Objectives

Chapter 10

Define what PM means

PAY MANAGEMENT
Understand the significance of PM
Understand equity issue in PM
Explain factors affecting wages

What is pay ?
Pay Management
A payment made to an employee in return for
is the HRM function that deals with
his/her contribution to the organization.
development
implementation and
maintenance
of a base pay system that adherers to equity.

Objectives of PM
1.To attract suitable qualified person to the Significance of PM
organization.
Employer pay expenditure
2.To motivate employees.
3.To retain most appropriate employee with in the Employee pay income
organization.
4.To comply with legal requirements. Conflict between employee and employer

5.To ensure equity. PM reduce the conflicts

6.To control employee cost.

1
 Consequences of pay dissatisfaction
Source: Edward E. Lawler, 1971, as in Werther and Davis Equity issues in PM
Performance

Strikes
Desire for Absenteeism Relative equity Absolute equity
Grievances
More pay
Search for Turn over
higher paying
job Psychological
withdrawal Internal equity External equity
Job
Lower dissatisfaction Dispensary visit
Pay
Attractiveness
dissatisfaction of job Poor mental health
Absenteeism

Factors affecting wages/salaries

*Pay should be related to the relative worth of jobs.
1.Government legal regulations
*Similar jobs get similar pay.
No 27 of 1941 Wage Board Ordinance
*Different jobs get different pay. No 19 of 1954 Shops & Office Act

External equity 2.Trade unions

Degree to which pay received by an employee in an organization is 3.Cost of living
related pays received by similar employees in other organizations.

4.Demand and supply

Absolute equity
Pay should be enough to meet normal expenses of the employee. 5.Productivity

6.Financial ability to pay

7.Competitive pays Pay Management Process
8.Other factors
Job Evaluation

Activity 10.2: Discuss how each factor affects the determination of Pay Survey
wages/salaries in an organisation.
Job Pricing
Adjustment of individual pays

Monitor and update the pay system

2
 1. Job Evaluation
JE Methods
Systematic process of determining the relative worth of all the jobs

available within the organization.

Qualitative Quantitative
• Main purpose is ensure the internal equity. method method

Job ranking method Point system

JE is performed by a committee including relevant experts in

pay management in specific and HRM in general.

Job grading method Factor comparison method

Job evaluation process

2.Pay Survey
1.Appoint the JE committee
Collection and analysis of pay information in
2.Examine job analysis information
industry.
3.Decide the JE method
4.Evaluate jobs Main purpose – to ensure external equity
5.Put jobs according to the order of importance

Steps of a pay survey

1.Determine jobs
2.Decide which information is needed
( starting salary, end salary, deduction, net salary)
3.Determine the organization for the survey
4.Determine survey techniques
5.Conduct the survey
6.Data analysis and presentation