What is the need for a Rational and Equitable Pay Structure?
Need for a Rational and Equitable Pay Structure:
Wages forms the most important factor of employment. There have been issues because of this factor. Some organizations pay for skills possessed by employees rather than for the jobs employees hold. The rationale is usually serious and continual skill shortages experienced by the organization. But most organizations measure employee contributions first in terms of the jobs employees hold. One interesting analysis of organizational compensation decisions is that pay structure decisions are intended to achieve retention of employees through prevention of dissatisfaction and encouragement of employee cooperation. Decisions on wage relationships among jobs within an organization are largely within the control of its decision-makers.
Wage level decisions are usually influenced more by forces external to the organization than wage structure decisions. Unions affect wage structure, but the differential effects of craft and industrial unionism and the type of bargaining relationship are considerable. People and institutions both have a hand in designing jobs and wage structures. Craft unions, for example, determine the ‘kinds of work their members do and expect employing organizations to adjust to these decisions. The labor market influences the wage and salary structure through the supply of labor: