Different Aspects of Salaries in People, Business, and Economy

A Research Paper Presented to Dr. Jose Cristina M. Paria

In Partial Fulfillment Of the Requirements for ENGLRES Term 3 (2012-2013)

Cua, Harold Stephen Chua, Jan Ervin

April 1, 2013 Thesis Statement: Salaries play a big role in the business world because these tend to be the income source of the employees, these affect the employees working performance, these are important in running businesses and these affect the economy of each country. Outline: I. Introduction II. Income Source A. Different class levels B. For survival 1. To afford wants 2. To afford needs III. Employees working performance A. High payment of salaries to employees 1. The expectations of the workers 2. The measurement of contributed task B. Low payment of salaries to employees IV. Importance in the business world A. Human resources B. Motivation 1. Higher work output 2. Employee satisfaction

V. Economy A. Competition in current market 1. The value of consumers 2. Cost of products B. Growth rate of money VI. Conclusion

When the market and trade era begun, we all know humans need to work to earn income and survive in this world and money does not grow on trees. Salaries are the fixed compensation paid to a person for work or services. There are a lot of effects in the relation between the employees and their pay. This paper talks about how salaries play a big role in the business world because these tend to be the income source of the employees, these affect the employees working performance, these are important in running businesses and these affect the economy of each country. To relate pay to performance in a realistic manner, give weight to other considerations and do this in a consistent manner for all employees requires some systematic planning approach. There is also a great need for salary planning because of the amount of money involved. Whether or not an employee is classified in one pay grade or the next highest generally involves a difference of something like ten percent. However, within grade progressions are generally from thirty to sixty percent, so that three to six times as much money is involved as in the determination of the proper classifications. (Mcbeath, 1964) According to Langsner (1961), before there was a problem in knowing the amount of salary, workers demand more labor. With this, more expense goes to the employees. The methods and process here are that in knowing the amount of salary. Salaries must be based on the standards of living of an individual. The standards of living is rising or falling depending on the advancement of a country trough technology and other factors. Philosophy of make-work and the thought that machines

make the work harder must not be the factors on determining wage. Accidents can happen to people, we must be sensitive to these problems (Langsner, 1961). Smith (2011) also indicated that as an employees salary increases his happiness on his job increases. When an employee rises up in the rankings of his workplace, rather than getting stress from more complications in the job, the employee gets happiness from his higher salary. The study that was conducted by CareerBliss on 2011 had results that money could increase the happiness of an employee. The employee who had a salary of $300,000 had a higher happiness level than of the employee who had $40,000 as salary. Sibson (1967) stated that merit rating has different techniques and these types can be all summed up by the guide managers thinking about the performance or qualities of each employee. It also does not tell how small or large an increase should be imposed. It does not explain why the conditions of performance exist or might be improved. None of the techniques are replacements or methods for the managers judgment. The technique serves as a guide for the judgment of its managers (p.83). A method called merit rating approach is very significant to companies for it focuses on the individual performance and output of the employees. This approach should be recognized or else it will lead to a loss of hardworking employees. Merit rating helps companies to adjust the salaries of employees based on their working performances (Sibson, 1967)

Furthermore, Sibson (1967) added that companies need to evaluate and monitor the performance of each employee; this is the first step on merit rating. This assumes that with accuracy, even if it cannot be measured, performance can be also observed. Merit rating helps determine the increase in salary (p.82). Gantt (1974) researched that there are four conditions to get the best results in work. The first one is to know the best way of a work done and have knowledge of the equipment used. Second, someone must be willing to teach other coworkers on how to use the information gathered about the job. The third is that the salary of must be high enough for the worker to feel that his work is worth for something. The fourth is there must be no increase in wages unless efficiency is maintained (p.40) . As stated by Langser (1961), jobs grades are the combination of different jobs in accordance to the sequence of importance. It is important to have occupational classifications to aid in giving jobs to different workers. It also helps on knowing the wage and salary effects on an individual. It can determine different wage rates based on jobs. A supervisor can easily distinguish job values with the classifications handed to them. Mcbeath (1964) also supplied that classifying a personal performance rather than a job performance may be better for each employee. This is processed by rendering special assignments to individuals who can be beneficial in improving ones manager or employee. This work is suitable during early stage of the employees career and would reflect on his present or his next stages of performance in his own position. A personal performance is used to guarantee a constant salary progress in with the individuals overall increasing value to the company.

