Opinion ID: 849275
Heading Depth: 1
Heading Rank: 2

Heading: General Motors' Payments to Employees

Text: As noted earlier, three categories of payments are involved in this case: profit-sharing, recognition awards, and signing bonuses. The GM profit-sharing plan has been part of its collective bargaining agreement with the United Auto Workers for a number of years. The agreement establishes a formula by which a portion of GM's profits is allocated to the profit-sharing plan. An eligible employee's profit share is determined by a two-part formula. The profit-sharing rate per hour is determined by dividing the total profit-sharing amount by the total eligible compensated hours for all eligible employees. Second, an individual employee's profit share is calculated by multiplying the profit-sharing rate per hour by the individual employee's eligible compensated hours up to a maximum of 1,850 hours per year. Payment is made once a year in the employee's regular payroll check. The second type of payment was a December 1996 signing bonus. As a result of the collective bargaining negotiations between GM and the UAW in the fall of 1996, GM agreed to provide a payment of $2,000 to each eligible employee. Under that agreement, each eligible employee would receive a payment of $2,000 in the employee's regular payroll check in December 1996. During subsequent years of the agreement, employees were to receive a three percent general increase in their base wages. The third category was the June 1997 recognition award payments that GM made to certain salaried employees. An affidavit submitted by GM established that under its compensation program GM created a single fund from which both base salary increases and the recognition award payments were made. The various compensation planning units at GM determined the appropriate mix between base salary increases and the recognition awards for their eligible employees. In doing so, a market rate salary administration system was used to determine comparable salaries for various job positions in the industry. All other factors being equal, employees with salaries below the market rate would normally receive larger increases in their base pay to bring their compensation level closer to the market rate. Employees with salaries above the market rate would normally receive smaller base rate increases since their current pay is already high in relationship to the market. Under market rate salary administration, recognition awards are a separate element of pay considered independently from base salary increases. A significant recognition award might be appropriate for an employee who will not receive a base salary increase because the employee's salary is already well placed in the salary range.