Employee remuneration

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?

Leads to employee motivation Affects employee productivity Affects work performance

FACTORS INFLUENCING EMPLOYEE REMUNERATION

A number of factors influence the remuneration payable to employees. They can be categorized into: External Factors Internal

Components of remuneration

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

Incentives: also called payment by result paid in addition to wages and salaries. depends upon

productivity, sales profit

1. individual incentives scheme 2. group incentives scheme

Components of remuneration

Fringe benefits :

- 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

Challenging job responsibilities Recognition of merit Growth prospects Comfortable working conditions Competent supervision

Factors

External factors

Labour market

Going rate Productivity

Cost of living Labour union Government legislations The society The economy

External factors

Labour Market

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
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
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
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
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
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)

Labour Unions

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

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.

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

Remuneration paid to employees is reflected in the prices fixed by an organisation for its goods and services

The economy

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

Internal factors

Business strategy Job evaluation and performance appraisal The employee

Business strategy

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

Job evaluation helps in setting up wage differentials among jobs Performance app helps award pay increases to employees who show improved performance

The employee

Performance Seniority Experience potential

Devising a remuneration plan

Remuneration plan should be understandable workable acceptable Remuneration scheme has two components

Base rate Scope of increasing the base rate

Remuneration model

Job description

Helps to define and weigh compensable factors eg skills, experience, effort To establish relative worth of jobs
Established by aggregating all points assigned to the compensable factors Higher point total is higher hierarchy

Job evaluation

Job hierarchy

Remuneration model

Pay surveys

To establish prevailing wage and salary rates in the labour market

sources

Other companies Labour dept Trade unions Consulting firms

Remuneration model

Pricing jobs

Establishing the appropriate level for each job Grouping the different pay levels into pay grades

Challenges

Skill based pay Pay reviews Pay secrecy Comparable worth International pay

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

Pay reviews

Fixed-date reviews Anniversary-date reviews Flexibile date

Pay secrecy

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.

Comparable worth

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