Affecting, determining and establishing pay rates..
Compensation may be defined as money received in the performance of work, plus the many kinds of benefits and services than organisations provide their employees. Money is included under direct compensations (popularly known as wages i.e. gross pay): while benefits come under indirect compensation and may consist of life, accident and health insurance and employer’s contribution to retirement, pay for vacation or illness and employer’s required payments for employees welfare as social security.
Factor affective pay rates include:-
a) The organisation’s ability to pay
b) Supply and demand of labour
c) The prevailing market rates
d) The cost of living
e) Living wage
f) Productivity
g) Trade union Bargaining power
h) Job requirements
i) Management attitudes
Higher wages are given by those organisation which can afford them. Companies that have good sales and therefore, high profits tend to pay higher wages than those which are running at loss or earning low profits because of high cost of production or low sales.
The labour market condition or supply and element forces operate at the national, regional and local levels and determine wage structure and level. If the demand for certain skills is high and the supply is low, the result is a rise in the price to be paid for these skills.
Most of the companies adopt prevailing market safe or going wage safe criterion for compensating its employees. This is done for several reasons. First, competition demands that competitors adhere to same relative wage rate. Second, various government laws and judicial decisions make the adoption of uniform wage rate an attractive proposition. Third, trade unions encourage this practice so that their members can have equal pay for equal work. Fourth, functionally related firms in the same industry require essentially the same quality of employees, with the same skills and experience. This result in a considerably uniformity in wages and salary rates, finally if the same or about the same general rates of wages are not paid to the employees as are paid by the organisational competitors, it will not be able to attract and maintain a sufficient quantity and quality of manpower.
The cost of living pay criterion is usually regarded as an automatic minimum equity pay criterion. This criterion calls for pay adjustments based on increases or decreases in an acceptable cost living index.
The living wage criterion means that wages paid should be adequate to enable an employee to maintain himself and his family at a reasonable level of existence.
Trade unions do effect rate of wages. Generally, the stronger and more powerful the trade union; the higher the wages. A trade unions bargaining power is often measured in terms of its membership, its financial strength and the nature of its leadership.
Generally, the more difficult a job, the higher are the wages. Measures of job difficulty are frequently used when the relative value of one job to another in an organisation is to be as curtained. Job are graded according to the relative skill, effort, responsibility and job conditions required.
Managerial attitudes have decisive influence on the wage structure and wage level since judgment is exercised in many areas of wage and salary administration including whether the firm should pay below average or above average rates, what job factors should be used to reflect job worth, the weight to be given below the structure and level of wages are bound to be affected accordingly. These matters require the approval of top executives.
Various factors for establishing pay rates include:-
1. These should be definite plan to ensure that differences in pay for jobs are based upon variations in job requirements. Such as skill, effort, responsibility or job or working conditions and mental and physical requirements.
2. The general level of wages and salaries should be reasonably in line with that prevailing in labour market.
3. The plan should carefully distinguish between jobs and employee. A job carries a A certain wage rate and a person is assigned to fill it at that rate. Exceptions sometimes occur in very high level jobs in which the job holder may make the job large or small, depending upon his ability and contributions.
4. Equal pay for equal work i.e. if two jobs have equal difficulty requirements, the Pay should be the same, regardless of who bills them.
5. An equitable practice should be adopted for the recognisation of individual differences in ability and contribution. For some units this may take the form of rate ranges, with in grade increases; in other this may take form of closely integrated sequences of job promotion.
6. The should be a clearly established procedures for hearing and adjusting with the regular grievance procedure if it exits.
7. The employees should be informed about the procedures used to establish wage rates. Every employee should be informed of his position and of the wage and salary structure. Secrecy in wage matters should not be used as a cover up for haphazard and unreasonable wage programme.
1. The wage should be sufficient to ensure for the worker and his family reasonable Standard of living. Workers should receive a guaranteed minimum wage to protect them against conditions beyond their contract.
2. The wage and salary structure should be flexible so that changing conditions can Be easily met.
3. The wage and salary payments must fulfill a wide variety of human needs, Including the need for self actualization. It has been recognized that money is the only form of incentive which is wholly negotiable, appealing to widest range of seekers. Monetary payments of ten out as motivators and satisfiers interdependently of other job factors