Prepared by: Lecturer, Ouch Phanhavisoth

1. What is Pay? - To give money or other compensation to in exchange for goods or services. - Give (someone) money that is due for work done, goods received, or a debt incurred. 2. Why is pay important? - People feel strongly about it (Encouragement, Motivation, inspiration. etc.) - Pay is the subject of important business legislation (e.g. national minimum wage; equal opportunities) - It helps attract reliable employees with the skills the business needs for success - Pay also helps retain employees – rather than them leave and perhaps join a competitor

 There are two types of cost: 1. Fixed cost: - business expenses that are not dependent on the level of goods or services produced by the business. - A cost that does not change with an increase or decrease in the amount of goods or services produced. 2. Variable cost: - are expenses that change in proportion to the activity of a business. Variable cost is the sum of costs over all units produced. - Variable costs are those costs that vary depending on a company's production volume; they rise as production increases and fall as production decreases

There are three concepts of payment: 1. Method of payment/Payment system 2. Employee payment/Salary, Wage 3. Pricing strategies

AdvantagesDisadvantages Payment is made straightawayCash has to be counted Ideal for small purchaseHas to be lock away for security ConvenientCan be stolen

AdvantagesDisadvantages Safer than cashTake time to clear Better for large amountsIt can “bounce Only person that is signed can cash itError can result in bank refusing cheques

1. Debit Cards: Deposit the money into the bank account then pay or withdraw 2. Credit Cards: Doesn’t have to deposit, you just borrow from the bank then return the money that you paid to the bank weekly, monthly or annually

AdvantagesDisadvantages Guaranteed paymentTakes 3 days for the money to be received Can be use for mail order or online purchases A fee must be paid to the bank No need to carry cash and safer than cashDanger of fraud

AdvantagesDisadvantages Cash back It forms of borrowing so MUST be use sensibly Enable card holders to borrow moneyHigh interest rate so expensive ways to borrow Guaranteed paymentTake 3 days for the money to be received Can be used for mail orders or online purchases A fee must be paid to the bank Credit Card benefitSome businesses charge for accepting credit card

 These are used for large transfers of money on a regular basis from one account to another, particular wages AdvantagesDisadvantages Fewer security problems as no cash involved The bank needs notice before releasing wage of large amount of people Records keep through bank statements They need check before being process. Cheaper and quicker than writing out lots of cheques

how much to pay?  Paying to the staffs or employees is very difficult to estimate in order to match or suitable with their knowledge, skill, experience and performance. Although, there are 5 keys to evaluate how much to pay for the employees: - Job evaluation - Fairness - Negotiated pay rates - Market rates - Individual performance

(cont) 1. Job evaluation: this is usually the most important factor. What is involved in the job being paid? How does it compare with similar jobs? 2. Fairness: pay needs to be perceived and be seen to match the level of work 3. Negotiated pay rates – the rate of pay may have been determined elsewhere and the business needs to ensure that it complies with these rates.

4. Market rates: another important influence – particularly where there is a standard pattern of supply and demand in the relevant labour market. If a business tries to pay below the “market rate” then it will probably have difficulty in recruiting and retaining suitable staff 5. Individual performance – increasingly, businesses include an element of “performance- related” reward in their pay structures.

MANAGING PEOPLE - METHODS OF PAY - There are 6 methods of pay: 1. Time-rate pay 2. Piece-rate pay 3. Commission 4. Performance related pay 5. Fringe benefits 6. Profit sharing 7. Total benefit package

- Time rates are used when employees are paid for the amount of time they spend at work. This is the most common method of payment in the UK. - The usual form of time rate is the weekly wage or monthly salary. Usually the time rate is fixed in relation to a standard working days (e.g. 8 hours per day). - Time worked over this standard is known as overtime. Overtime is generally paid at a higher rate than the standard time-rate – reflecting the element of sacrifice by an employee.

