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New Delta Pay Packages Are a Mixed Bag

Delta is rolling in dough, having racked up a net profit of $2.2 billion in the first half of 2015 alone. For shareholders, that has meant nice dividends and share buybacks. For customers, the benefit has taken the form of investment in new aircraft and upgrades. Not to be left out, the company’s employees are getting their own spas at Atlanta, Detroit, and Salt Lake City, airports. And more significantly, they’re getting a raise.

The new compensation package, which will affect most of Delta’s 80,000 employees from December 1, will increase base pay by 14.5 percent and increase the company’s 401(k) matching contribution from 5 percent to 6 percent.

More controversially, the company’s generous profit-sharing plan will be amended, to pay higher bonuses during low-profit years but lower bonuses for high-profit years.

Going forward, then, workers will benefit from higher guaranteed income but face the prospect of less generous bonuses. As it was explained in a management memo to Delta employees: “Profit-sharing will remain a permanent part of your total compensation, but you have made it clear that you want more in your monthly paychecks.”

In July, a roughly similar compensation arrangement was rejected by 65 percent of the members of Delta’s pilots union, mostly because the proposed profit-sharing plan was deemed less generous than the current one. In other words, the pilots were unwilling to trade the security of guaranteed higher base wages for potentially lower profit-share bonuses.

With higher average wages to begin with, and a strong union to represent their financial interests, the pilots’ view of the risk-reward equation in their compensation packages may be quite different than that of their mostly non-union brethren. But it could also be that, in the long term, the pilots got it right and the new package imposed on non-union workers will turn out to be a better deal for Delta than it is for its employees.

In that case, Delta will have screwed not only its workers but its customers as well, who will find themselves doing business with a demoralized workforce.

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