PAY AND

PERFORMANCE
PRESENTED BY:
Quidez, jerico
Ebelte, Leonadyn E.
Amoroso, Reshel Jhans
Ledina, Sheila
Rodela, Lovely
MONEY MOTIVATOR THEORIES
• What Is Taylor's Motivation Theory?
• Taylor's theory was actually the first of many motivational
theories in business. Taylor’s theory, also called Scientific
Management, could also be called the money as a motivator
theory. It was one of the first theories of motivation in the
workplace, notes EPM: Expert Product Management.
• To Taylor, workers were little more than cogs in the mighty industrial
machine, to be used as needed, to increase efficiency, output, and
profits. Taylor stressed money as a motivation in the workplace.
Indeed, workers were motivated only by money, Taylor said. That's
why his theory is often referred to as the money as a motivator
theory. For his efforts, Taylor has been praised by management
experts as the first true, and arguably most influential, management
consultant to this day.
• To Taylor, there was only one correct way to do each job, and workers
would need to be motivated to do their job exactly as management
described, either by coercion (such as the threat of firing) or with
money. As EPM further described Taylor's theory of scientific
management: 
• Workers don’t usually enjoy work. Because of this, they need to be
monitored and controlled closely. Essentially, Taylor believed that
employees had a natural tendency to take it easy of slack off
whenever they could. He called this natural soldiering.
• Why Are Employees Motivated by Money?
• Taylor's theory, as noted, argues that workers are motivated by money
– and only by money, while employers want low labor costs. As he also
stated in "Principals."
• The two competing factors, higher wages and lower labor costs, are
not incompatible, Taylor argued. The key is getting workers to work
more efficiently, that is, to complete their assigned tasks correctly,
consistently – the same each time – and in the least amount of time.
Taylor's theory never explained why he felt that workers are motivated
by money. But other experts certainly have weighed in on the subject.
• The National Business Research Institute, for example, says that some
workers are motivated by money, while others are motivated by other
factors. "Research studies sometimes have conflicting results. The
reason has to do with the complexity of human behavior," says the
institute. This is only logical: You can't paint all humans – and by
implication, all workers – with the same brush. Different workers are
motivated by different things, some by money, and others by praise
and meaningful work. So, you cannot simply state that all employees
are motivated solely by money, says the NBRI.
PAY AND PERCEPTION
• Pay Perception
• When it comes to compensation, a new report finds employers, managers
and workers all have very different views of what's considered fair.
• Money and financial savings background pattern for richness and business
success themes design with seamless green and white silhouettes of dollar
bills and coins stacks, wallets and hands with money, piggy banks and money
bags
• Determining fair compensation for employees is one of the great enigmas of
the HR world: Get it right and employees are happy. Get it wrong, and critical
metrics such as employee-retention and engagement rates could take a
nosedive, which could then lead to bottom-line woes.
• With that in mind, employers should take special note of a recent
survey from Pay Scale, the Seattle-based compensation-data provider,
which found that employers and managers are far from being on the
same page with employees—or each other—when it comes to
compensation. Yet, even with the perception disparities uncovered in
the survey, experts say there are some best practices employers can
utilize to close that perception gap.
WAGES AND SALARIES
• Wages are usually associated with employee compensation that is
based on the number of hours worked multiplied by an hourly rate of
pay. Generally, the employees earning hourly wages will be paid in the
week that follows the hours worked.
Example of Wages
For example, a warehouse employee works 40 hours during the work
week. If the employee's hourly rate of pay is $15, on the 5th day following
the work week, the employee will receive a paycheck showing gross wages
of $600 (40 x $15). If the employee had worked only 30 hours during the
work week, the paycheck will show gross wages of $450 (30 x $15).
• Salary is associated with employee compensation quoted on an
annual basis, such as $50,000 per year. Many employees working in a
company's general office will be paid a salary. Often the salaries are
paid semi-monthly. That is, one pay date will be the 15th day of the
month for working from the 1st to the 15th, and the other pay date
will be the last day of the month for working from the 16th to the last
day of the month.
Example of Salary
To illustrate, let's assume that the manager of a company might earn a
salary of $120,000 per year. If the manager is paid semi-monthly each
paycheck will show a gross salary of $5,000 for half a month's work.
BASIS OF WAGES PAYMENT
(i) Wages of Time Basis:
• Although, various wage incentive plans are gradually replacing time wages, the
straight time wage persists as the most common form of payment. Wages under
this method are determined per unit of time that a worker spends in the factory.
The unit can be hour, day, week or month. 
• If a worker’s wages are Rs. 25.00 per day, his total wages will be the number of
days he is present multiplied by Rs. 25.00. If he is paid 6 per hour and on a day he
works for 9 hours, his wage for the day shall be Rs. 54.00. Calculation is very
simple and, in addition, the worker is in no hurry (because his wages are
independent of the quantity he produces) and, therefore, can turn out better
quality work. In fact, if quality is of utmost importance, as in artistic goods, wages
should be paid on time basis.
• But in case of ordinary work, this system has many drawbacks. A worker
has no incentive to produce more and apply all his time in doing work.
Strict supervision is necessary. The efficiency of a worker will fall to the
level of the most inefficient worker, since the efficient worker will notice
that the inefficient worker also gets the same wages.
 
