employment contracts, which assist in reducing the conflicts (Lewis & Sergeant, 2009). Impacts of Underpayment on the Workplace and Management Employee underpayment refers to the condition under which the employers fail to pay the minimum monetary amounts such as allowances as prescribed under the award or agreements. In some cases, the employers might be prosecuted in a bid to recover the unpaid amounts. According to the Fair Work Ombudsmen, it is critical that the employers and employees attempts in resolving the workplace issues on in-house matters. Although the organizational guidelines managing the workplace might be different from the legislations provided by the Fair Work Ombudsmen, such principle remains the same. Besides, the Australian Department of Industry, Innovation, Science, Research, and Tertiary Education conducted a research showing self-resolution mechanisms providing opportunities to the economy, employers, and economy. Employees work best whenever they feel motivated. The employers need to consider the welfare of the employee through ensuring that they are adequately paid for their services (Bamber, Lansbury, Wailes & Wright, 2016). Poor payments among the workers contribute to the continuous cycle of poverty as their demands continue to increase, the economy continues recede, but the payment remains low. As a result, the workers always have deficiency in their budgets leading to poor economic developments. Underpayment does not only affect the workers but also the economic development since it discourages foreign investors due to low purchasing power of the locals. For sustainability, some employees often opt to steal organizational resources. Even with the tough economic times, the employees still need to sustain themselves through affording the basic needs. Without adequate payments to fulfill such payments, the employees often go extra miles in supplementing such resources, which could even involve stealing organizational resources to meet such needs. Underpayment involves not only the salaries and wages, but also insurance covers, bonuses, and commissions based on the amount of works undertaken by the employees. Solution to the poverty problems depends on manipulating the economic elements, which also involves availing disposable income for the employees. Better payments gives the workers opportunity of participating in economic developing through frequent contribution of their taxes to the relevant state institution and ensuring prevalence of respect on organizational resources. Since productivity of the employees depend on their level social wellbeing, poor pay could lead to reduced organizational general performance, losses, and poor competitive advantage in the market. References Bamber, G., Lansbury, R. D., Wailes, N., & Wright, C. F. (2016). International and comparative employment relations: National regulation, global changes. Los Angeles, California, LA: SAGE. Briscoe, D. R., Schuler, R. S., & Tarique, I. (2012). International human resource management: Policies and practices for multinational enterprises. New York, NY: Routledge. Butterworth, L., Clark, G., Smitheram, G., Solomon-Bridge, A., & SA Unions. (2006). Youth works: The high price of a low wage. S. Aust: SA Unions. Edwards, P. K. (2003). Industrial relations: Theory and practice. Malden, MA: Blackwell Pub. Fong, E. A. (2009). Relative CEO Underpayment and CEO Behaviour Towards R&D Spending. Journal of Management Studies, 47(6), 1095-1122. Hao, Z., & Li-rong, L. (2007). 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