Theories of wages in compensation management. Compensation and Employee Motivation 2019-02-28

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7 Important Theories That Can Explain Executive Compensation

theories of wages in compensation management

They also require luxuries of life to raise their standard of living. I noticed an interesting program in a hotel where I recently stayed. The latter are, as we know, now confronted with a legion of wage issues, including the establishment of the basic wage rate, wage differentials, overtime rates, and wage adjustments during contractual periods, as well as with the thorny problems involved in the negotiation of the so-called fringe, or supplemental, wage payments, which will be discussed in the next chapter. It considers only the supply of labour and the cost of production. The agency theory of compensation management can make it a priority to maximize productivity, performance, and the reputation of the company so that employees, management, and stockholders all ultimately have the same goals.

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Wages Theories in Compensation Management

theories of wages in compensation management

Arise when the workers in the same occupation and in the same area but in different industries are paid different wages. This record highlights the vital character of wage negotiations in collective bargaining and also suggests that in the area of wages much can be done to decrease management-labour conflict substantially. The supply of labour in this sense increases with any increase in the number of working hours. The amount of human capital acquired by the executive at any given point determines how valuable he is to the firm. There are three theories of compensation viz.

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Theories of Wages in Human Resource Management

theories of wages in compensation management

The Bargaining Theory John Davidson, an American economist, was the first exponent of the Bargaining Theory of Wages. In order to understand which components of remuneration are more effective, we need to understand the conceptual framework or theories or employee remuneration. Recent example as Walmart claims to giant retail stores dipped in serious allegations accompanied by lawsuit filed for not paying overtime wages at least minimum wages in accordance with federal laws. On the contrary, if workers are paid less than subsisĀ­tence wages, the number of workers will decrease as a result of starvation death; malnutrition, disease etc. Compensation management is a system that is put into place with the goal of maximizing employee performance and bringing together the goals of all people involved with running organizations. The basic assumption here is that the wage fund is a fixed and unchanging amount and so wage rates will fluctuate up or down based on the number of available workers in the market. The remuneration system should comply with three types of equity: 2.


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What are the Theories of Compensation? Business Jargons

theories of wages in compensation management

If a person is rewarded for a particular behavior, he or she is more likely to perform those actions again. Employees should be managed properly and motivated by providing best remuneration and compensation as per the industry standards. Purpose: To regulate the structure of wages and salaries with view to achieve economic and social objectives of the government. The wages are equal to the whole production minus rent, interest, and profit. Salary is a fixed periodical payment paid to a person for regular work or services. It has since become a dominant means of understanding how wages are determined.


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Wages Theories in Compensation Management

theories of wages in compensation management

To bring about more efficient allocation and utilization of human resources through wage and salary differential. Concept of Compensation The literal meaning of compensation is to counter-balance. Wages are fixed mainly as a result of individual bargaining, collective bargaining or by public or State regulation. Recruitment and retention of the best employees is of utmost importance to any organization. If the employee feels he is not being paid fairly for the amount of work he does in a day will result in lower productivity, increased turnover and high absenteeism. This payment, according to Karl Marx, is at subsistence level which is less than in proporĀ­tion to time labour takes to produce items.

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What are the Theories of Wage Determination? Business Jargons

theories of wages in compensation management

Collective bargaining can be seen as the reduction of two risks to which the worker is exposed through individual bargaining. As per this theory the price of the product is determined by the labor time needed to produce it and the surplus goes to be utilized for paying other expenses. According to him, wages are not only the cost of production for an employer but also incomes for the wage earners who constitute a majority in the total working population. Structural Theory Structural theory examines executive compensation at the firm level. According to him, wages are determined by the relative bargaining power of workers or trade unions and of employers.

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Theories of Wages in Human Resource Management

theories of wages in compensation management

Executives can expect to receive a relatively large amount of compensation in a firm that is of a considerable size and where there might be a large number of hierarchical levels. This is possible in big organizations where labor is well-organized. These days programmers are in short supply and are in great demand thus they will command a higher salary. How wages are determined has been the subject of several theories of wages. Traditional Theories of Wage Determination In this theory, the law of supply and demand dictates salary. At the first sight, outcome-oriented contracts seem to be the obvious solution.

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What are the Theories of Compensation? Business Jargons

theories of wages in compensation management

However, different methods of wage payment are prevalent in different industries and in various countries. If the labor is paid below the subsistence level, they will die out of malnutrition, disease or hunger and therefore, the number of workers gets reduced. Wages and salary are paid on the basis of fixed period of time and normally not associated with productivity of an employee at a particular time. Salary refers to as remuneration paid to white-collar employees including managerial personnel. In any area of human relations, ignorance breeds suspicion, distrust, and conflict; this principle of human behaviour is fully applicable to wage negotiations under collective bargaining.


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Compensation and Employee Motivation

theories of wages in compensation management

A company so placed might not be able to survive for long in the competitive struggle. According to this theory wages are depend upon the demand and supply of labor. When negotiations reach a stalemate, they frequently do so because management and union representatives are not able to find a formula to resolve wage disputes. Hence, the remuneration should be decided in such a way that the interest of both the parties can be aligned. The price of a product is determined by the amount of time; a labor devotes for its production.

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