2. Should wage caps be handled differently at different ends of the pay scale?
Many co-ops have some kind of living wage philosophy which guarantees those at the lowest levels in a pay scale are adequately and fairly compensated relative to similar positions in their communities. But because payroll dollars are tight, food co-ops have a tendency toward pay compression in the middle and upper pay levels and these levels can suffer from much lower comparative wages than their conventional or similar counterparts. Removing wage caps in the upper levels of a pay scale allows the comparative pay for these positions to grow to a level more commensurate with their peers in the market.
Additionally, food co-ops typically hire lower-paid employees directly from their local labor market, whereas upper positions requiring more specialized skills may have to be recruited from further afield. This means the compensation on more specialized positions in the co-ops may need more headroom, unconstrained by wage scale caps.
3. Are there other ways to supplement compensation if wage caps are in place?
Many co-ops have profit sharing or gain-sharing programs, some as part of “open book management.” This can be one way to provide a substantial financial reward for employees contributing to overall financial objectives—up to the equivalent of one to two paychecks worth of “bonus.” These programs are the most effective way to augment compensation because they provide an income “bump” to the employees but keep it appropriate to the co-op’s performance overall.
4. What about Cost of Living Adjustments?
Often small across-the-board raises are viewed by employees as Cost of Living Adjustments (COLAs). Many co-ops do not use COLAs because they do not want to tie their pay to external forces but rather establish pay levels according to what is appropriate to the co-op’s size and internal equity. Furthermore, it can happen that local cost of living in a market decreases, such as was the case of the 2007-2009 recession, and this puts co-ops in an awkward position if employees are accustomed to automatic COLAs. So, if a co-op pays out an across-the-board increase to all employees, be clear on whether it is a COLA. And if it is a COLA, be sure it is paid to everyone equally and not only to those who are or aren’t topped out in their range.
5. What are strategies for effectively communicating with staff about wage scale caps?
No matter whether a co-op has wage caps for all or some or none of its pay levels, it is important to effectively communicate its philosophy about compensation. Employees need to know that the system for compensation was