Transcript factors influencing employee remuneration

Employee remuneration
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Employee Remuneration refers to the
reward or compensation given to the
employees for their work performances.
provides basic attraction to an employee to
perform job efficiently and effectively
Why is it important?
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Leads to employee motivation
Affects employee productivity
Affects work performance
FACTORS INFLUENCING
EMPLOYEE REMUNERATION
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A number of factors influence the
remuneration payable to employees.
They can be categorized into:
External Factors
Internal
Components of remuneration
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Wages and Salary
Wages refer to the hourly rates of pay,
salary refers to the monthly rate of
pay,
wages and salaries are subject to annual
increments.
Components of remuneration
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Incentives: also called ‘payment by result’
paid in addition to wages and salaries.
depends upon
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productivity,
sales
profit
1. individual incentives scheme
2. group incentives scheme
Components of remuneration
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Fringe benefits :
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- These include such employee benefits as
provident fund, gratuity, medical care,
hospitalization, accident relief, health
insurance, canteen, uniform and like
Perquisites - These are allowed to
executives and include company car,
club membership, paid holidays, furnished
house and like
Non monetary benefits
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Challenging job responsibilities
Recognition of merit
Growth prospects
Comfortable working conditions
Competent supervision
Factors
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External factors
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Labour market
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Going rate
Productivity
Cost of living
Labour union
Government legislations
The society
The economy
External factors
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Labour Market
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Demand for and supply of labour influence wage
and salary fixation.
A low wage may be fixed when the supply of
labour exceeds the demand for it.
A higher wage will have to be paid when demand
exceeds supply, as in the case of skilled labour.
Labour market
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High remuneration to skilled labour is
necessary to attract and retain them.
But exploitation of unskilled labour, like, for
instance, paying niggardly wages because it is
available in plenty, in unjustified.
The Minimum Wages Act, 1948, is precisely
meant to prevent this kind of exploitation.
Labour market
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The Going rate system involves fixing
wage/salary rates in tune with what is paid by
different units of an industry in a locality.
Going rates are generally paid in the initial
stages of plant operators.
Productivity of labour also influences wage
fixation
Labour market
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Productivity can arise due to increased effort
of the worker, or as a results of the factors
beyond the control of the management, and the
like.
From advance technology and more efficient
method of production
Labour market
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Productivity has only a subordinate role in wage
fixation.
The argument that productivity would increase
if it is linked to remuneration is hardly
acceptable
Cost of living
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A rise in the cost of living is sought to be
compensated by payment of dearness
allowance, basic pay to remain undisturbed.
Many companies include an escalatory clause in
their wage agreement in terms of which
dearness allowance increases or decreases
depending upon the movement of consumer
price index (CPI)
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Labour Unions
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The presence or absence of labour
organizations often determines the quantum of
wages paid to employees.
Employers of non-unionized factories enjoy the
freedom to fix wages and salaries as they
please. Because of large unemployment
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An individual non-unionised company may be willing
to pay more to its employees if only to discourage
them from forming union, but will buckle under
the combine pressure from the other nonunionised organizations.
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The employees of strongly unionized companies
too, have no freedom in wage and, salary
fixation.
They are forced to yield to pressure of labour
representatives in determining and revising pay
scales.
The society
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Remuneration paid to employees is
reflected in the prices fixed by an
organisation for its goods and services
The economy
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Eg a depressed economy increases labour
supply and in turn lowers the going wage
rate.
Labour unions, the society and the
government are less likely to press for pay
increase during a depressed economy.
Factors
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Internal factors
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Business strategy
Job evaluation and performance appraisal
The employee
Business strategy
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Rapid growth_remuneration is higher than
what competitors pay
If strategy is to maintain and protect
current earnings remuneration level is
average or even below average.
Job evaluation and performance
appraisal
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Job evaluation helps in setting up wage
differentials among jobs
Performance app helps award pay
increases to employees who show improved
performance
The employee
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Performance
Seniority
Experience
potential
Devising a remuneration plan
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Remuneration plan should be
understandable
workable
acceptable
Remuneration scheme has two components
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Base rate
Scope of increasing the base rate
Remuneration model
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Job description
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Job evaluation
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Helps to define and weigh compensable factors
eg skills, experience, effort
To establish relative worth of jobs
Job hierarchy
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Established by aggregating all points assigned
to the compensable factors
Higher point total is higher hierarchy
Remuneration model
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Pay surveys
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To establish prevailing wage and salary rates in
the labour market
sources
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Other companies
Labour dept
Trade unions
Consulting firms
Remuneration model
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Pricing jobs
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Establishing the appropriate level for each job
Grouping the different pay levels into pay
grades
Challenges
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Skill based pay
Pay reviews
Pay secrecy
Comparable worth
International pay
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In skill based pay system an employee is
paid on the basis of number of jobs he or
she is capable of doing or the depth of his
or her knowledge. In the traditional
system pay is on the basis of job held
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Pay reviews
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Fixed-date reviews
Anniversary-date reviews
Flexibile date
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Pay secrecy
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Tendency among firms is to maintain pay
secrecy to avoid pay comparisons among
employees
Firms in public sector disclose full information
Family-controlled organisations tend to
maintain pay secrecy.
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Comparable worth
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Equal pay for equal work
If two jobs receive the same number of points
in a point-ranking method of job evaluation they
have to be paid the same subject to their
seniority and merit differences.
Thank you