• The employer cannot be sure of the labour cost per unit because this
will change if output per worker falls or rises. Because of fixed nature of
many expenses, the cost per unit will increase much if the output falls.
Circumstances where Time Rate is Suitable:

• (1) Where work is not tangibly measurable like office duties drafting,
repair jobs etc.
• (2) Where the time is entirely governed by the speed of operation
such as in oil refineries and chemical processing.
• (3) Where quality of work is main consideration.
• (4) Where work is extremely unskilled like surveying, cleaning etc.
• (5) In a small plant where work of each
employee can be identified.
• (6) Where workers are under training
• (7) Where measuring of work is comparatively
costly.
Advantages of Time Rate:

• (1) Time rate is clearly understood by workers, particularly where they

are illiterate.
• (2) There is no need of job evaluation and merit rating for fixation of rate.
These techniques are costly also
• (3) It is most suitable where work cannot be measured
•  (4) By time rate, the quality of work is raised. It is suitable where
quantity of work is not of prime importance.
Limitations of Time Rate:

• (1) Time rate prevents the workers from doing more work and earning
more through higher output.
• (2) It deprives the employer of the opportunity of lowering the cost of
production by means of higher productivity.
  (3) Time rate method provides no impetus to increase individually
efficiency and makes the labor force generally efficient.
• If this method is adopted, it is desirable from the costing point of view
to have separate wage sheets for direct workers, department by
department, and indirect workers. From the financial point of view
one wage sheet for all workers may suffice, showing total wages
earned by the workers and the various deductions to be made from
the wages.
• (ii) Wages on Piece Basis:
• In this method, the time spent by the worker is immaterial and payment is made
according to the quantity of work done. Rate of wages is per unit of work. A
worker may be paid Rs. 5.00 per unit; if his output in a month is 300 units, his
wages for the month will be Rs. 1500 i.e., 300 x 5.00.
 
• The wage rate may be expressed even as so much per hour; in that case for
computing the wages, the output will have to be expressed in terms of standard
hours. Suppose a worker is paid Rs. 2 per hour. On a day of 9 hours, he produces
36 units, the standard time for each unit being 20 minutes. The output of the
worker may be stated also as 12 hours, i.e., 36 x 20/60.
• The system should mean a good deal of
incentive to do the best. Output will thus be
maximized and the cost per unit of output will
be lowered. The employer will also exactly know
the labor cost per unit. This helps in making
quotations confidently.
Precaution in Piece Rate Method:

• Care should be taken to fix proper and scientific rates from the very beginning. Any future
cutting of rates will be disastrous for relations between management and workers. The need for
proper rates is obvious when we consider that, generally, piece rates are fixed according to the
performance of the worker under time basis. Suppose a worker paid at 25.00 per day usually
produced 50 units.
 