THE MAIN ADVANTAGES OF TIME-RATE PAY 1. Time rates are simple for a business to calculate and administer. 2. They are suitable for businesses that wish to employ staff to provide general roles (e.g. financial management, administration, maintenance) where employee productivity is not easy to measure 3. The employee can budget personal finance with some certainty

THE MAIN DISADVANTAGES OF TIME-RATE PAY/TIME-BASED WAGE 1. Does little to encourage greater productivity – there is no incentive to achieve greater output. 2. A time-based wage requires the employee to work a set number of hours per week in order to earn her monthly income.

PIECE-RATE PAY - Piece-rate pay gives a payment for each item produced – it is therefore the easiest way for a business to ensure that employees are paid for the amount of work they do. - Piece-rate pay is also sometimes referred to as a “payment by results system”.

- What is Payment by result? ‘Payment by Results’ (PbR) is the practice of paying providers or workers for delivering goods or services after agreed results have been achieved. - Two types of payment on result: 1. Straight piecework 2. Differential piecework

 The wages of the worker depend upon his output and rate of each unit of output; it is in fact independent of the time taken by him.

DIFFERENTIAL PIECEWORK  payment for each piece of work completed, determined by the total number of pieces produced over a period, with extra bonus payments for work completed more quickly

1. Motivation The opportunity to earn more money motivates some employees to increase productivity. If the employee increases her work speed, she can complete more units of work in an hour. 2. Cost Effective In many work settings, the piece rate pay method is cost effective, since the company is only paying for work completed. A slower employee may not complete many work units per hour. 3. One-Dimensional The piece rate pay system looks only at productivity making it a one-dimensional system for evaluating work. You may encounter employees who stop worrying as much about quality, instead only worrying about the quantity of work completed for greater earnings.

Question????????????? 1. What happens if production machinery breaks down? 2. What happens if there is a problem with the delivery of raw materials that slows production?

COMMISSION - Commission is a payment made to employees based on the value of sales achieved. - Commission is, therefore, a form of “incentive pay”. - Commission, like piece-rates, is a reward for value of work achieved. In most cases, the employee is paid a flat percentage of the value of the good or service that is sold.

1. Higher Pay Opportunity - When you work on commission you are paid based on what you sell, so if you have a good work and performance, you make good money, if you make a bad work and performance you don't get much. - The nice part of commission is that if you are motivated and a good salesperson you can make really good money. - The more sales, the higher the pay.

2. Freedom - Sales professionals have more freedom to operate than their co-workers in clerical positions. - Entry-level sales, such as call centers and telemarketers, don't have this type of freedom.

3. Productivity - For employers, paying commission is an incentive to motivate employees to produce more. Employees are motivated to put in more effort to increase their income. - You don't waste money paying staff members that do not produce.

- The negative is that sometimes sales are hard to come by and you never have a steady income, from week to week your pay may go up and down, and that's hard for a married or family person. - Commission pay has a way of weeding out those who don't have the talent for sales. If the sales person isn't capable of earning a living wage from her sales, then she will quit and move along to a salaried position.

- Performance-related pay is money paid to someone relating to how well one works. - Performance-related pay is a financial reward to employees whose work is considered to have reached a required standard, and/or above average. - This standards-based system is used for evaluating employees and setting salaries by many employers. they are paid more for selling more, and low performers do not earn enough to make keeping the job worthwhile even if they manage to keep the job.

- In addition to motivating the rewarded behavior, standards-based methods can provide a level of standardization in employee evaluations, which can reduce misjudgment and make the employer's expectations clear. - example: For example, an employer might set a minimum standard of sewing clothes 1200 sets a month for each persons in a simple data- entry job, and reassign or replace employees who cannot perform at that level.

- motivating and retaining key talent - getting unmotivated individuals to improve productivity

- The performance of a complex job as a whole is often reduced to a simple, often single measure of performance such as profit, without considering other factors that make up overall performance. - performance related pay can be disadvantageous in that it can create the potential for rifts among employees if they feel they are being treated unfairly or unequally if there are not strict and clear stipulations in place for the system. - employees may only be inclined to perform work that is measured in their performance appraisal. - employees are not as motivated by monetary incentives as employers once thought.

