There are a lot reasons why people work, but in the basic scheme of employment or labor the most evident reason is that people work to earn money to cover their expenses or personal needs. Money is a means to an end – various necessities ranging from the most basic which are essential for the subsistence of the individual such as food, shelter and clothing to the material wants and desires of the person. The relative access to these needs and facilities is a major determinant of how much pay the individual acquires or earns. This is fundamental to the individual since this directly relates to the person’s standard of living and is deemed as a determinant to the value of the performance or services provided or to be rendered.
The significance of pay not only relates to the individual who is working but also to other components that compromise the employment relationship. It is of equal importance and interest to the employer as well as to the government. Pay provides motivation or characterizes the quality of performance needed by the employer to cover the cost of the labor performed. As for the government, not only does it provide proceeds for national undertakings but it affects the stability of the both economic and societal facets of the country such as employment, inflation – purchasing power and other state developments in general.
The main component of employee compensation is the basic pay given to the worker. However, due to the demand and competitiveness characterized by both labor and product markets as well as other objectives and factors that directly affect the performance, productivity and profitability not only of the organization but also the worker new strategies are emerging toward increasing the pay levels given to the employee.
One of the usual and conventional ways of adjusting or modifying the base pay in order to reflect or make it appear higher than what is given is achieved by combining benefits and other incentives either monetary or non-monetary. The objectives of determining pay may have one or more that may be in discord with each other (De Siva, 1992). These objectives can be classified into four distinctive categories. First is equity which includes the narrowing of inequalities, wage increase of the lowest paid employees, the concept of equal pay for equal work value among others. The second is efficiency which is reflected in efforts to connect or associate part of the employee’s wage to the productivity or profit, performance whether group or individual as well as acquisition of both skills and knowledge related to the execution of job functions. The third perceived objective is related to the stability in the macro-economic aspect. This has something to do with the levels of employment as well as other related factors that of could either contribute or impede the balance and sustainability of development of the economy of a country. Last identified objective is the effective allocation of labor in the labor market. This particular objective relates to the mobility of workers whether geographical or industry related since the motive of doing such is to the idea of acquiring a net gain and not only to meet the individual’s basic requirements.
A lot of organizations are now in search of sustaining their competitiveness in the market by means of increasing the pay given to the employee. The type of pay is mostly related to performance measures, this is primarily done in order to sop up the costs of labor of the organization at the same time motivate and recompense the employee for the performance. The conventional way of companies in order to secure increased wages and reward their employees is through job appraisal and promotion. However, due to the limitations on resources as well as achieving higher positions in the organization not to mention that current developments in the organizational structure becoming less hierarchical due to market demands and types of flexibility employed in the company, incorporating pay increases based on performance is perceived to be more attractive and effective rather than rewarding the worker through promotions. One of the methods or strategies that is gaining acceptance throughout different industries particularly in the services sector in order to increase the productivity and profitability of the company at the same time rewarding the worker is through performance-based pay. Moreover, the trend in paying the employees is not for the output produced or even for the labor input rendered but simply for the time spent on the job (Blinder, 1990).
There are several theories in human motivation which incorporates pay or pay system as a driving force in motivating their workers to achieve, increase levels or maintain satisfactory performance. The systems of pay given to the workers are now being integrated as part of the human resource management of organizations. This is primarily done in order to achieve the business strategies and objectives whether financial or employee-related since both directly affect the operations of the business. Pay is viewed as a matching element or a dependent variable to the employee’s performance and productivity, by increasing or providing additional pay based on increased productivity and performance is an indication that the company could its financial profitability and could achieve its business objectives.
Its is noteworthy to take into consideration that in designing or structuring a performance pay system, the type of system should highly promote the kind of performance that the organization requires and not just to increase its revenue. Fundamental principles should be laid out and that the objectives and targets should be quite measurable or realizable. Furthermore, the achievement of the performance pay system should be supported by operative approaches and strategies so not to establish that the targets and objectives are impossible to attain. As necessary, employ consultation or increase the involvement in the decision making process or designing of the system. By employing such actions, it could generate efficient or effective ideas, approaches and strategies that could contribute or lead to the achievement of the goals. The organization should also have a feedback mechanism to review the processes, procedures, outcome among others of both pay system and the targets and objectives. It is a excellent avenue in determining and assessing the key factors of either success or failure. Lastly, organizations should also provide trainings since these are quite beneficial to the company and its workers in achieving their goals both monetary and non-monetary. To reinforce the training programs, the company should employ Total Quality Management which consists of continuous improvement activities involving everyone in the organization, managers and workers alike in a totally integrated effort toward improving performance at every level (Goetsch and Davis, 1997). It could be integrated as part of the organizational and professional development program. In a quality organization everyone is constantly learning. Management encourages employees to constantly elevate their level of technical skills and professional expertise. People gain an even greater mastery of their jobs and learn to broaden their capability (Scholtes as cited by Goetsch and Davis, 1997).
References:
Blinder, A. 1990, Paying for Productivity, The Brookings Institution,
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