• The management might be tempted to fix a piece rate of 50 paise. We should remember that 50
units per day was probably a low figure because the worker might have been wasting a lot of his
time. On piece basis, his performance might be much better and management might be tempted
to reduce the piece rate. From the very beginning, piece rates should be fixed on the basis of
time and motion study, if possible.
Circumstances Favoring Piece Rate Method:

• (1) Operations should be independent and capable of being steadily continued by a

single operator,
• (2) There should be steady supply of work so that no time is lost in waiting for next-work.
• (3) There should be proper maintenance of tools and equipment so that there may be no
interference in the working speed.
• (4) The method is suited where increase in the quantity is more important and quality
being insured by a proper supervision and inspection.
• (5) Where job time has been standardized by means of time and motion study.
Advantages of Piece Rate Method:

• (1) Plan is simple and easy to understand by the workers. 

• (2) The method provides direct incentives to increase output and quality are
maintained by a good inspection system.
• (3) In this method wages is easy to calculate.
• (4) When this method is adopted, fixed manufacturing overheads are lowered
per unit.
• (5) It is favored by efficient workers because it provides opportunity to earn
more by increasing efficiency.
• (6) This method discourages inefficiency and increases efficiency of
workers in general.
• (7) The benefit of increased efficiency is wholly received by the
worker. In certain incentive plans, benefit is shared by the
management also.
Limitations of Piece Rate Method:
• (1) The method is not suitable to beginners whose production is naturally low.
• (2) The plan is suitable on group basis, but not on individual basis. 
• (3) It is not suitable to tasks where standard time cannot be fixed on the basis of
time and motion study.
• (4) It is also not suitable where supply of work is not guaranteed.
• Under this method the worker pays no attention to quality and hence inspectors
have to be there to see that goods of poor quality are not produced. Bad quality
goods mean wastage of materials and wages of other workers on the same goods.
The worker is also likely to be reckless in the use of materials, machines and tools.
He may ignore his own health and insist upon working even when he is ill.
• (iii) Balance of debt :
• The workers is really paid on piece basis. If his wages according to the
piece rate fall below the wages on time basis. But the difference will
be recovered out of his future wages whenever the piece wages
exceed the time wage.
UNIFORM WAGES POLICY

