Executive Summary
Human resource management forms the core of any business operations in an organisation. Of particular importance is the distinction between minimum wage and the living wage as demanded by various legal provisions or employer-employee contracts. While the former refers to a fixed pay stipulated by the government to protect employees from being underpaid, the latter is a pay awarded to workers so that they can be able to adequately meet their daily needs. A living wage ensures that an individual is in a position to provide for basic needs and wants that are acceptable to the normal standards of living. The two types of wages may not be fully discussed without a mention of trade unions which facilitates the bargaining power of workers. There are some case business studies of firms that are already implementing the minimum wage requirements as demanded by law.
Even as business organisations strive to introduce both operational and human resource changes within business establishments, there are myriad of barriers that may hinder such changes unless the drawbacks are first of all cleared off the way.
Introduction
Human resource management continues to be at the centre of business operations on a day-to-day basis. Business managers are charged with the responsibility of ensuring that the goals and objectives of an organisation are met alongside maintaining a cordial relationship with workers. The double-ended responsibility might sometimes pose a real challenge to the working environment (Gereffi, 1999).
Firstly, the main driving force in any firm or business organisation is to maximize returns. A firm can improve on its returns by either reducing the cost of operations or engaging in other more profitable ventures. In other words, a business unit can boost its net returns by diversifying its portfolio.
Secondly, the productivity of a company is also determined by the nature of the existing workforce. Employees who are demoralised and lack motivation can hardly deliver or showcase their productivity at workplace (Clavel & Kleniewski, 1990). In this regard, human resource management has to draw clear lines between how much the company expects in terms of profitability and the net overheads on employee wages and fringe benefits.
To this end, a firm may opt to stick by the minimum wage requirements set up by the law or decide to pay a living wage to its workers. Although both types of wages have their implications, employees need to be assured of a conducive working environment that do not only rewards them fairly but also upholds their dignity as workers (Stigler, 2001). The working conditions are therefore paramount. For instance, occupational health and safety demands that employees should work in a safe and dignified environment. Nonetheless, employers in various business organizations continue to bear the brunt of meeting the constantly rising needs of workers, whether though maintaining a minimum wage, living wage or allowances even during periods of economic downturn. Quite often, there is least consideration of how much businesses may run into millions of losses when they have to keep a record of complying with the demands of workers.
Employee rights and welfare campaigners are always on their toes inserting pressure on employers to meet certain minimum requirements. Although some of these demands may be met, others are unrealistic since complying by them may occasion heavy losses and closing own of some organisations due to inability to cope with financial needs (Wills, 2009).
Terms of References
This business report is addressed to the executive so that they can investigate and determine the viability of implementing the minimum or living wage requirements alongside other employee benefits as demanded by workers’ rights campaigners. The first part of the report deals with the differences between the minimum and living wage while the proceeding sections explore the barriers to introducing changes in organisations as well as recommendations.
Differences between the ‘living wage’ and minimum wage
There is need to distinguish between minimum wage and living wage as applied in various work environments. In most accepted and well documented statutory definitions, the term minimum wage is mainly applicable to labourers who are either skilled or semi-skilled (Elmore, 2003). Different countries across the world have distinct minimum wage stipulations based on the economic performance as well as the cost and standards of living.
To begin with, a living wage is primarily a basic pay awarded to workers so that they can be able to adequately meet their daily needs. A living wage ensures that an individual is in a position to provide for basic needs and wants that are acceptable to the normal standard of living. For instance, a living age should be able to cater for food, education, healthcare as well as other expenses such as the cost of commuting. Most governments would demand companies and organisations to pay workers at least a minimum wage s that they can be in a position to foot various expenses even as they deliver their services on a day-to-day basis (Vogel, 2005).
On the other hand, a minimum wage refers to a fixed pay stipulated by a government or other employee welfare agencies that employers are supposed to pay their workers. The authority charged with the duty of fixing a minimum wage must be legally instituted so that it can enforce its mandate through a legal pursuit especially in cases where employers flout regulations (Weil, 2005). This least amount of wage that may be awarded to workers can also be put in place by a formal agreement between the employer and other interested parties such as workers themselves or labour unions. In addition, a minimum wage can affect either the whole state or a specific group of workers.
Although most legal provisions on minimum wage are often binding in most employee groups, there are certain occupations which may not be required to abide by these regulations. For instance, employees in the service and agricultural sector in United States are exempted from the minimum wage conditions (Weil, 2001). Again, minimum wage varies from country to country. On the same note, a commensurate wage may be paid to employees who have special physical or mental needs. This may still be classified as minimum wage payable to people with disabilities. It is imperative to note that each worker has a unique ability and performance at work regardless of the disability. Hence, the commensurate wage which acts as the minimum wage for the disabled may not be uniform across the board. Moreover, this wage is also dependent on the geographical setting and the status of the economy from which the workforce is derived (Goto, 2002). Nonetheless, it is vital to draw a clear distinction between the two types of wages in a more coherent manner.
