Corporate vs. Union Compensation


Harley-Davidson, often abbreviated as Harley or H-D, is a motorcycle manufacturer headquartered in Wisconsin, America. This company which was founded in Milwaukee in the first decade of the 20th century was among major motorcycle manufacturers in America that were able to survive the Great Depression. This company also managed to wade through a period of intensified quality control and competition from Japanese manufacturers. From 1977 to 2014 heavyweight cruiser motorcycles that had engine displacement of greater than 700cc were the only ones sold to the public with Harley-Davidson’s brand. H-D’s motorcycles are renowned for the tradition of dense customization which gave rise to the style of chopper type of motorcycles. Currently H-D’s motorcycles echo the styles of typical Harley-Davidson design, except for the contemporary Street and VRSC model families. Even though H-D strives to establish itself, the market of motorcycle has experienced awfully little achievement and has been mostly neglected from the beginning of 1978 sale of the Italian Aermacchi subsidiary. H-D reentered the middleweight market this year with its motorcycles of the street series. Harley-Davidson had an approximate of 2000 workers in the factory in 2009, when the employees of union agreed to restructuration and movement of the plant out of York County.

In 1901, 20 years since its establishment, Harley-Davidson created plans for a small engine which displaced 7.07 cubic inches (116cc) and four-inch (102) flywheels. This engine was specifically designed for use with the common pedal-bicycle frame for the north side Milwaukee machine shop at the home of Henry Melk. The machine was completed in 1903 with the assistance of Arthur’s brother who was named Walter Davidson. Once the founders have tested their power cycle, they have found out that it was not possible to climb the hills around Milwaukee without using the pedal (Wagner, 2003). Upon this realization, they quickly wrote off their first motorcycle as an important learning experience. Thus, this paper seeks to understand how regulations on benefits and compensation programs have affected the company.

Government-Mandated Benefits

Harley-Davidson is a company that has endeavored to provide and implement government-mandated benefits for its employees. Among these benefits are social security, FMLA, medical insurance, retirement plans, variable compensation programs, disability benefits, life insurance and prescription drug plans (Harley-Davidson, 2015).

Various legislative pieces addressing employee benefits such as social security, worker’s compensation, Medicare and FMLA have been introduced by the Congress. Medicare legislation, for instance, requires employers to offer minimum health coverage to workers and their families. According to the promoters of such laws, these legislations are significant for tackling the existing problem of an escalating number of citizens without coverage of health insurance and the ever-increasing problems of uncompensated care. Nonetheless, such legislations have created fear, particularly for small and medium companies, including Harley-Davidson, of the increased cost of labor. Consequently, higher expenditures that result from excessive payment of employee benefits affects the company’s returns and profits. Furthermore, these benefits have limited the capability of Harley-Davidson to employ more workers, since they will not be able to pay them appropriately while at the same time operating the company effectively. This challenge has motivated the management of Harley-Davidson to restructure itself and its operations in order to cut the cost of operations while simultaneously increasing productivity so as to remain competitive both at home and in international markets.

The cost of employee benefits has largely contributed to the problem of competitiveness of many American organizations. This issues owes to the fact that many small and medium organizations have less flexibility in rearranging compensation packages. Therefore, such firms face greater competitive pressures, since they find themselves unable to deflect the rising cost of labor. What is more, higher expenses as in the case of Harley-Davidson limit the ability of business ton substitute unskilled labor with skilled labor. In other words, a company such as Harley-Davidson is unable to hire highly skilled and experienced workforce, because it cannot manage to pay higher for the skilled labor.

Federal regulations of increasing worker benefits and compensation have had a negative impact on the general operations of not only Harley-Davison, but also of many other organizations. On the part of Harley-Davidson, the increased numbers of benefits have limited its employment capabilities as well as its output. Unfortunately, the costs associated with worker benefits cannot be offset by lower costs of labor or capital.

