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

 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 non- unionised 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  Job evaluation  To establish relative worth of jobs  Job hierarchy  Established by aggregating all points assigned to the compensable factors  Higher point total is higher 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.

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