Page 165 - DMGT406_HUMAN_RESOURCE_MANAGEMENT

Human Resource Management

Notes 6. Productivity: This is the current trend in most private sector companies when workers'
wages are linked to their productivity levels. If your job performance is good, you get
good wages.
7. State regulation: The legal stipulations in respect of minimum wages, bonus, clearness
allowance, allowances, etc., determine the wage structure in an industry.

10.5 Establishing Strategic Pay Plans

Strategic pay plans refers to the policies and decisions on how organisations give compensation
to its employees that may satisfy employee as well as achieve organisational goals and objectives.

Objectives of Strategic Pay Plans

The objectives of strategic pay plans can be as follows:
1. Equity:

Internal equity: This ensures that more difficult jobs are paid more.
External equity: This ensures that jobs are fairly compensated in comparison to similar jobs
in the labour market.

Individual equity: It ensures equal pay for equal work, i.e., each individual's pay is fair in
comparison to others doing the same/similar jobs.
2. Attract talent: Compensation needs to be high enough to attract talented people. Since
many firms compete to hire the services of competent people, the salaries offered must be
high enough to motivate them to apply.
3. Retain talent: If compensation levels fall below the expectations of employees or are not
competitive, employees may quit in frustration.

4. Ensure equity: Pay should equal the worth of a job. Similar jobs should get similar pay.
Likewise, more qualified people should get better wages.
5. New and desired behaviour: Pay should reward loyalty, commitment, experience, risks
taking, initiative and other desired behaviours. Where the company fails to reward such
behaviours, employees may go in search of greener pastures outside.
6. Control costs: The cost of hiring people should not be too high. Effective compensation
management ensures that workers are neither overpaid nor underpaid.
7. Comply with legal rules: Compensation programmes must invariably satisfy governmental
rules regarding minimum wages, bonus, allowances, benefits, etc.
8. Ease of operation: The compensation management system should be easy to understand
and operate. Then only will it promote understanding regarding pay-related matters
between employees, unions and managers.

Did u know? What is Wage Board?
This is one of the important institutions set up by the Government of India for fixation and
revision of wages. Separate wage boards are set up for separate industries. Wage Boards are
not governed by any legislation but are appointed on an ad hoc basis by the Government.

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