PAY DETERMINATION IN RELATION TO LABOUR MARKET AND PAY STRATEGIES
PAY DETERMINATION IN RELATION TO LABOUR MARKET AND PAY STRATEGIES

Summary/Abstract: In industrial companies, business strategy enhances the reward policy. In other words, the surrounding internal and external factors impact it. This essay focuses on three areas: pay industrial relation differentials, how pay determination relates to the labour market and organizational pay strategies, and how other institutions, such as trade unions and states, determine pay. In industrial relations, the various pay determination systems and structures must be understood and linked to worker pay methods, pay distribution across the labour market and employer attitude in recruiting and retaining employees. Controversies relating to pay negotiations have emerged due to concerns among employees, employers, trade unions and the state. Employers have created pay strategies, including pay grading systems, time and performance-based payment structures, to increase production and organizational performance and boost their managerial right to control. Nevertheless, those pay policies have faced barriers in accomplishing manager objectives since labour market costs remain challenging to quantify and measure. This essay outlines employee expectations and their response to employer pay decisions and whether job satisfaction or dissatisfaction affects productivity, motivating or demotivating workers. It presents the negotiations exercised individually or collectively with trade unions. Finally, this essay demonstrates how some pay policies, such as time-based pay structure, are easy to form, whereas other ones, such as performance-based structures, are not so easy to develop.

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