Labor unions play a crucial role in any organization by working together with employees to establish a collective voice to assist them in negotiations with their employers. Although some people view labor unions as negative, these organizations have many positive impacts on the labor market to both the employer as well as employee. Unions have helped in increasing working class wages, particular because at every workplace, there are usually two competing interests. These are the employer interests that are characterized with a desire to minimize overhead expense as well earn big profits. On the other hand, the employee interests imply the urge to have decent salary to commensurate the cost of living.
When employees join a union, there is strengthening of their bargaining power because of the ability to conduct a mass action like strikes, which can hamper company operations. Research shows that unions have been instrumental in campaigns to raise the unionized workers wages; hence, the significant difference between employees in unions and others who are not members of any union. At the same time, unions assist in inequality reductions in the workplace (Martocchio, 2009). It is obvious that managers in the workplace often receive higher wages compared to other employee, in addition to enjoying similar benefits. A study conducted in this subject indicated that unions reduce wage inequalities as they raise wages at the bottom and the middle wage, unlike at the top.
Conversely, unions help to improve the benefits given to the employees by their employers as well as negotiating for improved non-wage benefits. A union formally acknowledged by an employer negotiates with an employer on the terms and conditions in relation to the job description of the worker. It is obvious that for collective bargaining to be efficient, both the unions and employers have to agree on the operation of the arrangement.
Benefit of Cash Balance Plan to Employees
A cash balance plan is a beneficial pension plan, which promises an employee of an employer’s equal contribution about a certain percentage of their yearly earnings. Cash balance tends to build value progressively and often at a similar pace for every employee regardless of the number of years that they have worked for an employer. In most cases, the aim of this plan is to build wealth and offer uniform accrual all through an employee’s career.
Majority of benefit plans are often based on multiplication of the number of years served by an employee and the final pay. This means that any increase in compensation in one year tends to increase the benefit accruals for all the past years. Cash balance plan entails fixed interest rate, protection of retirement savings, retirement adjustment in terms of contributions in case of salary increase, and management of retirement funds (Martocchio, 345). Employees willing to join other companies have an option to transfer the retirement capital to another firm or be given a lump sum of money.
The usage of a cash balance plan is beneficial to young employees since it easily cultivates reliable employees to work for many years in the company. On the other hand, there is interest adjustment given to older employees in the cash plan. The adjustments and the likelihood of funds transfer accumulated, compensates for the prejudiced nature in relation to older employees. Conversely, older employees benefit from savings transfer to cash balance accounts, as the Pension Benefit Guarantee Corporation protects the accounts.
Importance of “Age Discrimination in Employment Act” to employees
The Age Discrimination in Employment Act has been instrumental in tacking age discrimination in the work place. Employers are now increasingly understanding the importance of fair and a just playing field in employment as well as promotions. The situation has led to better working conditions and improving of companies’ image in the public eye. Presently, the judicial pronouncements make it crucial for employers to avoid age discrimination and become equal opportunity employers. Better standards of living have made it likely for employees to be productive for a long time; hence, there is need for protection against an issue such as age discrimination. Such discrimination need to be discouraged in the work place, particularly during recruitment, training, advancements, as well as promotions.
The significance of laws in relation to age discrimination in the work place is currently applicable worldwide. Discrimination needs to be avoided in both the private and public sector. Employees have benefited from the law with the message being the duty of the employer is to offer an atmosphere devoid of discrimination against age, sex, as well as affiliations. The law is one of the most significant rights, which is available to the present and future employees. Another advantage of the law to employees is redundancy or layoffs protection, as older employees are no longer unnecessarily framed and blamed by their employers. It is a an essential anti discrimination responsibility for employers to ensure employees enjoy equal right in terms of employment. This means that decision making in employing an individual should not be justified in relation objective criteria and employers’ fancies.
Integration of Qualified Pension Plans and Social Security
Recent surveys indicate that majority of private pension plans and public plans have been clearly integrated together with the social security. The significance of the integration is to ensure that there is a retirement income adequacy in relation to all the covered employees in the scheme. At the same time, the process ensures equity in retirement income equity, which is interpreted as the equivalent of the total replacement rates for all employees in spite of their salary levels. Conversely, integrated plans aim to attain these goals by ensuring they take into account the amount received by a retiree from the social security. At the same time, they offer a beneficial plan that is sufficient in establishment of an integrated plan and a social security. This comes with benefits that entail approximately similar percentage of employees’ preretirement reward, which are independent of their position in relation to the pay scale.
The main reason for integration is to offer a retiree a joint benefit, which will comprise of the same percentage of an employee’s preretirement compensation. The social security plan formula is extremely progressive and tilted towards the junior employees in the work place; hence, the impact integration is to offer employees more benefits.
Benefits of Defined Contribution and Defined Benefit Plans
There are two major pension plans known as Defined Contribution and Defined Benefit. Presently, DC plan has become common unlike DB. The American State Department of Labor indicates that from 1990 to 1991, DB plans had reduced by around 30% and continued to experience a drop. The loss of its dominance has been linked to various reasons. DB plan is a definite promise of future payments after the death or retirement of an employer. The benefit is often calculated in advance by application of a formula that is based on age, salary and the number of years worked in a company. The promised benefit remains the final salary percentage of the employee.
Employers are accountable for making payments after retirement, which means a DB pension plan can be termed as an employer pre-funded account. On the other hand, in DB plan, there is payment of fixed contribution by employees. The money is deposited in an individual fund, which is sponsored by employers in the employees’ career life. The contribution is often deducted directly by an employer from the salary of an employee and the portion matched by an employer. Conversely, the retirement income is often not known as it relies on the contributions made by an employee in their career life and their funds investment returns. Consequently, there is often no guarantee on retirement benefit as it is based on contributions and investment earnings. Lately, DB pension plans have lost their supremacy slowly in many countries owing to the emergence of other pension plans.
The shift from DB to DC has many advantages in relation to employees when they are changing jobs. DC plans, being portable, accrual risk challenges and employer’s insolvency risk are not an issue (Martocchio, 234). On the other hand, employers with the choice of controlling their pension savings using their preferred method often manage DC plans. In addition, changing to DC plans tends to shift other challenges and risks from employees, which were absent in the DB plan. It is evident that employees using the DC plans often assume market as well as longevity risks formerly borne by DB plan sponsors.
Works Cited
Martocchio, Joseph J. Employee Benefits: A Primer for Human Resource Professionals. Boston, Mass: McGraw-Hill, 2003. Print.
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