An organisations internal pay structure can affect the way employees perform to the business strategy. A workers performance not only depends on the pay level they receive (Solow, 1979, in Alexopoulos & Cohen, 2003), but also takes into consideration their pay compared to workers above and below them, those within the same group, and the external labour market (Akerlof and Yellen, 1990). Pfeffer (2005) argues wage compression, the act of reducing the size of the pay differences among employees, improves productivity. To gain competitive advantage, organisations need to acknowledge not only hierarchical wage compression (between management and employees) but also the differences between individuals at similar levels. Narrowing pay discrepancies promotes a sense of community and a common fate, leading to greater efficiency by diminishing interpersonal competition and increasing collaboration (Pfeffer, 2005).
Lacey (2015) considers these factors and it could be suggested that creating a positive atmosphere and company ethos could be a relatively cheap method in managing performance. The increase in job enjoyment could assist the engagement of the workforce. Contrary to this view, by replicating ideal working conditions could not only be a costly endeavour, but possibly a wasteful effort. In contrast to Standards oriented approaches, Excellence orientation tends to appeal to the individual over the organisation. It can be argued that the motivation of the workforce could in fact be the determinant of organisational performance.
But at the minimum wage level, quantity of labour demanded, D_min decreases at the marginal cost of labour to a firm increases. As a consequence, the distance D_min to S_min shown in the above graph is a surplus of unemployed labour in the labour
The Top Down The top approach has factors that help companies decide whether funds are available for the organization to establish pay increases. The company first has to examine its financial health and determine if they are in a competitive position to change wages of its employees. The company then must analyze the how will increasing wages position them in their labor for similar type industries and locals companies as well to insure they are getting the most of each increase. Factors like employee turnover and cost of living can disrupt an organization budget. When making wage decisions, the company has to consider, will the current wages keep employees engaged.
After which, they can enjoy utility of that wage through consumption; whereas, the capitalists or firms seek to maximize their profits by producing goods and services from the employees which is covered by wages. The case of competition as a result of globalization is prevalent in the market environment and therefore firms seek to maximize outputs at a lower wage rate leading to pressure on the employment relationship (Dibben... ... middle of paper ... ...oyment Relationship, pp. 94-118 Budd, JW 2013, "The Thought of Work in Employment Relations", Employee Responsibilities and Rights Journal, vol. 25, no. 1, pp.
Procedural equity refers to the decision made regarding the allocation of pay by looking at the fairness in the processes and procedures. Employees received rewards which satisfy their needs and expectations (individual go... ... middle of paper ... ...ng the organization productivity (Lawler, 2003). The importance in conducting this study is actually to oversee whether the equity systems are considered during assessing the employee performance. If the equity systems linked with the performance, most of the organization must be used equity systems in setting their compensation rate. It is learnt that, money is one of motivator factor which may increase the employee credibility level in performing well.
Collective bargaining is a strategy that is often adopted by firms as a means of setting minimum working standards, wages and conditions. Thus, local level has the ability of making wage adjustments, which reflect conditions of firms and workers (Vachon, & Wallace, 2013). These adjustments are based on the need to reduce the cost of labor, which firms incur. For example, when firms fail to make adjustments on their wages, it implies that their cost of labor increases significantly. This occurs since the market conditions are not favorable for conducting... ... middle of paper ... ...tes fluctuate in the economy.
This essay focuses on the impact of two specific employee involvement programmes i.e. employee ownership and representative participation on an organisations performance by drawing data from several empirical studies. Employee Ownership refers to workers becoming part owners of a company by being allocated shares in their respective firms in addition to their wages. Having a direct link between their effort and reward, employees are motivated into putting in greater effort as they have a larger interest in their employee’s profitability ( Bennett, 1997). A study of Polish Cooperatives was conducted in 1993 to derive the effect of employee ownership on a firm’s productivity.
"Do Minimum Wage Hikes Reduce Employment? State-Level Evidence from the Low-Wage Retail Sector." Journal of Labor Research Summer 1999: 393. EBSCOhost MasterFILE Premier. 22 April 2001 .
Public Opinion Quarterly, 74(1), 85-108. Stevans, L. K., & Sessions, D. N. (2001). Minimum wage policy and poverty in the united states. International Review of Applied Economics, 15(1), 65-75. doi:10.1080/02692170120013358