Human Resource Management (ENG) — Ünite 6 Soru-Cevap

Production means transforming inputs consisting of physical and human resources into outputs so as to meet peoples’ needs.

Wage is a fixed regular payment earned for work or services, typically paid on a daily or weekly basis.  Some related concepts are: base pay, bare wages and total earnings, nominal and real wages, gross and net wages, wage level, wage structure, wage payment systems and compensation management. 

Base pay: Base pay is the amount of wage that is determined to be paid or that needs to be paid per production unit or time unit.

Bare wage and total earnings: Bare wage is the minimum amount (minimum wage) paid to the personnel in cash, i.e., the base wage. Total earnings are the wage calculated by taking into account the additional wage to the base pay or the additional benefits arising from agreements or laws.

Nominal and real wages: Nominal wages are the quantum of wages. Real wages are the purchasing power of the nominal wage calculated by considering the level of prices in the country.

Gross and net wages: Gross wages are the total wage paid to the personnel. Net wages are the wage received by the personnel after the deductions, such as income and stamp taxes, social security withholdings, amortizations of debt.

Wage level: It is the general average of the wages paid to the employees in an enterprise.

Wage structure: Wage structure reveals how much a job should be paid compared to other jobs within the enterprise and includes all wage differences.

Wage payment systems: These are the systems that designate the methods of calculation and the payment of the wages.

Compensation management: It is an important human resources management function that includes the establishment and execution of a wage system that meets the expectations of both business management and staff.

It is possible to summarize these objectives as follows:
• Compete with other businesses to attract and retain qualified people,
• Meet the needs of the personnel, including security and self-respect,
• Increase and maintain morale / job satisfaction,
• Encourage staff to achieve the desired level of performance,
• Reward and promote top level performance,
• Apply in a fair and continuous manner throughout the organization,
• Reduce staff turnover and increase business loyalty,
• Ensure that it is cost effective and at the level that the organization can pay,    • Reward the knowledge, skills, or competencies and seniority of the personnel (i.e., working time contributed to the Organization),
• Reduce complaints about wages,
• Support organizational culture and organizational change,
• Work in compatible with trade unions,
• Comply with legal regulations on wage management.

There are four dimensions that should be taken into account in providing wage justice. These are internal equality, external equality, individual equality, and organizational equality.

All components of an employee’s wage packet are 

• Base wage
• Beneits
• Pay incentive
• Wage

• Benefits resulting from laws;
• paid time off;
• housing allowance;
• employee discounts;
• medical, disability, and life insurance;
• retirement and fringe benefits

Pay incentive: This is a program designed to reward employees for good performance. The reward may be a bonus, a premium, a commission, a share from benefit or income, a shareholding, etc.

Wage policy is a general plan that guides the decisions and actions to be taken by the management regarding wages in order to achieve predetermined goals.

The policies to be determined regarding the wages will be related to the following:
• How to determine the wage rates,
• Whether to keep the wage levels above, or below, or the same as the average wage levels in the market,
• What will be the wage difference between the beginner level new personnel and the senior personnel,
• What will be the criteria for wage increases,
• What will be the scope of performance, knowledge, skills, competences, and/or
seniority that will affect these increases,
• How to determine the extra payments ordeductions regarding overtime and off days taken for various reasons,
 • How to increase wages in case of transfers and promotions,
• Whether the indirect and fringe social benefits will be paid, or which personnel
groups will be included in these payments to which extent.

Wage strategy is known as the relationships between the business purposes of the organization and  the strategies, the culture that will support these strategies, and the reward systems that will reveal and maintain the desired behaviors.

Job definitions are one of the key elements that determine the wage structure in a workbased wage system. Job descriptions, which are a critical element of both pricing and selection systems, provide a written definition of the tasks and responsibilities involved in the work, the qualifications to be held by the employee, the function of the job, the environmental conditions in which the work is performed, the hazards involved, the tools and machines used, and other aspects.

The job study allows the identification of inefficient and useless processes that need to be eliminated by using various methods. Thus, it provides the opportunity to utilize the labor, machinery, materials, and tools at the highest level of efficiency.

Job evaluation includes a systematic evaluation of job definitions. In this
evaluation, the similarities and differences between the scopes and values of the jobs are compared. At the end of this comparison, jobs are put in a hierarchical order with regards to their values for the organization.

Nonnumeric job evaluation methods are ranking and classification methods.
• The Ranking method is the oldest and easiest job evaluation method. With this method, jobs are compared to each other as a whole. It is a simple, affordable, easy to understand method that is not time-consuming in terms of its use. However, it is only recommended for smaller organizations with a smaller number of jobs.
• In the classification/grading method, jobs are categorized within groups /classes and grades. If these groups contain similar jobs, they are referred to as classes; if theycontain similar jobs in terms of difficulty levels, although they are different, they are referred to as grades. This method is simple, easy to understand, and not time-consuming. Since it is based on competence and seniority, it enables a simple wage management that can be applied in all units of the enterprise.

The performance, knowledge, skills, competence, and seniority of the employees are significant factors that determine their wage.

Market conditions, cost of living, collective bargaining with the unions, general economic conditions, and the laws should be considered with respect to labor market.

In this approach, jobs are individually compensated according to their ranks, grades, or scores in accordance with the evaluation method used. So, there would be as many wage levels as the number of jobs within the enterprise.

Although individual compensation seems simple, it may create a very complex structure depending on the increase in the number of jobs because it is likely to have different wage levels for hundreds or thousands of jobs. Thus, it is very
difficult to implement.

In individual compensation, it is impossible to directly utilize the wage curve that has been found at the end of the job evaluation process. In order to increase the flexibility of the system and to eliminate some disadvantages of this method,
curves (that determine the lowest and the highest limits) are drawn to enable us to periodically change the wages.

In this approach, the employees are classified, and the steps in wage /compensation are created for each class. Thus, a ladder-like wage structure is
developed, and this ensures that the jobs within the same category are paid equally.

When creating wage/compensation steps, it is important to stress the number of classes. Having too many wage classes would deviate the classification from its aim, and would complicate the system by making, the wage management
process difficult.

This method ensures that an administratively simple wage structure is established. However, if the number of classes is not determined correctly,
it will lead to distrustfulness. In addition, when classes are in equal distance from each other, it becomes impossible to compensate the personnel in accordance with their seniority or performance.

When creating job classes, many different factors, such as the quality of the jobs, the organizational structure, the traditional wage structure of the
enterprise, industrial practices, etc., should be considered.

According to this approach, jobs are divided into point intervals, and a wage range is determined for each point interval. The resultant rectangular shape
on the diagram is called the wage/compensation band. The main factors to be considered in the process of creating wage/compensation bands are the number and height of bands and their positions with respect to one another. The number of bands is as many as the number of point intervals to be selected. The number of point intervals is determined in accordance with the agreements signed with the unions, the wage strategy and policies of the enterprise, and the distribution of jobs on the wage-point diagram. The number of bands is also related to the band height. Various methods can be used to determine band heights and the positions of the bands with respect to one another. However, no matter which method is selected, the policies and conditions regarding seniority and performance increases will always be considered. This increase is usually 20-40% of the base pay.