Opinion: Market value

POSTED: 01/10/13 12:57 PM

When you’re old, you quickly find yourself on the sidelines. Too expensive for companies to hire your services, too energetic for a one way ticket to the grave yard. It is a well-known dilemma for older workers who feel that they are unceremoniously dumped when the going gets tough. Too many companies prefer cheap rookies to expensive experienced workers.

In the Netherlands there is currently a huge discussion going after the information technology company Capgemini asked its more expensive workers to give up 10 percent of their salaries. The objective is to protect employment. The company is not making the distinction based on age, but in the practical sense that distinction is there: the more expensive employees of any company will almost always be older as well.

In the IT-business these workers joined the company during its golden years when the sky was the limit. Their salaries went up over time, but revenue in the sector is now on the decline. The Dutch daily Trouw notes in an editorial that the company is taking a crisis measure to cut costs.

Employees have been complaining for years that they are being pressures to give up a part of their salaries. They talk about an atmosphere of intimidation at Capgemini. But the company’s management says that it wants a fundamental debate about paying salaries according to market value.

That’s a bad idea, Trouw wrote: if this is really the intention it could seriously backfire when the economy recovers and the labor market becomes tight (in the sense that it will become tough to find qualified personnel). In such a situation Capgemini will be forced to pay all its employees higher salaries.

Paying based on market value is something you do with suppliers or with independent contractors, not with employees. You pay them based on their function and maybe based on productivity if there is a variable payment system.

Variable payment systems come in many forms and there is nothing against them, Trouw wrote. But companies have to be vigilant and on the lookout for negative impulses that could harm the quality of the work.

At the same time the paper notes that it is a good idea to start thinking about alternatives for traditional and linear salary-development (higher, higher, higher, and then be made redundant) that have become almost standard. Demotion – going a step down the ladder, does not have to be taboo. But it has to be part of a transparent and social human resources policy that has an eye for talent and the ability of people to perform, depending on the stage of their career and their age. This could mean that an older employee starts working fewer hours, and thereby earn less, or provide added value in a different function. When this is done right, the idea that older employees are too expensive for what they deliver becomes obsolete.

When a company encounters difficult times, employees could decide to give up part of their salaries to save jobs. People are often prepared to do this and they have the freedom to take such a decision. But paying employees based on market value will only feed insecurity and fear. That is not good for the employee and not good for the company either, Trouw concludes.

This way if thinking is something St. Maarten could learn from. If we consider, for instance, the civil service as a public company, we see that salaries in this sector follow a linear and upward line. The longer a civil servant sits behind a desk, the more expensive he or she becomes, while the output does not necessarily increase with the salary.

Given the tight financial perimeters our Finance Minister has to work with it seems a reasonable idea to at least explore these salary structures and to find ways to accommodate the country when it is in dire financial straits.

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