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Chapter 31: Methods of Remuneration

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Dan Whitehouse

on 12 November 2012

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Transcript of Chapter 31: Methods of Remuneration

Time Rates Methods Of Remuneration This is when the rate of pay is based on the number of hours worked. Most useful when:
Employees perform similar work to each other
It would be difficult to try to identify individual effort-Group work etc
The amount of work performed is not under the employers control
Quality is more important than quantity
There is no link between effort and payment HR Wages & Salaries There is a difference between a wage and a salary Wage- This is when an employee's payment is not constant and depends on either how they perform or the number of hours they work

Salary- This is when the employee is paid a fixed amount per year paid usually paid by 12 equal payments one each month

A wage is usually used for regular employees where as a salary is used to pay either professionals and managers

Both are subject to change via bonus's etc Piece Rates This is when an employee is paid for the amount of work they do This is what a pure piece rate graph looks like- there is no base pay it is purely how much the employee works

This is what a piece rate graph looks like with a base minimum pay

This is what a piece rate graph looks like when there is a maximum limit to how much can be made- because a business might not be able to sell enough. Output Pay £ Pay £ Pay £ Output Output Performance related pay Three main types of performance related pay- Piecework ( as mentioned), Commission or Bonuses Commission- Usually in businesses where selling is part of the job. For example estate agents- every house they sell they would get 3% of the sale and that is their wage. Some staff however may try and sell products for them selves and not for the customer.

Bonuses- Two types of Bonuses and they are paid annually
Fixed Proportion- Employees would get a bonus equal t a percentage of their salary or wage - e.g. 10% of a £40,000 salary- a bonus of £4,000
Performance Related- Employees would get a bonus dependent on their performance Measured Day Work This type of performance related pay merges both piece rates and time rates What ever output zone the worker falls into they will get that same zone pay Pay £ Output 1 2 3 A B D C Appraisal This is most common in managerial Professions This is when managers set them selves targets at a meeting and they try and achieve those goals over the next year for example it could be to learn a new language to help with global business- the targets need to help the business and the individual.

If the goals are achieved then a bonus will be paid out.

Helps with recruitment and retention of employees
Can motivate via higher rewards
Rewards loyalty and commitment
Encourages employees to focus on reward and not the wider picture
Be diverse and demotivates employees
Discourages teamwork
Rewards may be small if they have high salary Non Monetary Methods of remuneration Perks and Benefits There are other methods of paying its employees for example perks such as a company care or free private health care.

Perks benefit the business and employees- For example private health care- the employee would receive better quality of care however the business benefits because the employee will work better for the company and will return back to work sooner if taken seriously ill Deductions from Pay There are several legal deductions from pay Employers have to deduct certain things from an employees pay for example national insurance contribution etc. This means when an employees pay is £200 for one week it may actually cost the business £220 with the statutory deductions Statutory Deductions from pay: The legal deductions that have to be made by a business from an employee's pay: income tax and employee's national insurance contribution Changing Methods of Remuneration There are procedures businesses need to follow to change the method of remuneration. Advisory , Conciliation, and Arbitration Service Recommends:
Be carefully selected to take account of business and employees
Have the commitment of all employees on all levels
Be developed and maintained with participation of representatives
Identify why the old system was unsatisfactory
Identify precisely what the new system is supposed to do
Involve the employees or their representatives at this point
Ensure all proposals mean that as few employees as possible will not be worse of financially
Ensure that any change fits in with the business culture
Ensure that the proposed system fits in with the businesses objectives
Try to ensure that any of the changes are agreed rather than imposed
Monitor and evaluate the change- What has been the reaction from employees. New and Old Pay Old Pay New Pay Related to a hierarchical pay structure
Inflexibility over the work performed
Increases in pay based on length of service promotion and rate of inflation
Payment system is rooted in past practice Related to a flatter organizational structure
Flexible approach to the work performed
Increases in pay based on individuals worth to the business
{payment system is closely allied with the business strategic objectives
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