Differential Pay Cheques : Labor unrest

Published by MBA Skool Team, Published on August 10, 2011

For any organization quality products, effective marketing, stable financials etc form an essential part of determining its growth. But the backbone of an organization is its human capital. Human resources are the mainstay of any business. The skills, effectiveness, knowledge management etc of these people ensures the speedy growth of a business. However, a business is dependent on various factors like economic scenario, seasonal variations, external factors, government policies. Hence, a lot of companies hire laborers and workers on a contract basis, as it fulfills their immediate requirement of human capital. However, since this workforce is temporary, there is a difference in wages amongst the permanent & hired laborers and that causes a labor unrest.


On Strike ?

Labor wages form an integral part of an organizations financial performance as the workers have to give money for their skills and services. Permanent employees and workers come under the company's regulations and they are paid fixed salaries for their contribution. However, in any business there are fluctuations in demand, and a sudden surge requires more workforce to increase production to meet the needs.


To fill the need of increase in production requirements due to rising demands, companies prefer to hire workers on a contract basis for a temporary time period. The pay which is given to the contract workers is quite less than what is given to permanent employees. This difference in wages causes a lot of issues amongst the workforce. A major reason for that a contract worker who performs the same activities, with the same experience and with similar skills is paid much less for his services as compared to the permanent worker, and thus feels neglected and cheated. All the benefits and incentives are provided to the permanent employees and thus a class differentiation is created amongst the workers causing labor unrest. This labor unrest causes further problems for the management as workers go on strikes and causes a decline in production, thereby hurting the company. Hence, it becomes a critical point for the management to think upon, since contract workers form a high percentage of the workforce.


Also, the expenditure on the temporary workers is never shown under the employees cost. Multinational company’s follow the low-cost model of business of hiring a temporary workforce as per the requirements and release them when the job is done, thus making the contract workers helpless.


On the contrary, the companies are also justified in having this approach of hiring contract workers. Manufacturing companies cannot afford to keep all the workers all round the year. Hiring temporary workers helps companies manage costs and help fulfill the increasing seasonal demands. Also, if the temporary laborers are given wages similar to the permanent workers, then it creates a sense of unrest amongst the experienced employees and changes their attitude, trust and loyalty towards their company.


Human capital would always be the most important element in any business. Companies expect skills and services from workers, who in return want equality in pay and a good standard of living. However, the complexities of economics make it difficult to create an ideal situation. And decline in production due to disruptions by labor unrest over differential wages would always be a nightmare for manufacturing companies.

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