• The term “Wage Policy” refers to legislation of government action

undertaken to regulate the level or structure of wages or both for the
purpose of achieving specific objectives of social and economic policy.
The social and economic aspects of wage policy are normally inter-
related measure inspired by special considerations; inevitably have
economic effects and action designed to achieve specific economic
result has social implication.
• 3 Main Concepts of Wage Policy
1. Minimum Wage is the minimum amount of remuneration that an employer is
required to pay wage earners for the work performed during a given period, which
cannot be reduced by collective agreement or an individual contract.
2. Fair wage a wage that is reasonable for the type of work done. Fair wages is an
adjustable step that moves up according to the capacity of the industry to pay, and
the prevailing rates of wages in the area of industry.
3. Living wage is defined as the minimum income necessary for a worker to meet
their basic needs. Needs are defined to include food, housing, and other essential
needs such as clothing. The goal of a living wage is to allow a worker to afford a basic
but decent standard of living through employment without government subsidies.
• 2 Main Objectives of Wage Policy
The main objectives of wage policy are as under:
1. Economic Objectives:
An important objective of an effective wage policy is to achieve maximum economic welfare.
This requires:
• Maximized National Income.
• The national income should be divided equally among all the members of the economy.
• There should be a fair amount of stability in the national income.
In general, economic welfare will be maximized in case the highest and most stable standard of
living possible for each section of the community is attained.
Social Objectives:
• Both the social and economic objectives have close inter-relation. Measures
inspired by social considerations inevitably have economic effects, and those
designed for the achievement of specific economic results have social
implications.
• A wage policy must be instrumental in achievement of the following:
• Elimination of exceptionally low wages.
• Establishment of fair labor standards.
• Protection of wage earners from the effects of rising prices.
• Incentive for workers to improve their productive performance.
• Key Considerations of Wage Policy
The key to considerations in public policy concerning wages/salaries may
be identified as under:
1. End of Exploitation
2. Differentials – To provide for wage differentials.
3. Regulation of Wages – To regulate wages and salaries to
eliminate/reduce undue disparities.
4. Linking – To link remuneration to productivity.
5. Compensation – To compensate for increasing in cost of living.
Fixation of Minimum Wages – To fix a statutory minimum wages in selected
industries and promote fair wage agreements in the organized industries
(Industrial Policy Resolution, 1948).
7. Equality – To ensure equal pay for equal work (Constitution of India).
8. Determination – To determine fair wages over and above minimum wages
with due regard to-
• The productivity of labor.
• The prevailing level of wages.
• The level of national income and distribution.
• The place of industry in the economy of the country.
 9. Capacity to Pay – However, the Supreme Court ruled that ‘an
employer who cannot pay minimum wages has no right to exist’. The
capacity to pay becomes a subject of consideration to determine fair
wages over and above the minimum wages.
10. Basic Needs – The basic needs of labor.
11. Living Wages – To secure a living wage for workers.
• Factors Influencing Sound Wage Policy
Important factors to be taken into account while determining a sound wage policy are as
follows:
1. Demand for and supply of labor
2. Prevailing wage rates
3. Ability to pay
4. Productivity
5. Cost of living
6. State regulation
7. Job requirements
8. Trade unions
• 8 Major Limitations of Wage Policy
The limitations of wage policy are as under:
1. Enforcement – Enforcement in unorganized sector.
2. Rise in Prices – Prices rising is almost beyond government’s regulatory
capabilities.
3. Wages versus Productivity – Wages lag far behind from the labor productivity.
4. Imbalanced Labor – Lesser number of workers in organized sector takes away
bulk of wages than unorganized.
5. Less Skilled Labor – Ever increasing addition to workforce yet death of skilled
labor.
6. shifting of Methods – High wages may force employer to shift
towards capital-intensive methods.
7. Reduction in Capital – High wages brings a reduction in the capital
for growth.
8. Increased Consumption – The nature of wage incomes are
consumption-oriented rather than savings-oriented so increased wages
would mean increased consumption. Therefore, economic growth may
not be affected directly as it depends upon rate of investment possible
with the medium of savings.
Performance Rating
• is the step in the work measurement in which the analyst observes
the workers performance and records value representing that
performance relative to the analyst concept of standard performance.
• helps people do their jobs better, identifies training and education
needs, assigns people to work they can excel in, and maintains
fairness in salaries, benefits, promotion, hiring and firing. Most
workers want to know how they are doing on the job. Workers need
performance feedback to work effectively. Accessing an employee
timely, accurate, constructive feedback is key to effective
performance.
Administering Pay Rewards
• there are variety of way to reward people for the
quality of the work they do in the workplace.
• For example: rewards can be in the form of money,
benefits, time off from work, acknowledgement for
well done affiliation with other workers or a sense of
accomplishment from finishing a major task.
• Reward Management - consist of analyzing and controlling employee
remuneration, compensation and all of the other benefits for the
employees reward management aims to create and efficiently operate
a reward structure for an organization. Reward structure usually
consists of pay policy and practices, salary and payroll administration,
total reward, minimum wage, executive pay and team reward.
PRODUCTION BONUS SYSTEM

