Merit Pay in Unionized Environments

Merit pay – pay increases linked to employee performance – has been used as an incentive tool for decades. However, while this type of compensation is well established for non-unionized employees, only 8 per cent of unionized employees were subject to a merit pay, or pay-for-performance, program in 2004.

In the spring of 2005, the Conference Board interviewed six Canadian organizations in the public and private sectors that had implemented pay-for-performance programs for unionized employees. This report is based on those interviews, supplemented by a literature review.

How have organizations implemented and structured merit pay programs for unionized staff? How does the labour movement view merit pay? Is merit pay the best solution for all situations?

The briefing identifies the common characteristics of the merit pay programs of the organizations interviewed; looks at labour’s views and negotiating merit pay at the bargaining table; and discusses factors to consider in deciding the appropriateness of merit pay programs.