Financial Reward

{ Salary
This is the annual income that
is usually paid on a monthly
basis

Definition
 Salary is a fixed amount of money or compensation paid to
an employee by an employer in return for work performed.
 Salary is commonly paid in stages at fixed intervals, for
example, monthly payments of one-twelfth of the annual
salary
 No allowance or perquisites or benefits are included in
salary for this purpose
 Salary is taken on one due basis only
 Salary is most common form of payment for professional,
supervisory and management staff.
 The salary level is fixed each year and it is not dependent
on the number of hours (time rate) or the number of units
produced (piece rate).

Introduction
 The fixing of the salary level for each job is a
very important process because it helps to
determine the status of that post in the whole
organization.
 Payment of salary is most suitable in

organisation’s that provide services because it

is not possible to measure the amount of work
that they have done.

 Salary range is the range of pay established by employers to pay to
employees performing a particular job or function. The salary range
generally has a minimum pay rate, a maximum pay rate, and a
series of mid-range opportunities for pay increases.
 The salary range is determined by market pay rates, established
through market pay studies, for people doing similar work in
similar industries in the same region of the country.
 Pay rates and salary ranges are also set up by individual employers
and recognize the level of education, knowledge, skill, and
experience needed to perform each job.
 The salary range for executive-level positons is normally the
largest. The salary range for lower-level positions is normally the
narrowest. There is always more flexibility in the salary range with
regard to senior leaders because their decisions impact the
bottom-line and have a major effect across the entire organization.

Salary Range
Example of how salary may be distributed
in an organization
 Employee Security
There are many people who would simply prefer to work with the relative
security of a salary position. They want to know precisely how much
money they're going to make each month and to feel as though that
income is dependable.
 Straight-Forward Budgeting

For you as a business owner, paying fixed salaries allows you to

precisely know how much you're going to pay out each month in labor
costs and to budget accordingly. You can tweak the budget annually by
deciding whether the business has flourished enough to offer merit
raises.
 It is easier to process payroll.

Salaried employees typically receive the same compensation, no matter

what their hours may be. This eliminates the need to punch a clock or
keep track of their time, allowing for a simpler payroll process.

Advantages
 Salary pay allows employees to plan their own finances.
When you know how much your paycheck is going to be, then it becomes easier
to budget their own financial needs. This makes it much easier to plan for
retirement, college expenses, or other common household expenses from today.
 An early shut-down day means a full day of pay.
If the computers go down and everyone gets sent home, then the hourly workers
receive a dock in their pay. Those on salary get to go home without the same
reduction.
 It has a reputation of prestige.
Employees who earn a livable wage on salary feel proud of achieving this status.
It serves as a career milestone and fosters a deeper connection with their
employer.
 It gives employers and employees more flexibility.
Instead of having rigid attendance polices, sick leave days, and other productivity
rules, salary pay allows employers and employees some added flexibility to their
scheduling. A sick day may be avoided by using “comp time” or by switching a
scheduled day to new hours to avoid using the benefits. Shift hours may also be
adjusted to accommodate doctor’s appointments, teacher conferences, and other
family responsibilities.

cOntd….
  The hourly equivalent of the salary may be below minimum
wage.
If you work 80 hours on salary and the 40-hour equivalent
of the salary is $14/hour, then the salaried employee would
be netting just $7.00 per hour for the work that they’ve
performed. That’s below the minimum hourly wage in the
US, so the worker on salary pay would be losing money.
 Overtime and holiday pay are usually excluded.
Although salaried workers do typically receive holiday
bonuses and other pay incentives, overtime and holiday pay
cannot generally be claimed. Hourly workers on overtime
and on a holiday could potentially earn 3 times their normal
wage. A salaried worker would be paid the same no matter
what.


Disadvantages
 Employers will typically choose the most qualified employee
with the lowest salary requirements.
If two employees have equal qualifications for the same job,
then the employer will typically hire the person who is willing
to take the least amount of money. Even though productivity
might be of slightly lower quality, the cost savings from the
lower salary will make up for it.
 Other benefits can sometimes be included in the base salary
package.
An employer might also have health insurance or other
benefits rolled into the final salary figure. In the US, this
would mean a salary package of $50,000 might actually only
provide a paycheck salary of $35,000 to the employee. The
opposite might also be true. A $75,000 salary might be
offered to compensate for an overall lack of benefits.
  Less Hungry Employees
An employee who works only on salary has little external
motivation to go above and beyond. For example, an
employee who is going to make the same amount of
money whether he sells one refrigerator or 100 is more
likely to become complacent.
 Not Tied to Your Profits

How much you spend on salaries often has little to do

with your profits. On the other hand, when you pay
commission, you pay when an employee does something
to cause your business to see a profit. Each time a
commission check is cut you have the satisfaction of
knowing that it's due to something positive.

Contd…
  Salary pay is often based on equity instead of complexity.
Many employers come up with a salary offer that is based
on what other employees are typically earning. Even if the
job is the most complex on the team, the equity concerns
will lower the salary offer even if the complexity of the
job creates a negotiation opportunity.
 Many salaried employees only get paid 1-2 times per
month.
Hourly workers might be paid on a weekly basis in some
industries. For salary pay, it is usually only distributed
once or twice per month. This means workers on salary
must be fiscally responsible with their budgeting to
maintain financial health.

Contd..