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Factors Influencing Wage And Salary Structure
The organization‘s ability to pay:
Wage increases should be given by those organizations which can afford them. Companies that have good sales and therefore high profits tend to pay higher wages than those which are running at a loss or earning low profits because of the high cost of production or low sales.
Supply and demand of labour:
If the demand and certain skills are high and the supply is low the result is rise in the price to be paid for these skills. The other alternative is to pay higher wages if the labour supply is scarce and lower wages when it is excessive.
The cost of living:
When the cost of living increases, workers and trade unions demand adjusted wages to offset the erosion of real wages. However, when living costs are stable or decline the management does not resort with this argument as a reason for wage reduction.
The living wage:
Employers feel that the level of living prescribed in workers budget is opened to argument since it is based on subjective opinion.
Job requirements:
Jobs are graded according to the relative skill responsibility and job conditions required.
Trade unions bargaining power:
Trade unions do affect the rate of wages. Generally the stronger and more powerful trade union, higher the wages.
Productivity:
Productivity is another criterion and is measured in terms of output man-hour. It is not due to labour efforts alone. Technological improvements, greater ingenuity and skill by the labour are all responsible for the increase in productivity.
Prevailing market rate:
This is also known as ‗comparable wages‘or ‘going wage rate‘. Reason behind this is competition demand that competitors adhere to the same relative wage level.
Skill levels available in the market:
With the rapid growth of industries, business trade there is shortage of skilled resources. The technological development, automation has been affecting the skilled levels at a faster rate.
Psychological and social factors:
This determine in a significant measure how hard a person will work for the compensation received or what pressures he will exert to get his compensation increased.
