Different Aspects of Salaries in People, Business, and Economy

A Research Paper

Presented to

Dr. Jose Cristina M. Pariña

In Partial Fulfillment

Of the Requirements for

ENGLRES

Term 3 (2012-2013)

Cua, Harold Stephen

Chua, Jan Ervin

April 1, 2013

Thesis Statement:

Salaries play a big role in the business world because these tend to be the

income source of the employees, these affect the employee’s working performance,

these are important in running businesses and these affect the economy of each

country.

Outline:

I. Introduction

II. Income Source

A. Different class levels

B. For survival

1. To afford wants

2. To afford needs

III. Employee’s working performance

A. High payment of salaries to employees

1. The expectations of the workers

2. The measurement of contributed task

B. Low payment of salaries to employees

IV. Importance in the business world

A. Human resources

B. Motivation

1. Higher work output

2. Employee satisfaction

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V. Economy

A. Competition in current market

1. The value of consumers

2. Cost of products

B. Growth rate of money

VI. Conclusion

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When the market and trade era begun, we all know humans need to work to earn

income and survive in this world and money does not grow on trees. Salaries are the

fixed compensation paid to a person for work or services. There are a lot of effects in

the relation between the employees and their pay.

This paper talks about how salaries play a big role in the business world because

these tend to be the income source of the employees, these affect the employee’s

working performance, these are important in running businesses and these affect the

economy of each country.

“To relate pay to performance in a realistic manner, give weight to other

considerations and do this in a consistent manner for all employees requires some

systematic planning approach. There is also a great need for salary planning because

of the amount of money involved. Whether or not an employee is classified in one pay

grade or the next highest generally involves a difference of something like ten percent.

However, within grade progressions are generally from thirty to sixty percent, so that

three to six times as much money is involved as in the determination of the proper

classifications.” (Mcbeath, 1964)

According to Langsner (1961), before there was a problem in knowing the

amount of salary, workers demand more labor. With this, more expense goes to the

employees. The methods and process here are that in knowing the amount of salary.

Salaries must be based on the standards of living of an individual. The standards

of living is rising or falling depending on the advancement of a country trough

technology and other factors. Philosophy of make-work and the thought that machines

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make the work harder must not be the factors on determining wage. Accidents can

happen to people, we must be sensitive to these problems (Langsner, 1961).

Smith (2011) also indicated that as an employee’s salary increases his

happiness on his job increases. When an employee rises up in the rankings of his

workplace, rather than getting stress from more complications in the job, the employee

gets happiness from his higher salary. The study that was conducted by CareerBliss on

2011 had results that money could increase the happiness of an employee. The

employee who had a salary of $300,000 had a higher happiness level than of the

employee who had $40,000 as salary.

Sibson (1967) stated that merit rating has different techniques and these types

can be all summed up by the guide managers’ thinking about the performance or

qualities of each employee. It also does not tell how small or large an increase should

be imposed. It does not explain why the conditions of performance exist or might be

improved. None of the techniques are replacements or methods for the managers’

judgment. The technique serves as a guide for the judgment of its managers (p.83).

A method called “merit rating approach” is very significant to companies for it

focuses on the individual performance and output of the employees. This approach

should be recognized or else it will lead to a loss of hardworking employees. Merit rating

helps companies to adjust the salaries of employees based on their working

performances (Sibson, 1967)

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Furthermore, Sibson (1967) added that companies need to evaluate and monitor

the performance of each employee; this is the first step on merit rating. This assumes

that with accuracy, even if it cannot be measured, performance can be also observed.

Merit rating helps determine the increase in salary (p.82).

Gantt (1974) researched that there are four conditions to get the best results in

work. The first one is to know the best way of a work done and have knowledge of the

equipment used. Second, someone must be willing to teach other coworkers on how to

use the information gathered about the job. The third is that the salary of must be high

enough for the worker to feel that his work is worth for something. The fourth is there

must be no increase in wages unless efficiency is maintained (p.40) .

As stated by Langser (1961), jobs grades are the combination of different jobs in

accordance to the sequence of importance. It is important to have occupational

classifications to aid in giving jobs to different workers. It also helps on knowing the

wage and salary effects on an individual. It can determine different wage rates based on

jobs. A supervisor can easily distinguish job values with the classifications handed to

them.

