Remuneration

REMUNERATION

 

Fayol is of the opinion that the employees should get a fair remuneration so that the employees and the owners find equal amount of satisfaction. It is the duty of the manager to ensure that employees are being paid remuneration according to their work. If, however, they are not paid properly for their work, they will not do their work with perfect dedication, honesty and capacity.

As a result, the organization shall have to face failure. Proper remuneration depends on some factors like the cost of living, demand of labour and their ability. Fayol feels that in order to motivate the employees, apart from general remuneration, they should be given some monetary and non-monetary incentives.

In discussing how to apply fair modes of payment, Fayol mentions several still used strategies, e.g. time rates, job rates, and piece rates . Most interestingly he also mentions the aforementioned bonuses and profit sharing. He emphasizes that there should be no overpayment “beyond reasonable limits”.

One can only speculate how Fayol would think about the bonus practice of banks today. As Fayol explains himself, in his time bonuses and profit-sharing were still rather new concepts. And he wonders what would happen with bonuses in lean times, pointing out, that a salary entirely depending on profit-sharing would lead to a loss of salary under certain circumstances.

Revisiting the banks’ situation of today we see how Fayol’s thoughts on remuneration are largely ignored in regards to the example of the hotly debated banker-bonuses. Additionally, he describes salary policies as important in maintenance of “relative social quiet”, as he calls it .

This attitude echoes like a warning for today’s management leaders, whose remuneration practice is perceived as socially unsustainable and hence immoral, and Fayol’s suggestion is thereby proven to be a relevant principle also today.

Methods of Remuneration:
 

1. Basic pay for standard hours. An employee works to a set contract e.g. £x per hour for a 30 hour week, of a salary of £y per month. This scheme alone does not provide an incentive to work harder, but if the rewards are good relative to those offered for similar work then this will act as a motivating factor in itself.

2. Additional hours rewards. Employees are usually paid extra for working unsocial hours or for working longer hours.

3. Commission. Sales staff are typically paid on a commission basis. The commission rate depends on their success rate so acts as an incentive to employ effective selling techniques.

4. Bonuses are another form of incentive to meet particular targets. Typically these will be used to encourage and motivate employees to work harder when required, e.g; offering football players an incentive bonus to win an important game.

5. Performance related pay. Many companies operate some form of performance related pay scheme. Pay is then related to the achievement of objectives and targets. The performance that is measured may be at company wide level, plant level, team level or individual level.