• Production bonus means any bonus payable by the parties Under the
Contract on attainment of any specified rate, level or quantity of
production of hydrocarbons.
• A property structured staff bonus system awards bonuses only when
production and collection targets are reached. Bonus system give
team members a strong incentive to work together. A team that
works well together means less stress in the office and better
customer service.
• SUCCESFULL BONUS SYSTEM ADHERE TO THE FOLLOWING
FOUR RULES.
1. The bonus is based on revenue, not production. Bonuses based on
production are ineffective because you cannot spend what you have
not collected. The entire team needs to realize that revenue must be
collected to run an efficient business.
2. The program must be easy to understand. If the bonus system is so
complicated that staff members cannot tract their progress daily, the
system will fail to have any motivating effect. Explain how the bonus
system will work during staff meeting before you implement.
Tie the bonus to team performances. Many staff members tend to view
a bonus simply as extra pay that automatically comes their way.
Thinking that a bonus will occur regardless of performance encourages
a sense complacency, hardly conductive to creating a more productive
team. Team members must realize the bonus will only be earned when
the practice meets set goals.
4. The bonus system is about the entire team. For these parties to
meet its goal, everyone must contribute. When the practice does well,
then everyone does well. An effective bonus system can help create an
even stronger team, while increasing job satisfaction to both staff.
MERIT INCREASE PROGRAM
• Merit pay is an approach to compensation that reward higher
performing employees with additional pay, sometimes called
incentive pay. It is a tool that employees can use to make sure that
their best performing employees feel as if they are adequately
compensated for their contributions
• A merit pay increase also known as a merit bonus means that an
employee will get a bump in their normal salary , based on a
preciously agreed upon policy of conduct ,such as above average
efficiency and performance.
• To be engine for a merit increase an employee must be employed
with at least six months of continuous service before the merit award
date. An employee whose pay is the maximum of the salary range
may not be granted an increase that would cause the base salary to
exceed the maximum of range for the position.
• HOW ARE MERIT INCREASE DETERMINED
• Merit increase are an internally focused raise philosophy. Managers
crate their employees (or employees rate each other in a 360 evaluation
philosophy) usually bases on performance over the last year. Top
performers get a larger raises, while the bottom performers get no raise.
• Merit pay has advantage and disadvantage for both employees and
employers over a traditional pay system that puts the money in base
pay. Before implementing a merit pay system it is a good idea to review
the advantage and disadvantage of this approach to your employee’s
compensation
• ADVANTAGE OF A MERIT PAY SYSTEM
• A merit system is must applicable when detailed data available to
measure the performance of employees. Consider how that data can
push employees to achieve more, padding their own pay checks, as
well as the company's bottom line.
1. Communicate company objectives. Merit pay sends a powerful
message about how you want to see employees perform and what you
want to see them contribute. It confirms what you must value from
employers.
 2. Let’s employee know where they stand. Making the range of the available
merit pay public allows employees to see where their increase falls in the merit
pay ranges established by your company pay plan. It can be a good way to
reward the employees that you must want to keep. When employees receive
less than the top increase, supervisors has an opportunity to describe and
discuss exactly how the employees will need to improve their performance to
qualify for the top merit increase during the next cycle of raises.
3. Aids in employee retention. Merit pay can help an employer differentiate
between the performance high and low performing employees and reward the
performance of the higher performers this can aid in retention, because no
employer wants to low the organizations best performers.
• DISADVANTAGE AND CHALLENGES
• Some business are not conductive to measuring, employee
contributions to clearly and definitely, making it difficult to establish
an effective means for merit pay. Consider whether or not you might
be trying to force such a system into an office where it won’t work.
1. Concern about favoritism. Without clear measurable, others easily
could dispute the outcomes when merit pay is determined.
2. Uses time the resources better spent elsewhere: the amount of time
and energy that organization invest in an attempt to make performance
measurable for merit pay including developing competencies,
measurements baseline for performances and so forth is better spent
on delivering service for customer.
3. COMMUNICATION TROUBLE
• Some supervisors communicate better that others, and this means
the effectiveness of merit pay sometimes can vary widely from one
department to the next based on the communications skills of
supervisors.