Mcbeath (1964) also supplied that classifying a personal performance rather than

a job performance may be better for each employee. This is processed by rendering

special assignments to individuals who can be beneficial in improving one’s manager or

employee. This work is suitable during early stage of the employee’s career and would

reflect on his present or his next stages of performance in his own position. A personal

performance is used to guarantee a constant salary progress in with the individual’s

overall increasing value to the company.

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In addition, it is also better to check both job title and grade are recorded and

assigned to each employee and they represent a current position. Special grades

assigned to each individual may be higher or lower than the actual grade of the job

(Mcbeath, 1967).

Salaries and employee performance should complement each other. They

should have a connection between them. What the manager annoys the most is that

seeing an employee getting fired although this is the same employee he just admitted a

promotion three or four months earlier. This occurs more often in the company because

there is no relationship between the performance of the employee and the salary.

Employee appraisal programs have been studied by companies but not been used to

pay salary decisions. But these should be adopted so that these could effectively

combine employee performance and salary together. Appraisal programs must begin at

the top of the organization. After that, there should be a system assigned for different

position levels (Milton, 1984).

Another researched by Mcbeath (1964), it is very critical to promote or improve

for staff with potential. Succession planning is organized to cover up long-term job

replacements in a large company, but less clearly formulated and coordinated.

Promotions should always be planned in advance to avoid salary adjustments to the

employee’s salary. Succession planning charts or other available information should be

checked to establish planned career moves.

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Salary adjustments are planned within a budget in most organizations. This will

set limits and decide patterns of each individual which is used for review. Salary

adjustments must also be planned within the guiding framework of the organization’s

policy. This will classify procedure and merit salary scales. This also includes a group of

rules with the size or frequency of salary adjustments (Mcbeath, 1967).

Gantt (1974) found that “this report was made only two months after the bonus

system was stated, now nearly nine years ago, and is particularly valuable as it

emphasizes some of the fundamental principles on which successful work of this

character must be founded. We must secure the confidence and co-operation of the

workman by assuring him equitable compensation. If we fail to do this, any results we

may get will be short duration and our work will finally come to naught. Many of the

failures to get continuously the high efficiency which seemed easily possible have been

due to a disregard if the fact that the workman is entitled to a share in the benefits of

increased efficiency, and in the long run will not cooperate unless he gets it.” (p.110)

According to Milton (1984), in today’s business environment, many managers still

decides with less consideration of relevant facts involved. Ignorant managers based

salary decisions on subjective factors which may result in big-hearted or cheap pay

practice. These practices result in an insufficient and unfair pay structure which will

impact attitudes and work performance of employees. So practices of salary

administration need to be fair and sufficient to result a positive factor in each employee.

Gantt (1974) also stated that a great business condition regarding to employees

is that the employer has an efficient worker for the job and the worker is paid at the right

reasonable price for his labor. If the employer demands more work from the employees

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or the employee demands more money for his job, they will both have a problem in the

long run. The employer will worry about his workers complaints about salary and in turn

the employee will lose his job because of the employer losing money because of too

much wages. In short, good work with good pay in a business can result to a good long

running business (pp.33-34).

As reported by Belcher (1962), needs motivate people. One way of satisfying the

needs of an employee is by providing compensation. Hence, pay becomes an

instrument for satisfying needs and to motivate the employees. Back then, salary was

the only motivation to work. Employees need to increase pay to boost the employee’s

motivation. But today, motivation is too compound. The needs of the employees

became more complex and complicated. There is a ranking of basic needs familiar and

practiced nowadays.

Likewise, money can be a powerful motivator. This shows how employees aim

towards the company’s target the same as achieving their goals. Some employees

perceived that to work more is to earn more money. It is better to acknowledge money

as motivation to cooperate in the company rather than to produce (Belcher, 1962).

Not all employees aim for high salaries and high positions. Some just wanted job

satisfaction in exchange for their salary. But there are two types of employee

satisfaction. One is job satisfaction and the other is salary satisfaction. Job satisfaction

talks about how employees enjoy their work and contented with the management and

relationship with the organization. Employees tend to have high performance rating

when they are satisfied and determined to do their tasks or work. The next type, salary

satisfaction, is when employees are already satisfied with their salaries to the equal jobs

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they perform. It also means equal salary is as good as the equal job they perform.

(Mayhew, n.d.)

Mayhew (n.d.) also combines that job satisfaction may also be related to the rank

or position of the employee. When the organization promotes an employee into a higher

position, the employee’s job satisfaction will be larger. This is the same as the relation

between job satisfaction and employee motivation. This means that it motivates

employees when the employers recognize and praise them. This results to a better

working performance. This is also a benefit to the organization because employee

recognition is a reward that is non-monetary and job satisfaction is visible for the reason

that employees execute into more challenging tasks and derive into solid performances.