In addition, it is also better to check both job title and grade are recorded and assigned to each employee and they represent a current position. Special grades assigned to each individual may be higher or lower than the actual grade of the job (Mcbeath, 1967). Salaries and employee performance should complement each other. They should have a connection between them. What the manager annoys the most is that seeing an employee getting fired although this is the same employee he just admitted a promotion three or four months earlier. This occurs more often in the company because there is no relationship between the performance of the employee and the salary. Employee appraisal programs have been studied by companies but not been used to pay salary decisions. But these should be adopted so that these could effectively combine employee performance and salary together. Appraisal programs must begin at the top of the organization. After that, there should be a system assigned for different position levels (Milton, 1984). Another researched by Mcbeath (1964), it is very critical to promote or improve for staff with potential. Succession planning is organized to cover up long-term job replacements in a large company, but less clearly formulated and coordinated. Promotions should always be planned in advance to avoid salary adjustments to the employees salary. Succession planning charts or other available information should be checked to establish planned career moves.

Salary adjustments are planned within a budget in most organizations. This will set limits and decide patterns of each individual which is used for review. Salary adjustments must also be planned within the guiding framework of the organizations policy. This will classify procedure and merit salary scales. This also includes a group of rules with the size or frequency of salary adjustments (Mcbeath, 1967). Gantt (1974) found that this report was made only two months after the bonus system was stated, now nearly nine years ago, and is particularly valuable as it emphasizes some of the fundamental principles on which successful work of this character must be founded. We must secure the confidence and co-operation of the workman by assuring him equitable compensation. If we fail to do this, any results we may get will be short duration and our work will finally come to naught. Many of the failures to get continuously the high efficiency which seemed easily possible have been due to a disregard if the fact that the workman is entitled to a share in the benefits of increased efficiency, and in the long run will not cooperate unless he gets it. (p.110) According to Milton (1984), in todays business environment, many managers still decides with less consideration of relevant facts involved. Ignorant managers based salary decisions on subjective factors which may result in big-hearted or cheap pay practice. These practices result in an insufficient and unfair pay structure which will impact attitudes and work performance of employees. So practices of salary administration need to be fair and sufficient to result a positive factor in each employee. Gantt (1974) also stated that a great business condition regarding to employees is that the employer has an efficient worker for the job and the worker is paid at the right reasonable price for his labor. If the employer demands more work from the employees

or the employee demands more money for his job, they will both have a problem in the long run. The employer will worry about his workers complaints about salary and in turn the employee will lose his job because of the employer losing money because of too much wages. In short, good work with good pay in a business can result to a good long running business (pp.33-34). As reported by Belcher (1962), needs motivate people. One way of satisfying the needs of an employee is by providing compensation. Hence, pay becomes an instrument for satisfying needs and to motivate the employees. Back then, salary was the only motivation to work. Employees need to increase pay to boost the employees motivation. But today, motivation is too compound. The needs of the employees became more complex and complicated. There is a ranking of basic needs familiar and practiced nowadays. Likewise, money can be a powerful motivator. This shows how employees aim towards the companys target the same as achieving their goals. Some employees perceived that to work more is to earn more money. It is better to acknowledge money as motivation to cooperate in the company rather than to produce (Belcher, 1962). Not all employees aim for high salaries and high positions. Some just wanted job satisfaction in exchange for their salary. But there are two types of employee satisfaction. One is job satisfaction and the other is salary satisfaction. Job satisfaction talks about how employees enjoy their work and contented with the management and relationship with the organization. Employees tend to have high performance rating when they are satisfied and determined to do their tasks or work. The next type, salary satisfaction, is when employees are already satisfied with their salaries to the equal jobs

