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Chapter 11

Managing Basic Remuneration

Human Resource Management, 5E 1

Learning Objectives

• Identify the different components of

• Describe the theories of wage and salary
• Identify the variables that influence employee
• Point out the wage policy of Government
• Explain the wage concepts
• Explain how special groups can be

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Components of Employee Remuneration



Financial Non-financial

Job Context
Fringe Benefits Perquisites Challenging job
PF Company car Responsibilities
Hourly and
Incentives Gratuity Club membership Recognition
Monthly rated
Individual plans Medical Care Paid holidays Growth prospects
Group plans Accident Relief Furnished house Supervision
Health and Group Stock option Working
Insurance, etc. Schemes, etc. conditions
Job sharing, etc.

Direct Indirect

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Theories of Remuneration

• Reinforcement theory
• Expectancy theory
• Equity theory
• Agency theory

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Consequences of Pay Dissatisfaction


Desire for More

Search for Higher
Paying Jobs

Pay Lower Attractiveness

Dissatisfaction of Job Job Psychological
Dissatisfaction Withdrawal

Absenteeism Visits to the


Poor Mental

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Influencing Factors of Remuneration

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Linkage of Remuneration Strategy to
Business Strategy

Market Position and Remuneration Blend of

Business Strategy
Maturity Strategy Remuneration

High cash with above

Merging or growth Stimulate average incentive for
Invest to grow
rapidity entrepreneurialism individual performance.
Modest benefits,
Average cash with
moderate incentives on
Manage earnings- Normal growth to Reward management
individual, unit, or
protect markets maturity skills
corporate performance.
Standard benefits.

Below-average cash
Harvest earnings- No real growth or with small incentive tied
reinvest elsewhere decline to cost control.
Standard benefits.

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

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Remuneration Model
Job Description

Job Evaluation

Job Hierarchy

Pay Survey

Pricing Jobs

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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

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Challenges of Remuneration

vs. Non- Salary
Monetary Reviews

Employee Pay
Remuneration Secrecy

Below Market
Eliticism or
or Above
Market Rates

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Skill-based Pay and Job-based Pay

Factors Job-based Skill-based

Pay structure Based on job performance Based on ability to perform

Job carries wage; Employee Employee carries wage;

Employer’s focus
linked to job Employee linked to skills.

Job promotion to earn greater Skill acquisition to earn greater

Employee focus
pay pay.

Pay based on value of work

Advantages Flexibility; Reduced workforce.

Potential personnel Potential personnel

bureaucracy; Inflexibility bureaucracies; Cost controls.
Source: Raymond A. Stone, Human Resource Management, John Wiley & Sons, 1995, p.324.

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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 12

Reality Check

• Do you think that people work mainly for

pay? Ascertain views of your classmates.
Presentation and discussion can follow in
this class.

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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?

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