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Issues Of Two Tiered Salary Structures

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Create a report that summarizes the current status of two-tier plans and what we know about how they work. What direction we can expect from them in the future and how stakeholder concerns should be addressed.



In short to define two tier wage system, it can be said that it is a specific type of the structure of the payroll where a group of employees get lesser salary than the other employees (Bridget M., and Ortiz 2015). The purpose of this report is to highlight how the workforce value propositions can be distinguished for the individuals who are getting paid at higher levels in two tier plans. Apart from that this report shades light on the possible challenges and shortcomings of this plan and along with it discusses regarding the latest events and reports regarding this topic.

Maintaining a talented workforce

Labor unions have a tendency to eradicate the two tier systems for the labors but in most cases in industries like automobile industry two tier systems are present in the market of America. In this system there are a lot of advantages and disadvantages, thus under this particular structure the managements can face a few problems in managing the workforce (DiPrete 2013).  In this structure at times the labors who are comparatively new, work for a much lesser salary than the experienced individuals and they share the same amount of work load. In this structure naturally a disruption gets created among the new joiners and that is where the management has to work on in order to keep them motivated. In such conditions, the management has to take initiatives so that the workforce remains motivated and loyal towards the organization (Dinovitzer, Ronit, and Hagan 2013). To make it happen, the management can provide opportunities to the new joiners so that if they perform well they will be eligible to get promotions rapidly. In order to make it happen, the management should take up more new policies in order to keep things within control. In this way the organization will be able to reach the financial targets they have made earlier.

Challenges of this structure

In America the two tier wage plan has become a burning issue for the labor unions and it is being held as a deep rooted issue in America. In this structure, individuals who have joined work recently get remuneration that is much lower than the salary withdrawn by the senior employees (DiPrete 2013). The main issue is that the new employees and the senior employees in most cases share same kind of work load and there rises the grievances. The managements of the organizations need to put in extra effort in order to keep harmony in the workforce. The two tier wage system has some advantages and disadvantages. If the employees work under a single tier wage system, they will be in peace, but there would not be any type of competitive nature among the workers. On the other hand, the employees under two tier wage system would always try to compete with the senior employees in order to get the same pay scale the senior employees are getting.


Recent cases

Recently regarding this issue there has been a lot of disruption among the workforce of reputed automobile manufacturer companies of America, where the labor union protested saying that they want equal distribution of wages in the workforce according to the posts in the organization (Bridget M., and Ortiz 2015). They claimed that the individuals who are posted in a same rank should get equal salary regardless of the seniority. In real time this is something that is not possible for the organizations, as they cannot provide equal remuneration to the individuals with no experience and to the individuals who have acquired experience in the field of work. There have been instances where the union leaders gave brief interviews regarding this topic. While giving the interview they claimed that this type of wage structure brings in inferiority complex as well as superiority complex among the workforce and that is not right.


Thus to conclude, it can be said that in any sector if the management follows a two tier salary structure then there might be a disruption amongst the workforce and it will be the duty of the management of that particular organization to find out ways in order to keep the employees motivated and content with their stay in the organization. It is seen how due to the disruption in the workforce ruined an organization’s reputation to the ground. There are some instances where the organizations successfully maintained a content workforce along with maintaining a two tier salary structure within the organization. This depend highly on the efficiency of the management of the concerned organization. If the managers are competent enough to motivate the workforce then these issues do not have any lasting impact on the productivity. As this is a very sensitive issue, thus the organizations should put in extra effort to eradicate these issue.



Bordelon, Bridget M., and Maria Ortiz. "An exploratory study of the Destination Management Company (DMC): Building a profile." (2015).

Dinovitzer, Ronit, and John Hagan. "Hierarchical structure and gender dissimilarity in American legal labor markets." Social Forces 92.3 (2013): 929-955.

DiPrete, Thomas A. The bureaucratic labor market: The case of the federal civil service. Springer Science & Business Media, 2013.

Gibson, John, David L. Anderson, and John Tressler. "Citations or Journal Quality: Which Is Rewarded More in the Academic Labor Market?." Economic Inquiry (2017).

Vledder, Monique, et al. "Optimal supply chain structure for distributing essential drugs in low income countries: results from a randomized experiment." (2015).

Ylijoki, Oili-Helena, and Jani Ursin. "High-flyers and underdogs: The polarisation of Finnish academic identities." Academic identities in higher education: The changing European landscape 38 (2015): 187


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