Page 135 - DMGT106_MANAGING_HUMAN_ELEMENTS_AT_WORK

Unit 6: Compensation and Rewards

Though it is difficult to make a comparison, the organization should make a comparison. Notes
It is only then that they can fix their wage level at the average rate prevailing in the industry
or they may decide on a higher or lower wage level for itself.

Performance-Based Payment
Finally, the organization has to decide whether all individuals in jobs at the same level should
be paid the same pay or not. There are four approaches to determine the individual pay:
(i) Single Rates: When employee performance is almost similar, single rates are paid to
employees on jobs, e. g. clerks in office jobs.

(ii) The Informal Approach: Under this method, individual pay decisions are made on an
informal basis without any guides or controls.
(iii) The Automatic Approach: Under this method, both the rate of the pay increase and the
period of review are usually predetermined. Individual merit has no consideration.
(iv) Merit Approach: Under this method, individual performance and output are important
basis for compensating employees. Merit rating system assumes that performance can
be observed with reasonable accuracy.

The organization must decide that all individuals in jobs at the same level
should be paid the same pay, otherwise there will be conflict among the
employee.

6.2.4 Methods of Wage Payment

Compensation paid to the labour for the services offered is called wages or salary. Giving
satisfactory and fair amount of compensation can probably eliminate most of the labour
disputes. The fundamental methods of compensating the workers are:

(a) Time Wage (b) Piece Wage
Time Wage

It is based on the amount of time spent. Wage is measured on the basis of unit of time, e.g.
per day, per month, etc. Wages do not depend on the performance of the employee.
Features of Time Wage

(i) It is more widely used as it is very simple to compute the earnings.
(ii) It provides guaranteed and secured income, thereby removing the fear of irregularity
of income.

(iii) It facilitates payroll function.
Advantages of Time Wage System:
(i) Sense of security of income. The worker knows the exact amount he would get.
(ii) Conducive climate is provided for better labour-management relations as disputes are
minimized.
(iii) The worker will give greater care and attention on quality and therefore workmanship
can be assured.
Disadvantages of Time Wage System:
(i) Time Wage System offers no incentive for employees to put forth their best efforts.
Efforts and reward have no direct positive correlation.

LOVELY PROFESSIONAL UNIVERSITY 129