Final answer:
Base pay offers labor flexibility and can increase productivity through the efficiency wage theory. It is not a guarantee of performance but creates an environment for it. Union agreements on pay are complex, but strategic investments can align productivity and higher wages.
Step-by-step explanation:
When discussing why an organization may decide to use base pay as a cornerstone for a compensation scheme, it is essential to consider its benefits. One key rationale is that base pay provides the organization with significant operational flexibility. This includes labour flexibility in the allocation of tasks, as it allows for a clear structure that can accommodate various roles and responsibilities without the need for constant negotiation or adjustment of pay rates.
Another important point to consider is the efficiency wage theory, which suggests that a level of base pay above market rates can lead to increased productivity. Employees who are paid more than the going rate may feel more motivated and less inclined to leave their jobs, which reduces turnover costs and increases overall productivity. It is less about guaranteeing performance, as employees' output can vary for reasons beyond pay, and more about creating an environment conducive to high performance.
Lastly, while the assertion that unions are most likely to agree with management might hold in some cases, it is not a universal truth. Union agreements on pay structures are complex and can vary widely based on the industry, the economic climate, and the specific demands and priorities of union members. However, strategic investments in machinery may lead to higher productivity, allowing management to offer higher wages without sacrificing profitability, which can be a point of negotiation with unions.