All through history, the problem of suitable reward for work done has always presented some difficulties. The essence of investment is to create wealth, and for wealth to be created, the manager must plan the best way to combine the available organizational resources: land, labour, money, management and technology to achieve the organizational goals. When the wealth is created, different portions of its goes to the different factors of production, referred to above as organizational resources. The part that goes to human capital(workers) accrues to them as wages or salaries and other welfare packages.
According to Cole(2002), organizations will use their wage system to retain and motivate such employees. Of course, pay is not the only factor involved in attracting, retaining and motivating employees, but it is an extremely important factor. Pay can also be used to encourage employees to work productively and with particular attention to the quality of their work.
In his contribution, Ogunna(1999: 258)opined that:
Wages/salary is the cost of the employee’s service the employer. Its primary purpose to the employee is to provide him with means of subsistence; while on the other hand, its primary purpose to the employer is to motivate the worker in order to provide performance for organizational efficiency and productivity.
An appropriate reward programme is designed to motivate and reward good performance. Where wages and salary administration is carried out in a manner in which increases in pay are made on the basis of merit, those who put in low performance are given low remuneration. Wage and salary plan would serve as a powerful instrument of motivation.
According to Edward, Susan and Gerald (1998 :156):
The … feature of reward systems that is crucial for employee involvement, concerns how the base pay of individuals is structured and set.
In order for a pay system to support employee’s involvement, it needs to send the proper message about individual development, growth, learning and the organizational culture.
Whitney (1994: 345) in his book, “The Trust Factor” opined that:
Companies should begin with some base pay
and give all employees the same percentage
merit rise. Doing so, he says, sends out the
message that everyone in the company is important.
However, the above view may work out to some extent, but it would on the long-run encourage idleness, as some lazy workers may relax, believing that when increment comes, everybody is bound to benefit equally.
In this vein, Alan, Robert and Terence (1999: 447) posit that: “A salary structure defines the different pay levels existing within an organization, and has two key components”:
- Grades or level into which jobs of equivalent ‘value’ or ‘size’ are grouped.
- Pay ranges associated with each grade or level that are calculated according to the organizations desired market and market positioning (according to the reward strategy).
For effective reward administration, whatever should serve as wage, salary or welfare package must be good or reasonable enough as to enable the worker and his dependents maintain a good living.
Meanwhile, no matter how low the employees’ performance may be, there is a level at which the wage cannot fall below, because at a pay rate below that level, employees would react negatively; though restriction of output, massive labour turn-over, absenteeism, production of many rejects etc.
Naturally, labour is not demanded or supplied for direct satisfaction of a particular need or task; rather the demand for labour is a derived demand which means that it is demanded and supplied based on the productivity or services it renders. In consonance with this, Bratton (1999: 320) opined that:
The supply of human resources focuses on many factors including the wage rate for the particular occupation, its status, the qualification of employees and preference of people regarding paid work and leisure.
In support of the above view, other major factors that determine the reward for labour are skill, qualification, experience, the size of the industry/firm, the nature of the task, the productivity and the cost of the goods to be produce or the services rendered or to be rendered.
This goes to buttress the fact above, that one of the factors that determine what an employee receives as a reward is determined by the quality or cost of the goods or services to be produce or produced. However, in Nigeria situation, there are many that produce very highly values products or services but are paid poorly, maybe as a result of the economic melt-down or selfishness of the entrepreneur or the government as the case may be.
Aluko, Odugbesan, Gbadamosi and Osuagwu (1998: 178) while contributing on Business Policy and Strategy in a book “Organic Business Functions” revealed that one of the ways that an organization can succeed is:
To offer a remuneration package of pay and benefits which compares favourably with other firms, within a structure based on recognized differentials and reward for individual merit.
In Nigeria, since the Udoji Commission of 1974, there have been so many other salary review commission and panel, yet the Nigeria worker is still regarded as the least paid, besides all these salary/wages reviews, productivity seems to be diminishing after every subsequent salary increase. This goes to explain and confirm the facts raised earlier, that apart from rewards, factors such as skills, experience etc, play a prominent role in employees’ performance.
Brown and Welsh (1995:360) while discussing on labour market said thus:
In a perfect market for labour, management would have no discretion over what to pay. If pay fell below the ‘going rate’ or if the level of effort demanded rose above what was normal, the employees would according to traditional economic theory start to
leave and the employer will then have to move back to be in line with others, in order to remain in business.
In line with the above postulation, employers try to pay the going rate in order to remain in business. In fact, many Nigerian organizations due to the economic crunch which has occasioned unemployment pay anything they like believing that the employee has no option.
Telgan (2001), stated that without wage transparency. Market pressures cannot work their true magic and ensure that compensation reflects real value.
To differ from those that regard money as the only major source of reward, Bakke (2001:288) advised:
Money shouldn’t be used as a weapon in the fight for talent. People should join the company because they value an environment where they can use all their gifts and skills without being squelched.
Appleby (1994) in his contribution advised that “wages or reward policy and methods cannot and should not be considered in isolation from country’s economic policies”. He noted that wages may account for up to 80 percent of total cost in some industries. He identified some of the objectives of reward as follows:
- To attract and retain sufficient staff of the required caliber to meet the organization’s objectives
- To provide staff with incentives for better work
- To have a policy which is logical and consistent, easily understandable and flexible.
In the government sector, wage and salary structure is usually represented as a pay ranges, each consisting one or more rates or steps. There is a casual relationship that exist among an organization’s wage and salary structure, reward policies and objectives, the labour market in which the organization is situated and organizational job-evaluation plan. Policy decisions include the objectives of reward: membership, merit or performance, equity, market value, and organizational job value. These decisions are carried out through the wage and salary plan.
One way to determine whether an organization’s salaries are competitive with comparable positions in other companies is to participate in salary surveys. Salary survey may be conducted by one organization or sponsored by associations to which a company is a member, or by group of firms that are willing to share and compare data (Arthur, 1995).
In Nigeria, the present system of wage determination was largely inherited from the colonial era. Based on its own historical experiences, the British home government wanted wages and working conditions in all sectors of the colonial economy to be determined by collective bargaining with minimal government intervention.
Sim (2001:250) while contributing on the best way to fix workers salary stated thus:
Employees should be involved in theDevelopment of the system, contributing ideas on the salary ranges of different jobs and on how merit is actually measured… the system should be open, so that employeesknow their salary range and have a clear idea of where their job fit into the company’s pay structure.
However, the insatiable nature of man makes one to disagree with Sim, because man in his real nature is never satisfied with any condition, the more you involve him, the more he would agitate.
Cascio (1995:160) recommended that:
The actual remuneration (reward) plan should not be strictly a matter of what is being paid in the market place. Instead wages and salary plan must drive from an assessment of what must be paid to attract and retain the right quality of employees, what the organization can afford, and what would be required to meet the organization’s strategic goals.
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