Comparative norm as a method of wage determination works with the concept of how much do similar employer’s pay. An advantage of this is that union workers normally earn more than their counterparts- non-union. This advantage can be a limitation in that it becomes a greater draw back in the wage determination. It is also advantageous in work recruitment and workers retention.
Ability to pay is on how much an employer can afford. An advantage to this method is that companies with higher sales will tend to pay a high-wage rate to their employees after subtracting their expenses. On the other hand, one of its limitations of this method is that, during the period of depression, wage payment is cut down because of unavailable funds, which are mostly practiced by marginal firms and nonprofit organizations. Also with respect to this method, one limitation is that it is hard to determine or define the profits to the organization.
Cost of living criterion is normally regarded as a minimum equity criterion. An advantage of this method is that it calls for payment adjustment whenever there is an increase in the cost of living among employees. However, when living cost is stable, the management does not bother the argument as a reason for wage reduction.
Considering all this methods, an organization should not use any of these methods as a way of payment to their employees. The reason behind is that it is influenced by many life factors and is not certain to be used.
The government in the recent years has been trying to set prices and wages trough price controls. This has amount to be unsuccessful because of the negative results of its attempt. Controls have so far been a block to the price system from rationing the available supply. This appeal has also failed to give protection to many consumers especially to those who are hard-pressed to meet price increase. In the process of holding down prices and wages, the government has affected the allocation of resources by setting administrative and legal framework in which the economy is functioning. In addition, it has prevented the setting of new ventures and even activities of the existing ones and has so far not monitored or subjected to a serious control.
One of the things employers need to know concerning overtime is that if overtime is needed, workers must agree to do it. After the agreement, they are not supposed to work for more than three hours overtime per day or ten hours overtime in a week. This overtime must also be paid at a rate of 1.5 times more than the workers normal payment or wages. Concerning when overtime should be paid is that overtime compensation must be paid on a regular basis for the period and must be paid in cash (Kirk, 2011). One of the limitations befalling the employers regarding overtime work is that they sometimes use improper rate of calculation at which overtime is paid. Some of the employers in the case of bonus fail to adjust an employee’s payment rate after the payment of a bonus. Employers have also abused suffer or permitted rule which stipulate the work that benefits employer in some way but the employee has taken advantage of it.
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Q4. A two-tier wage system is a type of payroll system in which one group of employees receives a lower wage payment than another. An example of this two-tier wage system is the two-tier benefit systems, which allow new employees to have benefits if they receive a promotion or when hired into an incumbent structure. Most companies have tried to adopt this system, but they find themselves scheduling for closure because of the many disadvantages caused by the system. One of them is the nature to discriminate some workers separating them into different classes.
Moreover, the same system also creates friction between the workers and management as it violates the workers work for equal pay and amount of work. This system is also based on the concept of cheap and morally bankrupt in that if there are no laws against it then it results to workers abuse. Due to its disadvantages towards the workers, it is not a valuable system for wage determination.