Question

Discuss and explain these General Factors Determining Pay Levels:

1. The external value of the job (external relativities): market rates for jobs as influenced by economic factors operating within external labour market

2. The internal value of the job (internal relativities) the comparative value of jobs in the internal labour market as assessed by formal or informal job evaluation processes

3. The value of the person, as assessed by formal or informal appraisal or performance management processes

4. The contribution of the individual or team

5. Pay negotiations with trade unions

Answer 1

1) The external value of the job (external relativities): market rates for jobs as influenced by economic factors operating within external labour market- Market rates for Jobs play a vital role in deciding the pay levels. Industry Price for a given set of work is very important.It includes Educational Qulaification, Work experience ,skiillsets, law of demand and supply and it further impacts the salary levels in the organisation.

2) The internal value of the job (internal relativities) the comparative value of jobs in the internal labour market as assessed by formal or informal job evaluation processes:  Increasingly there is a trend towards gearing wage increases to productivity increases. Productivity is the key factor in the operations of a company. High wages and low costs are possible only when productivity increases appreciably. The above factors exercise a kind of general influence on wage rates. In addition, there are several factors which do affect the individual difference in wage rates.

3. The value of the person, as assessed by formal or informal appraisal or performance management processes: There is an internal process which every organisation has to assess the performance of every employee which is commonly known as Performance Management Process. Employees are given their goals at the start of the year and they are measured against those goals at the end of the year and based on their performance, every employee is given a pay increase.

4. The contribution of the individual or team: Every Individual is very important to the organisation's performance.There are roles which involves individual contribution and some requires team efforts and collaboration. Pay level are also decided by the magnitude of the impact every individual or team creates towards growth of the organisation.

5. Pay negotiations with trade unions: Labour unions often demands an increase in wages on the basis that the firm is prosperous and able to pay. However, the fundamental determinants of the wage rate for the individual firm emanate for supply and demand. If the firm is marginal and cannot afford to pay competitive rates, its employees will generally leave it for better paying jobs. However, this adjustment is neither immediate nor perfect because of problems of labour immobility and lack of perfect knowledge of alternatives. If the firm is highly successful, there is little need to pay for more than the competitive rates to obtain personnel