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Employee Remuneration refers to the reward or compensation given to the employees for
their work performances. Remuneration provides basic attraction to a employee to
perform job efficiently and effectively. Remuneration leads to employee motivation.
Salaries constitute an important source of income for employees and determine their
standard of living. Salaries affect the employee’s productivity and work performance.
Thus the amount and method of remuneration are very important for both management
and employees.
1. Time Rate Method: Under time rate system, remuneration is directly linked with
the time spent or devoted by an employee on the job. The employees are paid a
fixed pre-decided amount hourly, daily, weekly or monthly irrespective of their
output. It is a very simple method of remuneration. It leads to minimum wastage
of resources and lesser chances of accidents. Time Rate method leads to quality
output and this method is very beneficial to new employees as they can learn their
work without any reduction in their salaries. This method encourages employees
unity as employees of a particular group/cadre get equal salaries.
There are some drawbacks of Time Rate Method, such as, it leads to tight
supervision, indefinite employee cost, lesser efficiency of employees as there is
no distinction made between efficient and inefficient employees, and lesser
morale of employees.
Time rate system is more suitable where the work is non-repetitive in nature and
emphasis is more on quality output rather than quantity output.
Piece rate system is more suitable where the nature of work is repetitive and
quantity is emphasized more than quality.
• External
• Internal
• Labour Market
• Cost of Living
• Labour Unions
• Government Legislations
• The Economy
Labour Market
• Demand for and supply of labour influence wage and salary fixation. A low wage
may be fixed when the supply of labour exceeds the demand for it. A higher wage
will have to be paid when demand exceeds supply, as in the case of skilled labour.
High remuneration to skilled labour is necessary to attract and retain them. But
exploitation of unskilled labour, like, for instance, paying niggardly wages
because it is available in plenty, in unjustified. The Minimum Wages Act, 1948, is
precisely meant to prevent this kind of exploitation. The Going rate system
involves fixing wage/salary rates in tune with what is paid by different units of an
industry in a locality. Going rates are generally paid in the initial stages of plant
operators. Productivity of labour also influences wage fixation. Productivity can
arise due to increased effort of the worker, or as a result of the factors beyond the
control of the management, and the like. From advance technology and more
efficient method of production Productivity has only a subordinate role in wage
fixation. The argument that productivity would increase if it is linked to
remuneration is hardly acceptable.
Cost of Living
Labour Unions
Labour Laws
We have plethora of laws at the central as well as at the state levels. Some of the laws
which have bearing on employee remuneration are :
The Payment of Wages Act 1936: for certain classes of persons employed in the
industry. Protection against irregularity in payment of wages in a particular form and at
regular intervals
The Minimum Wages Act, 1948: enabled central and state Government to fix minimum
rates of wages payable to employees
The Payment of Bonus Act 1965: provides payment of a specified rate of bonus to
employees in certain establishments.
Equal Remuneration Act, 1976: provides payment of equal remuneration to men and
women workers for same or similar work.
The Payment of Gratuity Act 1972: provides payments of gratuity to employees after
they attain superannuation.
Society
The Economy
The last external factor that has its impact on wage and salary fixation is the state of
the economy. In most cases, the standard of living will rise in an expanding economy.
Since the cost of living is commonly used as a pay standard, the economy’s health
exerts a major impact upon pay decisions. Labour unions, the government, and the
society are all less likely to press for pay increases in a depressed economy.
Internal Factors
• Company/Business’s strategy
• Job evaluation
Business strategy
The overall strategy which a company pursues should determine the remuneration to
its employees. Where the strategy of the enterprise is to achieve rapid growth,
remuneration should be higher than the competitors pay. Where the strategy is to
maintain and protect current earnings, because of the declining fortune of the
company, remuneration level needs to be average or even below average.
The Employee