they perform. It also means equal salary is as good as the equal job they perform. (Mayhew, n.d.) Mayhew (n.d.) also combines that job satisfaction may also be related to the rank or position of the employee. When the organization promotes an employee into a higher position, the employees job satisfaction will be larger. This is the same as the relation between job satisfaction and employee motivation. This means that it motivates employees when the employers recognize and praise them. This results to a better working performance. This is also a benefit to the organization because employee recognition is a reward that is non-monetary and job satisfaction is visible for the reason that employees execute into more challenging tasks and derive into solid performances. As stated by Tullao (1985), since the Philippines requires tertiary schooling the country has a potential of making the economy higher in terms of growth, but many professionals who finished the tertiary level become unemployed. With this the educational system failed to make more needed professionals. The country suffers economic decline because of misallocation of jobs (p.12). In line with this, Filipinos are one of the most schooled in Asia. The country has an average literacy rate of 95% according to recent statistics. Education is also known as a type of investment, because it helps us earn more in the future. Studies show that 18 million are employed as of 1982 and 37.6 million as of 2012 according to the national statistics office. A problem is that there is a mismatch in graduates; these mismatches tend to not fill the required labor force, and thus making our economy go down (Tullao, 1985).

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According to Belcher (1962), Salaries are considered an economic problem. As a matter of fact, salary does not revolve around on problem, but it also includes sociological, psychological, political and ethical problems. Setting a price of a certain product includes a group of decision makers, not only the market. Belcher (1962) also included that salaries have two sides. One is the cost to the employer; the other side is the income to the worker. In the side of the employer, salary is a price he must pay as a factor of production, this is an economic transaction. While on the employee, he provides energy and work to his job for him to earn income and money. This is a process of give and take where purchasers demand and suppliers supply and also to allocate the scarce resource (p.4). As stated by Lehman (1985), the practice of paying employees in the third world countries is unfair compared with employees in the first world or other industrialized countries because employees in the third world countries are paid at a lower rate than employees in the first world countries. There is also a principle of equal pay for work of equal value and with that it is really biased when both are doing the same tasks and jobs but receiving different pays. An example given will be jobs performed by women are equal compared to jobs performed by men but women are paid at a lower rate and this is unfair for them. That is why jobs of equal value should be paid at the same rate and salaries should be paid for equal work done (Lehman, 1985).

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Our interviewee, Sandra Cua, also added that salaries are very important because one has to pay his employees for the services they have rendered. The employees perform efficiently based on how they are properly paid and another is the knowledge and ability that they have to perform on the assigned task. Just like we researched, employees get their motivation when they got promoted or they have an eager to earn income. Jacqueline Chua, a business woman, stated that salaries are essential to a business because it makes the employees meet their needs and support their own family. It also motivates workers to work properly since the salary has an effect in the lifestyle of a worker. She also stated that some of the workers get motivated because of the thought of getting a better pay. She also said that other than salary, the working environment and the boss-employee relationship can affect the employees

performance on a job. In conclusion, Salaries play an important role in a workers life and in the business. It motivates workers to work efficiently if given the right amount of salary. An employees happiness in his workplace can be affected by his salary. Salaries also affect the economic status of a country because the income of a worker measures what he purchases to have his wants and needs. Salaries can help or hinder the worker and the business so we need to be fair on the amount when giving it.

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References: Belcher, D. W. (1955). Wage and salary administration. Eaglewood Cliffs: Prentice-Hall International, Inc. Gantt, H. L. (1974). Work wages and profits (2nd ed.). New York: Easton Publication Company. Langsner, A. & Zollitsch, H. (1961). Wage and salary administration . Cincinnati:

South-western Publication Company. Lehman, H. (1985). Equal pay for equal work in the third world. Journal of business ethics, 4 (6), pp.487-491. Mayhew, R. (n.d.). Jobs salary vs. job satisfaction. [online] Retrieved from: http://www.ehow.com/info_12004111_jobs-salary-vs-job-satisfaction.html. Mcbeath, G. & Rands, D. N. (1964). Salary administration. Great Britain: Business Publications Limited. Rock, M. L. (1984). Handbook of wage and salary administration . New York: McGraw Hill Inc. Sibson, R. (1967). Wages and salaries: a handbook for line managers . United States of America: Vail-Ballou Press Inc.. Smith, J. (2011). How your salary level affects your happiness. [ONLINE] Retrieved from: http://www.forbes.com/sites/jacquelynsmith/2011/11/10/how-your-salary-

level-affects-your-happiness/. Tullao, T. (1985). High education and the labor market: The case of the Philippines. Journal of Business and Economics, 3(1), pp.1-13

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