Two firms in the chemical solvent industry decide to merge. Employees in the tes

Question

Two firms in the chemical solvent industry decide to merge. Employees in the testing department of firm A have enjoyed high pay for many years. However, firm A is purchased by firm B who has a history of paying low wages. As a result, employees in firms A’s testing department earn on average $1.00 more per hour than those at firm B. Upon completion of the merger, what wage levels should prevail? Should wages be cut for those who worked for firm A? Or, should wages be increased for those in firm B?

Explanation / Answer

Through merging and acquisitions, the employers face many ethical compensation dilemmas. The operations, pay structure etc of two organizations would be different and it would be challenging for the employers to accept the others pay structure as it. In the given scenario the firm B buys A, Firm B has lower pay structure for the testing department whereas the same department of the firm A have higher pay scale.

According to the Equity act 2010, the employers are supposed to provide same compensation to the employees working in the same department. Hence after merging the employer should either lower or higher the compensation. If they lower the compensation then it can impact the interests of the firm A. the organization has to restructure the payment structure of the company after merging. It has to consider the financial and performance status of the company before it decides to raise the salary. The employer can lower the salary by highlighting the proper reasons behind it.

Hence raising the salary would a good choice from the employee perspective, if the financial status of the company is good. Else it can lower the salary through showing the proper documents and details to the authority. It can also take sufficient measures to retain the employees through some additional benefits.

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