"The remuneration of employees at the optimum rate and in the correct manner is critical to ensure efficient operations and to produce a highly motivated, flexible workforce. " This assignment will consist of analysis of the above statement with reference to the various methods of remuneration currently in use within the UK. It will also consider advantages and disadvantages of each method used by employers in the UK. INTRODUCTION
Labour Remuneration- "It is an amount paid in consideration for services rended by an employee. The major part of remuneration is in the form of wages or salary, but it may also include benefits such as free pension scheme, health insurance or the provision of a car". (Brockingson, 1993) Labour remuneration is also "a method of rewarding people for their contribution to the organisation. Ideally, systems should be clear and simple to follow so that workers can easily know how they are affected". (www. acas.
org. uk) The definitions indicate that it is important to operate the right payment schemes in the workplace and to ensure that employees understand the methods used. Methods of Payment In the UK, employers exercise various methods of payments, however they follow the same principle. Dickinson (1987) argues that there are two major principles upon within payment to employees are based. The first relates payment to the measured output achieved by the employee, and therefore gives rise to piecework schemes.
The second principle relates payments to the time for which an employee works, time based schemes. Within the two principles, there are various methods that are considered. However, this method can be a limitation to the employee, as he/she can be penalised through no fault of his/her own. ( circumstances beyond employee's control, such as low productivity, machine breakdown, etc. ) . It is also a drawback to the employer as quality of finished goods under this scheme tends to have poor standards. Also, negotiations over piecework rates and allowances can be a problem.
However, piecework schemes have declined in recent years, as many employers have moved to all-round performance rather than simple results/output based pay. Many bonus schemes integrate quality measurements or customer service indicators in the assessment to avoid the possibilities of workers cutting corners or compromising safe working methods in order to increase output. Therefore, this scheme independently is not efficient sufficient to produce a highly motivated and flexible workforce. Time based Scheme
Under this system workers are paid on the basis of a basic rate per hour for the number of hours worked. It is usual to set a number of hours an employee will work, and any additional hours are classed as overtime and paid at a high rate. This is a very common scheme used in the UK particularly in the manufacturing (Production) section. It is an easy method to calculate and negotiate wages. This method is also considered to be the fair way of paying employees, as they are not being penalised due to circumstances beyond their control. Disadvantages
There are no incentives for workers to increase output, and efficient and inefficient employees are paid the same, demotivating the high performers. Under this scheme there is no incentive to work therefore employees are not motivated. To encourage good work, firms in the UK adapt to the high rate system, where employees produce above normal level, and receive above normal rate of pay. This is a scheme, where the bonus is paid to a group as a whole. For instance, a firm can pay the bonus to the Department that performed better in a specific work period.
Profit Sharing Under this scheme, employees are rewarded at the end of the financial year if profits are higher that predicted. However, this could lead to dissatisfaction when profits do not exceed predictions. The time of which employees are rewarded is also a problem, as such rewards have to be made immediately to have the right effect on producing a highly motivated workforce. Consequently, employers may offer company shares to its workforce, making them feel part of the company, and so they show interest in the welfare of the business.
Appraisal/performance related pay This is a method where the reward is an additional amount of money paid as form of a bonus. Here, pay is mainly related to development of performance. This method is a fair rewarding way, however the time lapse is a problem as it weakens the incentive effect. Competency and skills-based pay In this incentive method a direct link is created between the achievement, development and effective use of skills and competencies and the individual's pay.
This scheme is beneficial as it increases skills and flexibility in the workforce, however, wages costs will increase as workers gain higher rewards for improvement of skills. These are a few of many other incentive schemes that are exercised by many employers in the UK. Most of these systems are advantageous towards efficient operations, and flexibility of workforce; yet, they are a drawback to the employers as it, for instance, increases costs, weakens incentive effects, etc.