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Significance of Labor markets and its role in the area of compensation systems
GROUP MEMBERS SHARAD SHARMA YASIR YOUSUF NIKHIL CHOUDHARY
Significance of Labor Markets • Approximately 3/4th of National Income goes to Labor. • Demand for Labor differs from that for consumption goods.
THE GENERAL WAGE LEVEL Ø REAL WAGE. Ø WORKERS BETTER OFF THAN THEY WERE 100 YEARS AGO.
LABOR QUALITY qEarnings Benefit from Education and Experience. qEarnings profiles of men show that earnings rise with both
LABOR SUPPLY
Compensation & Measurement
Wage is a basic compensation for paid labour, and the compensation for labour per period of time is referred to as the wage rate. The two terms are sometimes used interchangeably.
Other frequently used terms •Wage = include: payment per unit of time (typically an hour) •Earnings = payment accrued over a period (typically a week, a month, or a year) •Total compensation = earnings + other benefits for labour •Income = total compensation + unearned income •Labor can be measured in terms of
Compensation Management • Payroll involves large sums of money • Pay systems are therefore an integral part of the business strategy • The pay debate as to whether the best way of rewarding service is through pay is far from settled.
Demand for labour and wage determination • The employer's cost of production is the wage, in which the business or firm benefits from an increased output or revenue. • Wage differences exist, particularly in mixed and fully/partly flexible labour markets.
Objectives of compensation system • A large sum of money is invested in people • Design rests on what the company achieves. • System needs to attract good employees by structuring packages that tempt people to do the job
Achievement of the objectives are determined by : • Labour market forces • Collective bargaining • Government legislation • Top managements philosophy regarding pay • Top managements willingness to recognise ability and effort
Traditional Pay Systems • Traditionally people were paid primarily through base salaries determined by specific job, the need to maintain a certain level of internal pay equity an the need to pay externally competitive salaries. • Employees were not encouraged to develop skills.
This had to change
Emerging Pay Systems • • • • •
Pay for knowledge and skills Pay for competencies Performance based pay Incentive pay systems Broad banding = employees might spend most of their careers in a single band moving laterally
Arms sales (agreements), by Supplier, 2000-2007 (in billions of constant 2007 U.S. dollars) Supplier Total Sales in US Dollars (billions) Percent of total sales Source: Richard F. Grimmett, CRS Report for Congress; United States Russia France United Kingdom China Germany Italy Other European Others
134.835 38% 67.549 19% 32.096 10% 26.425 8% 12.547 4% 13.859 4% 7.045 2% 39.024 11% 22.523 7%
GROUP MEMBERS SHARAD SHARMA YASIR YOUSUF NIKHIL CHOUDHARY
Significance of Labor Markets • Approximately 3/4th of National Income goes to Labor. • Demand for Labor differs from that for consumption goods.
THE GENERAL WAGE LEVEL Ø REAL WAGE. Ø WORKERS BETTER OFF THAN THEY WERE 100 YEARS AGO.
LABOR QUALITY qEarnings Benefit from Education and Experience. qEarnings profiles of men show that earnings rise with both
LABOR SUPPLY
Compensation & Measurement
Wage is a basic compensation for paid labour, and the compensation for labour per period of time is referred to as the wage rate. The two terms are sometimes used interchangeably.
Other frequently used terms •Wage = include: payment per unit of time (typically an hour) •Earnings = payment accrued over a period (typically a week, a month, or a year) •Total compensation = earnings + other benefits for labour •Income = total compensation + unearned income •Labor can be measured in terms of
Compensation Management • Payroll involves large sums of money • Pay systems are therefore an integral part of the business strategy • The pay debate as to whether the best way of rewarding service is through pay is far from settled.
Demand for labour and wage determination • The employer's cost of production is the wage, in which the business or firm benefits from an increased output or revenue. • Wage differences exist, particularly in mixed and fully/partly flexible labour markets.
Objectives of compensation system • A large sum of money is invested in people • Design rests on what the company achieves. • System needs to attract good employees by structuring packages that tempt people to do the job
Achievement of the objectives are determined by : • Labour market forces • Collective bargaining • Government legislation • Top managements philosophy regarding pay • Top managements willingness to recognise ability and effort
Traditional Pay Systems • Traditionally people were paid primarily through base salaries determined by specific job, the need to maintain a certain level of internal pay equity an the need to pay externally competitive salaries. • Employees were not encouraged to develop skills.
This had to change
Emerging Pay Systems • • • • •
Pay for knowledge and skills Pay for competencies Performance based pay Incentive pay systems Broad banding = employees might spend most of their careers in a single band moving laterally
Arms sales (agreements), by Supplier, 2000-2007 (in billions of constant 2007 U.S. dollars) Supplier Total Sales in US Dollars (billions) Percent of total sales Source: Richard F. Grimmett, CRS Report for Congress; United States Russia France United Kingdom China Germany Italy Other European Others
134.835 38% 67.549 19% 32.096 10% 26.425 8% 12.547 4% 13.859 4% 7.045 2% 39.024 11% 22.523 7%
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