Voluntary Benefits

Employees at Harley-Davidson also enjoy a number of benefits that are voluntarily offered by the company. Additional perks include the vision plan, flexible spending accounts, Harley-Davidson Stock Purchase Plan, wellness resources as well as paid vacations and holidays. Harley-Davidson provides its employees with STD for 6 months and mandates that an employee pays a premium consisting of 50% or 60% of their salary. They as well offer tuition reimbursements for which the employee pays 10% of the tuition cost. However, the employee must stay with the company for 18 months after graduating or pay the company back. In addition, the firm also offers Flexible Spending and Health Saving Accounts. Furthermore, the company offers $1,500.00 per person or $2,500.00 for a family in the event that the employee meets all the requirements of the company’s Healthy Roads account. The money is applied to the deductibles for insurance. These and other voluntary and comprehensive benefits are geared towards improving employees’ lifestyles and the freedom to receive the benefits that work best for them as well as their families.

Since 2005, Harley-Davidson has continued to contribute approximately $102.3 million annually towards its post-retirement healthcare programs. The company further contributes a total of $6.7 million to its pension programs on a yearly basis.

Compensation Plans

Workers of the company are categorized as either unionized or non-unionized. Union workers are further divided into the following groups:

  • Production Tech 1 – the compensation is between $25.00- $36.00 per hour;
  • Production Tech 2 – the compensation is between $32.00- $45.00 per hour;
  • Flexible Workforce – the wage is between $16.00- $19.00 per hour.

The company utilizes flexible workers in a variety of entry level roles within manufacturing:

  • Material handling
  • Fabrication
  • Powdercoat and paint
  • Machining support
  • Assembly
  • High school diploma OR GED OR
  • One year work experience OR
  • Manufacturing skills standard certification
  • Not eligible for retirement or healthcare benefits

In addition to the above benefits, Harley-Davidson has also introduced pension plans alongside other post-retirement benefits which cover all the workers at the Motorcycle department substantially. The company also has an unfunded supplemental employee retirement plan agreement (SERPA) in place. It was basically established as a replacement for the benefits that were no more available under the Tax Revenue Reconciliation Act introduced in 1993.

However, the company does not expect to keep up with its contributions towards the pensions and post retirement plans. Somehow, it anticipates to broaden its SERPA healthcare, including post-retirement plans, which are equivalent to the benefits paid during one year.

As a way of complying with governmental regulations under section 409A, Harley-Davidson has incorporated a deferred compensation plan which is hereby identified as the original plan. This plan is aimed at benefiting eligible employees and their affiliates. The original plan, which has been in place since 2004, is intended to promote the best interest of the firm and its stakeholders. It allows to attract and retain essential personnel who possesses a strong interest in successful operations of this firm. This plan is further set to encourage continued loyalty, counsel and services to the company and its partners. This plan is also restated and amended on a regular basis so as to comply with the specific regulations in the Section 409A (Hatfield, 2002).


From this case study, it is evident that employee benefits are essential for improved performance and retaining of important personnel. In essence, instituting benefits and attractive compensation plans is not only an obligation of the employer, but also an enhancing factor when it comes to employee motivation and royalty. It is anticipated that if benefits are applied accordingly, there would be a significant improvement in terms of performance. In addition, the company will be able to retain many of its workers, thus avoiding the expenses of having to engage and train new employees on a regular basis.

On the other hand, several organizations, particularly small and middle sized firms, will find it a challenge to put all the worker benefits into practice not endangering both their performance and income. Considering that labor is an essential component of production for any business organization, the measures or regulations aimed at increasing the already high labor costs along with additional benefits, which have not been existing before, have caused multiple concerns among many businesses. In order to bail out the companies from bankruptcy, governments ought to finance some of the benefits and welfare programs in order to eliminate the liability of employers in relation to their employees. Moreover, leaving employers to fund all these programs could cause serious ramifications to the businesses and the business in terms of raised cost sf production, minimized job opportunities and the loss of capability of businesses to compete in the global business environment. Instead, the companies should be allowed to establish and implement employee benefits and compensation programs according to their capabilities.