Human Resource Management, 5E 1

Managing Basic Remuneration

Human Resource Management, 5E 2

Learning Objectives

• Identify the different components of remuneration

• Describe the theories of wage and salary payments

• Identify the variables that influence employee remuneration

• Point out the wage policy of Government• Explain the wage concepts• Explain how special groups can be

compensated

Human Resource Management, 5E 3

Components of Employee Remuneration

Remuneration

Financial Non-financial

Job ContextChallenging jobResponsibilities

RecognitionGrowth prospects

SupervisionWorking

conditionsJob sharing, etc.

PerquisitesCompany car

Club membershipPaid holidays

Furnished houseStock option

Schemes, etc.

Fringe BenefitsPF

GratuityMedical Care

Accident ReliefHealth and Group

Insurance, etc.

IncentivesIndividual plans

Group plans

Hourly and Monthly rated

WagesSalaries

Direct Indirect

Environment

Human Resource Management, 5E 4

Theories of Remuneration

• Reinforcement theory

• Expectancy theory

• Equity theory

• Agency theory

Human Resource Management, 5E 5

Consequences of Pay Dissatisfaction

Desire for More Pay

Performance

Strikes

Grievances

Search for Higher Paying Jobs

Absenteeism

Turnover

Pay Dissatisfaction

Lower Attractiveness of Job Job

Dissatisfaction

Absenteeism

Psychological Withdrawal

Visits to the Doctor

Poor Mental Health

Human Resource Management, 5E 6

Influencing Factors of Remuneration

Human Resource Management, 5E 7

Linkage of Remuneration Strategy to Business Strategy

Business StrategyMarket Position and

MaturityRemuneration

StrategyBlend of

Remuneration

Invest to growMerging or growth rapidity

Stimulate entrepreneurialism

High cash with above average incentive for individual performance. Modest benefits,

Manage earnings-protect markets

Normal growth to maturity

Reward management skills

Average cash with moderate incentives on individual, unit, or corporate performance. Standard benefits.

Harvest earnings-reinvest elsewhere

No real growth or decline

Stress

Below-average cash with small incentive tied to cost control. Standard benefits.

Source: Wayne F. Cascio, Managing Human Resources, McGraw-Hill, 1995, p.352.

Human Resource Management, 5E 8

Remuneration Model

Job Description

Job Evaluation

Job Hierarchy

Pay Survey

Pricing Jobs

Human Resource Management, 5E 9

Raising Salaries

2003 2004(Increase in percent)

IT 15 17

ITES 23 25

Telecom (Services) 10 12

Insurance 23 25

Banking (Retail) 12 15

Manufacturing 6 7

Pharma 20 22

Source: Business Today, September 12, 2004. p.46

Human Resource Management, 5E 10

Challenges of Remuneration

Monetary vs. Non-Monetary Rewards

Employee Participation

Pay Secrecy

Salary Reviews

Comparable Worth

Eliticism or Egalitarianism

Skill-based Pay

Remuneration

Below Market or Above

Market Rates

Human Resource Management, 5E 11

Skill-based Pay and Job-based Pay Compared

Factors Job-based Skill-based

Pay structure Based on job performance Based on ability to perform

Employer’s focusJob carries wage; Employee linked to job

Employee carries wage; Employee linked to skills.

Employee focusJob promotion to earn greater pay

Skill acquisition to earn greater pay.

AdvantagesPay based on value of work performed

Flexibility; Reduced workforce.

DisadvantagesPotential personnel bureaucracy; Inflexibility

Potential personnel bureaucracies; Cost controls.

Source: Raymond A. Stone, Human Resource Management, John Wiley & Sons, 1995, p.324.

Human Resource Management, 5E 12

Wage Concepts

• Minimum wage– provides for sustenance of life but also for

preserving efficiency

• Fair wage– comparable with standard wages elsewhere

• Living wage– providing essentials plus certain comforts

Human Resource Management, 5E 13

Reality Check

• Do you think that people work mainly for pay? Ascertain views of your classmates. Presentation and discussion can follow in this class.

Human Resource Management, 5E 14

Reality Check

• How far luck does influence pay? Have you come across any individual who has been lucky enough to be more than he or she deserves?