Firstly, the legal framework governing the living wage principally differs from those regulating minimum wage. One outstanding feature of a living wage is that in most cases, the coverage of its legality may affect only a small fraction of the workforce contrary to the minimum wage whose provisions affect a larger population (Echeverri-Gent, 1993). The living wage laws mostly affect specific group of workers in given organizations so that they can afford both basic and secondary needs. In addition, a living wage is often used in some countries to calculate poverty index while the minimum wage cannot be used for such purposes (Viscusi, 2006). Hence, the two types of wages are related but completely different from each other. To further create a vivid distinction between minimum wage and living wage, it is pertinent to investigate the effects brought about by both types of wages (Nadvi et al. 2004).
In real practice, low income workers can indeed benefit when the living wage is implemented at their place of work (Wills, 2009). In line with this, the urban poverty index can be lowered substantially whenever this ordinance is implemented, bearing in mind that it caters for a larger population of workers than the minimum wage.
By the side, the minimum wage provisions are more likely to raise the living standards of people living within or below the poverty line (Berry, William & Stephen, 1998). Besides, employees are more likely to put more efforts at workplace and improve individual productivity because they will be motivated by this arrangement that makes sure they are paid below certain minimum level. Similarly, minimum wage has the potential of improving the economy of a country due to the improved spending power of the poor.
Although the typical low income earners are the beneficiaries of this type of wage, it may lead to lack of efficiency in companies during periods of recession (Brenner, 2005). In addition, firms which are still at their infancy stage may be unfavoured economically by the seemingly high spending on wages contrary to the revenue generated. Worse still, when minimum wage is followed to the letter, it has the potential to trigger inflation.
Compliance to the living wage by British clothing companies
Some firms and companies have already endeavoured to comply with the provisions of the living wage. One such firm is the Continental Clothing Company located in the United Kingdom. The clothing firm has a well documented set of guidelines that stands out to protect the general rights of workers in addition to the contention on living wage. The Continental Clothing Company has outlined its employee working policies in line with the legal requirements on living wage (Continental Collection, 2011). The company has termed these guidelines as part of its social responsibility.
First, the living wage is being implemented under the working environment whereby child labour is strictly forbidden. Besides, the working hours even as the living wage is being implemented has been standardised in the sense that the company does not allow its workers to work for long hours to the detriment of their health and social life. To implement the living wage, the Continental Clothing Company has set up standard wages and other fringe benefits and allowances that each worker is entitled to on a normal working week (Continental Collection, 2011). The set standards are either those that are commonly used by other players in the industry or the legally accepted ones.
As the company notes, the living wage awarded to employees are adequate to meet their daily upkeep as well as be left with surplus disposable income. Furthermore, the company emphasizes that it will not permit or effect any financial deductions from the living wage of employees based on disciplinary cases. If some deduction is effected on a worker’s living wage, then such an action must be authorised by the existing laws. Better still; any deductions from the living wage should not lead to a situation whereby a worker receives wage pay which is much less than the stipulated minimum wage (Continental Collection, 2011). It is also the sole responsibility of the Continental Clothing Company to inform the employees quite several issues regarding their jobs in the company. For instance, employees should be adequately informed of their pay specifications. Some of the details on wage payment include how much constitutes their basic pay as well as the time taken before the very pay is implemented. Moreover, employees of the company should be able to visualize their work input and the amount of wage they are being paid and then compare the two if they are commensurate to each other.
Although Continental Clothing Company has well laid down procedures for maintaining the legal requirement of a living wage for all of its employees, it does not imply that the workers cannot form or join trade unions to fight for their terms and conditions of working. The company permits its entire workforce to join labour unions so that collective bargaining on their needs as workers can be presented and heard more efficiently. Moreover, officials who represent employees cannot be discriminated at workplace by the management of the company since they are allowed to have access to all working points within the company and assess the working conditions of employees.
Business case for improving working conditions
Nike Shoes Company has been in business for a considerably long period. Its production line mainly concentrated in Taiwan and South Korea throughout the 1970s (Clark, 2006). The company was later compelled to shift its operations to Indonesia when employees started forming trade unions to fight for better working conditions including hike in wages. This was the only way to cut down on costs especially those arising from wages. Although this strategy worked for a while, the Indonesian government soon stipulated some minimum wage that was to be adhered to by all local and foreign business. As part of complying with the regulations of the government, Nike hiked the wages of its workers over and above the minimum level dictated by the government. This took place in 1999 (Clark, 2006).