As stated by Tullao (1985), since the Philippines requires tertiary schooling the

country has a potential of making the economy higher in terms of growth, but many

professionals who finished the tertiary level become unemployed. With this the

educational system failed to make more needed professionals. The country suffers

economic decline because of misallocation of jobs (p.12).

In line with this, Filipinos are one of the most schooled in Asia. The country has

an average literacy rate of 95% according to recent statistics. Education is also known

as a type of investment, because it helps us earn more in the future. Studies show that

18 million are employed as of 1982 and 37.6 million as of 2012 according to the national

statistics office. A problem is that there is a mismatch in graduates; these mismatches

tend to not fill the required labor force, and thus making our economy go down (Tullao,

1985).

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According to Belcher (1962), Salaries are considered an economic problem. As a

matter of fact, salary does not revolve around on problem, but it also includes

sociological, psychological, political and ethical problems. Setting a price of a certain

product includes a group of decision makers, not only the market.

Belcher (1962) also included that salaries have two sides. One is the cost to the

employer; the other side is the income to the worker. In the side of the employer, salary

is a price he must pay as a factor of production, this is an economic transaction. While

on the employee, he provides energy and work to his job for him to earn income and

money. This is a process of give and take where purchasers demand and suppliers

supply and also to allocate the scarce resource (p.4).

As stated by Lehman (1985), the practice of paying employees in the third world

countries is unfair compared with employees in the first world or other industrialized

countries because employees in the third world countries are paid at a lower rate than

employees in the first world countries. There is also a principle of equal pay for work of

equal value and with that it is really biased when both are doing the same tasks and

jobs but receiving different pays.

An example given will be jobs performed by women are equal compared to jobs

performed by men but women are paid at a lower rate and this is unfair for them. That is

why jobs of equal value should be paid at the same rate and salaries should be paid for

equal work done (Lehman, 1985).

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Our interviewee, Sandra Cua, also added that salaries are very important

because one has to pay his employees for the services they have rendered. The

employees perform efficiently based on how they are properly paid and another is the

knowledge and ability that they have to perform on the assigned task. Just like we

researched, employees get their motivation when they got promoted or they have an

eager to earn income.

Jacqueline Chua, a business woman, stated that salaries are essential to a

business because it makes the employees meet their needs and support their own

family. It also motivates workers to work properly since the salary has an effect in the

lifestyle of a worker. She also stated that some of the workers get motivated because of

the thought of getting a better pay. She also said that other than salary, the working

environment and the boss-employee relationship can affect the employees’

performance on a job.

In conclusion, Salaries play an important role in a workers life and in the

business. It motivates workers to work efficiently if given the right amount of salary. An

employee’s happiness in his workplace can be affected by his salary. Salaries also

affect the economic status of a country because the income of a worker measures what

he purchases to have his wants and needs. Salaries can help or hinder the worker and

the business so we need to be fair on the amount when giving it.

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References:

Belcher, D. W. (1955). Wage and salary administration. Eaglewood Cliffs: Prentice-Hall

International, Inc.

Gantt, H. L. (1974). Work wages and profits (2nd ed.). New York: Easton Publication

Company.

Langsner, A. & Zollitsch, H. (1961). Wage and salary administration. Cincinnati:

South-western Publication Company.

Lehman, H. (1985). Equal pay for equal work in the third world. Journal of business

ethics, 4 (6), pp.487-491.

Mayhew, R. (n.d.). Jobs salary vs. job satisfaction. [online] Retrieved from:

http://www.ehow.com/info_12004111_jobs-salary-vs-job-satisfaction.html.

Mcbeath, G. & Rands, D. N. (1964). Salary administration. Great Britain: Business

Publications Limited.

Rock, M. L. (1984). Handbook of wage and salary administration. New York: McGraw

Hill Inc.

Sibson, R. (1967). Wages and salaries: a handbook for line managers. United States of

America: Vail-Ballou Press Inc..

Smith, J. (2011). How your salary level affects your happiness. [ONLINE] Retrieved

from: http://www.forbes.com/sites/jacquelynsmith/2011/11/10/how-your-salary-

level-affects-your-happiness/.

Tullao, T. (1985). High education and the labor market: The case of the

Philippines. Journal of Business and Economics, 3(1), pp.1-13

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