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Constitute an important element in HRM. Few considerations affecting Policies & Programs concerning Pay & Benefits are: Theoretical, Public Policy and Legal Framework, Company objectives, Labour market situation, Pressures from Unions and Competition, etc. Systematic approach to finalizing the Pay & Benefits is Job Evaluation and Pay Surveys. Certain part of the components of the Pay structure bears no relation to performance. Therefore organizations are finding the need to develop various incentive schemes and payment-by-results systems.
Theoretical Considerations Public Policy and Legal Framework Company Objectives Labour market situation Pressures from Unions Competition
Theoretical Considerations
Many economists have formulated theories which assert the following: The natural price for labour is the subsistence-level wage. Higher wages will, over the time, increase labour supply and bring down wage levels. The reverse also could happen. For, If wages fall below subsistence level, people will die of disease and malnutrition which will lead to diminution in the supply of labour (David Ricardos Subsistence Theory of Wages) There is a pre-determined fund (surplus income) which decides the wages. It pays to increase the fund through collective efforts than to ask for a higher share in the existing fund through legislation or otherwise (Adam Smiths Wage Fund Theory) The workers will never receive full compensation and that wages constitute an inadequate payment for the surplus value created by the workers for employer (Karl Marx Surplus Theory of Wages). Not the theories of Wages: State has to manipulate the allocation of income to wageearners to restore full employment (J M Keynes General Theory of Employment, Interest and Money). Cheap Labour would be a basis for comparative cost advantage in international trade (Comparative Costs Theory)
Other Theories: Frederic Herzergs Two-Factor-Theory of Motivation. It suggests that rewards affect work behaviour in substantially different ways depending upon whether they are intrinsic rewards (motivators/satisfiers) or extrinsic rewards (hygiene factors/dis-satisfiers) The Process Theories seek to explain how the individual work behaviour is started, energized, directed, sustained and stopped. The motivating power of rewards does not reside in the rewards themselves, but in a process which meets the perceptions and expectations of the employees as well as the needs of the Organization. An employee will perform at a given level if he believes that a series of conditions exist and organization would do well to ensure that these conditions are met. Public Policy and Legal Framework
Today most modern societies are moving towards becoming a Welfare State. Today State actively intervenes, directs and sets conditions which govern, among other things, the wage and salary administration policies. The Constitution, Employers, Unions, Legislatures and Courts actively influence Public Policy.
Industrial Truce Resolution (1947) Industrial Policy Resolution (1948) The Constitution Planning Documents Ministerial Speeches