Despite the rise in minimum wages, several court cases were filed by workers’ representatives regarding the violation of minimum wage by other businesses. This action prompted Nike to form the Global Alliance for Workers and Communities. This alliance comprised of non-governmental organisations, business groups, and non-profit organisations as well the general public. Its main mandate was to launch a landmark assessment of workplace through surveying of workers, conducting interviews as well as forming small purpose-oriented focus groups to assist in assessing and evaluating the working conditions of employees. This was a bold step taken by Nike bearing in mind that it was not an employee rights wing but a business establishment equally besieged by nagging workers. According to the argument by campaigners, there is need for employees to understand and fight for their rights even though independent monitoring is also of great help (Seidman, 2008).
Before the close of the last century, the company also made multiple beneficial changes especially on occupational health and safety, an initiative which most companies had not adopted yet. For instance, the shoe company started using water-based solvents in its production contrary to oil components that had been used for sometimes in manufacturing shoes (Clark, 2006).
Barriers to introducing changes
To implement change in an organisation with minimal resistance, there are quite several setbacks that may be experienced. These barriers to introducing change should be eliminated if any change will have to take effect in an organisation (Anker, 2006). To begin with, goals and objectives that have not been clearly defined are barriers to change. Clarity of goals and objectives should be a priority before and during the process of change. The process of introducing change may also be interfered with inadequate working capital. Finances are required to fully implement change in an organisation and compete effectively with other market rivals. Moreover, when resources are not available or they are poorly allocated in an organisation, it may hinder the introduction of any change necessary in the life of an organisation. Bad or inappropriate decisions are occasioned by bad decisions made by managers especially in the allocation of finances and human resource to various units within an organisation.
Finally, traditional leadership structures are often repugnant to change and therefore it may grossly strangle any adjustments being introduced. This may be coupled with poor communication within and without the organisation.
Barriers to ensuring that changes in HR policy and practice are operationalised
There are myriad barriers that have worked against implementing changes in human resource system. It is vital to that human resource development forms the backbone of any organisation without which it may be practically impossible to do business. Hence, relevant changes should be injected into organisations regularly to meet the changing needs and demands of a business unit (Locke, Amengual & Mangla, 2009). These changes my include but not limited to enhanced working conditions, better wages and benefits as well as sustained cordial employee relations with the organisation. Nevertheless, implementing these human resource changes may prove to be cumbersome and challenging owing to some of the reasons discussed below.
First, changes to human resource can be thwarted by the high cost marinating talented employees in a business organisation. Employees with a higher input ratio to a company can only be retained when there is a better wage level, favourable working environment as well as attractive fringe benefits that are over and above the basic pay. Although most firms would wish to retain talent rather than hire amateurs or semi-experienced workers, the former desire is short-circuited by high operational costs which only cut down on net revenue.
Second, capacity building and training through seminars, workshops and team building exercises is indeed a worthy investment to make on existing employees (Cohen & Joel, 1995). This will not only equip workers with the necessary organizational tools required for optimum performance, it will also replicate into higher productivity of the firm under question. Similarly, training costs may also increase organizational overheads.
Another barrier to changes in human resource policies is evident when recruiting employees for various positions in an organisation. In the even that the recruitment policy in place is not good, then it will act as a hindrance towards implementing the right policies on human resource. In addition, organisations with poor support system may not have an upper hand in adopting and implementing the much needed changes on human resource. Issues being faced by the employees in an organisation ought to be communicated to the right authorities within the organisation for appropriate action to be taken. Malfunctioning support system is a barrier to an operational human resource (Abrami, 2003).
Finally, lack of employee motivation due to poor or lack of performance management system is a real setback to vibrant human resource system. Performance appraisals should be conducted regularly to ascertain whether goals were met or not. Employees who meet the targets should then be motivated in variety of ways to remain productive.
Conclusions and Recommendations
In recap, it is vital to reiterate that a cordial employer-employee relation is paramount in steering growth in a business organisation. While the minimum wage can be determined by the existing laws, a living wage is quite different. It ensures that a worker can cater for basic needs and wants to meet the normal standards of living. Both of these two types of wages can potentially improve living conditions and significantly reduce urban poverty index.
However, it s highly recommended that the company should first of all stick to the minimum wage levels as dictated by law. This will enable the clothing firm to meet its financial obligations within the provisions of the law as well as retain workers who are highly experienced and talented. In addition, benefits and other allowances should be awarded to workers based on their input to the clothing company and not on a level ground. The working hours should be standard and clear guidelines should be put in place to inform employees of what they should expect from the company and also what the company expects from them (Weil & Mallo, 2007). Hence, communication between both parties should be as coherent and smooth as possible.
Finally, the company should only execute either human resource or managerial changes that it can adequately handle. However, basic employee rights issues such as safe working environment and treating workers without any form of discrimination should be upheld at all times so that the clothing company can be ahead of its competitors and market giants.
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