How can a company construct a multi-tiered approach for compensation?  

A company can construct a multi-tiered approach for compensation through consultation with employees or their labor unions. This way, the workforce can have some input into a process that, if handled correctly, can keep them happy.

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Constructing a multi-tiered compensation scheme for employees can be a very effective way of reducing costs and retaining employees. If workers know beforehand what principles the relevant compensation scheme is based upon and which tier they fall into, it is less likely that there will be tension and disagreement over...

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Constructing a multi-tiered compensation scheme for employees can be a very effective way of reducing costs and retaining employees. If workers know beforehand what principles the relevant compensation scheme is based upon and which tier they fall into, it is less likely that there will be tension and disagreement over the potentially fraught issue of differential remuneration.

A multi-tiered approach to compensation is more open and honest and allows everyone working within a particular company to see what's what. For instance, it may be the case that new starters are immediately put into the first tier of compensation, the lowest pay grade available. Among other benefits, this gives employees a possible career path within the company that can potentially enable them to move from the lowest tier of compensation to the highest.

In putting together a multi-tiered compensation policy, it's important to consult with employees and their labor union representatives, if such representatives are formally recognized by the relevant company. This way, potential disagreements over compensation can be smoothed over before the policy is implemented.

Once everyone has bought into the new rules, this should mean that relations between management and workers are relatively cordial as both sides will have had some input into the process. As well as generally making employees happier with pay and conditions, tiered compensation can reduce costly labor disputes between managers and their workforce that can have potentially damaging consequences to the relevant company's profitability.

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