FRINGE BENEFITS - Fringe benefits are financial benefits that are not paid out directly in cash. - Examples of these include:  Company cars  Discounted season tickets  Health insurance  Pensions  Holiday and other entitlements to take time off work  Childcare provision  Staff uniforms  Staff discounts -

- Profit sharing refers to any system whereby employees receive a proportion of business profits. - Profit sharing is generally accepted as having many advantages, providing that all employees are able to participate.

- Creates a direct link between pay and performance. - Creates a sense of team spirit- helps remove ‘them and us’ barrier between managers and workers if all employees involved. - May improve employee’s loyalty to company

- The salaries of the individual employees go up equally, not on the basis according to their performance. - The focus of the employee may be on the profit rather than on quality. - Unfair standards working and ratings system - Damaged relationship - Emerging biases

- Total benefit package sometime refers as Total Compensation Package and it’s important to consider employee benefit package. - Clearly, a successful benefits strategy can play a major role in recruiting and retention efforts, as well as improving employee attitudes (and well-being) and driving strong business results. - There are many types of Total Benefit Package such as:

1. Medical insurance 2. Life and long-term 3. Disability insurance 4. Leave benefits (Vocation or Holiday) 5. Children benefit 6. Retirement benefits 7. Education Assistance and Scholarship Programs Those are extremely important- and valuable-parts of the total compensation package.

- Effective employee benefits strategies raise productivity. - Increase employee retention. - encourage working performance, motivation, and productivity. - Employers and employees share the responsibility for providing benefits. - Employees choose benefits to meet their needs, and value these benefits more highly.

- Organization pressure - High cost - Doesn’t suitable for the employees in some circumstance. - The choices made may cause problems both to employers and employees. - Weekend the relationship between employers and employees

- What is your product worth? - How much should you charge for your services? - How do you determine value of a product or service? Often this is a very difficult assessment. The old standby answers: "its value is what someone is willing to pay for it or for a product.

- Is an important signal of a product’s or service’s value to customers. - Price sends important signals to customers: Quality, prestige, uniqueness, and others. - Common small business mistake: Charging prices that are too low and failing to recognize extra value, service, quality, and other benefits they offer.

- What does it cost to produce? it’s very important to consider finished produced when you are determining the value of a product. For a service, you may look at the time and what it costs in time to perform the service. - How unique is it? Is this a product or service that people can buy from competitors? Are the competitors cheaper than you? What is the advantage of your product or service compared with the competition?

- How quickly do your buyers need what you are selling? Who would pay extra to have things overnight? Now, speed is an ever increasing component to a product or service's value. speed is sometimes extremely important to clients and they will pay extra for it. - Is this a one-time deal or something that will continue on into the future? Are you trying to establish a relationship with the consumer to continue with products or services? Do you sell a printer for less because you will make money selling ink into the future?

The “right” price for a product or service depends on the value it provides for a customer.

- Must take into account competitors’ prices, but it is not always necessary to match or beat them. - Key is to differentiate a company’s products and services. - Price wars often eradicate companies’ profits and scar an industry for years. - Best strategy: Stay out of a price war!

A pricing technique in which a company sets different prices on the same products and services for different customers using the information that it collects about its customers.

1. Odd pricing / Psychological Illusion: This is a simple strategy to encourage customers place orders, raise the chances of people purchase. 2. Price lining: Price lining, also referred to as product line pricing, is a marketing process wherein products or services within a specific group are set at different price points. (eg. car options, Nokia series) 3. A “me too” pricing policy.

4. Bundling: a marketing strategy that involves offering several products for sale as one combined product. This strategy is very common in the software business (for example: bundle a word processor, a spreadsheet, and a database into a single office suite) 5. Byproduct pricing: The by-product of any process, instead of being discarded, is sold at a cheaper price, often for a difference process.

6. Captive produce pricing: Setting a price for products that must be used along with a main product, such as blades for a razor and film for a camera. 7. Discount: A deduction from the usual cost of something. For example, you may have a product in your inventory that has not been selling as planned. You can create a discount for that product and promote it to customers who you think may need that product.