DETERMINATION OF INTER AND INTRA

INDUSTRY COMPENSATION DIFFERENTIALS

In Intra Industry, we include

Size of IndustryFinancial successCompetitorsMarket PositionLeadershipOrganisational culture

Types of wage differentialsOccupational wage differentialsInter- Occupational wage differentialsInter firm differentialsSkill differentialsSex differentialsInter-Industry differentialsRegional wage differentialsSectoral differentials

Factor influencing wage differentialsDemand and SupplyBargaining PowerGovernment PolicyGoodwill of the CompanyCost of livingProductivity of labourComparative wagesAbility to PayJob Requirement

Principles of Wage Differentials

Commensurate with work

Equal pay for equal work

Wages to attract workers

Uses of wage differentialsTo induce employees to

change jobTo get employees to learn

and acquire new skillsTo shift employees from

declining industries to new industries

To get employees to accept more responsible position

Variants of people-based pay:

Skill-Based Pay

Knowledge-Based Pay

Credential-Based Pay

Feedback Pay

People-Based Pay

Competency-Based

Pay

Factors in Compensation Estimate

Value added FactorAbility-to-Pay FactorGovernment Wage

PolicyUnion PressureCost of living Factor

Hierarchy of JobsNon-Wage Benefit

factorSeniority factorHazard factorScarcity Factor

In Inter Industry, we include

Nature of IndustryKnowledgeTroublenceTechnology RequiredLevel of skills and

competenciesCompetitive strategy

Pay Secrecy or OpennessThere are degrees of pay secretiveness and openness

In many organizations, pay ranges and individual pay are open to the public and fellow employees (open system)

With the secret system, pay is known only to the employee, her/his superior, and HRM/payroll In some organizations, employees cannot discuss pay

matters and, specifically, their own pay Opening up a system has costs and benefits

To reduce the manipulative aura surrounding pay, a company must share pay information with employees

As firms post job openings, information on pay becomes a critical decision

When deciding on secrecy or openness: Determine what employees want to know about pay Decide if the information will harm or help the firm Weigh performance, interdependence, and causal

relationships

Pay Security

Current compensation can motivate performanceSo can the belief that there will be future compensation

security

Plans for providing this security include: A guaranteed annual wage Supplementary unemployment benefits Cost of living allowances (COLAs) Severance pay Seniority rules Employment contracts