The payment of two separate rates of pay for the same class of work within a single, employing organization. Typically, the higher rate of pay is made to workers with seniority, while the lower rate is paid to new starters. The introduction of two-tier wages has been a feature of concession bargaining in American and British industry in recent years and has been sought by employers as a means of reducing labour costs. In the UK, the issue of two-tier wages has attracted particular attention in the context of public service contracting. When jobs are transferred from public sector organizations to private sector subcontractors employees retain their established terms and conditions of employment. But the private sector employer has been able to hire new workers on less favourable terms and conditions, thus leading to two-tier wages. Under pressure from the trade unions (see Warwick Agreement), the UK Government has introduced regulations that seek to reverse this pattern and ensure that all employees working for public subcontractors receive common rates of pay and standard conditions, linked to those in the public sector.
Subjects: Human Resource Management.