Compensation essay

Compensation

Introduction

     One of the most difficult functions of personnel management is that which concerns compensating the employees fairly and equitably. However, for a Christian businessman and entrepreneur or anyone in the leadership strata with the power to influence business or salary administration, there is the assumption that more that is expected (Noreen, 1988). This paper will discuss the Christian imperative surrounding compensation management in the light of the revelation of scriptures in stark contrast to the secular option. This paper firstly, outlines the standard secular administration of compensation (e.

g., what are provided by the law and definition of terms), from which a comparison with the Biblical imperative will be taken. It will then elaborate on the Christian worldview of work and wages and the rationale for taking such a view. The assumption is that Christian employer has higher obligations to his workers since he has to reckon not only the government mandated policies at work in the context of business or employment, but especially with the God with whom he will ultimately give an account.

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     “. . . And there is no creature hidden from His sight, but all things are naked and open   to the eyes of Him to whom we must give account” (Heb 4:13).

     “Obey those who rule over you, and be submissive, for they watch out for your souls, as those who must give account. Let them do so with joy and not with grief, for that would be unprofitable for you” Heb 13:17.

     “They will give an account to Him who is ready to judge the living and the dead.

” 1Pe      4:5

Terms defined

     When it comes to the world of work, much has changed since the inception of the Judeo-Christian religion considering that most of the laws governing today’s workforce, including the principles of human resource and organizational effectiveness have their roots in the Biblical conception of work and relationships. For instance, the service that a person renders in general, primarily benefiting others, has what McBride and others call as “historical motivations” including both the secular and the sacred. Contemporary employment seemed far removed from these influences as they are now called by different names and under myriad of “benefits” such as variations of incentives derived from employment (McBride et al 2003).

     Salary commonly refers to the compensation covering weekly, monthly, or yearly periods for services rendered. A salary based on a stated minimum number of days per week or hours per day or week. The term salary applies to the pay of higher levels of personnel such as white-collar employees or persons in positions of responsibility and authority in the firm (McGregor, 1960).

     Wages.  The term wages usually refers to compensation for manual labor-skilled or unskilled – for work done by so –called “blue-collar” workers. Wages are measured by the hour, day or week, unlike salaries, which are paid at stated intervals, such as every week or every fifteen days. Wages also refers to payment for a specified volume of production, i.e., on piece rate (McGregor, 1960).

     A merit increase is a raise in the salary wage of an employee on the basis of performance or merit. It is granted after a review of his performance and service in accordance with company policy or the firm’s performance appraisal program (McGregor, 1960).

     A union rate refers to an hourly or daily rate of pay, usually a single rate for an occupation or trade, set up by an agreement reached through collective bargaining. It is generally the base rate that can be paid to qualified workers on the job. There is usually no rule barring the employer from paying higher rates (McGregor, 1960).

     An across-the-board increase is a general wage raise affecting all the employees within a plant, company, or industry, usually as a result of collective bargaining. Such an increase may be granted in the form of a percentage of the current pay or a specified amount in centavos or pesos per hour, per day, or per month (McGregor, 1960).

Discussion

     To the average man in the street, what is fair and just is based on what the law has declared in favour both for the employer and the worker. There are four kinds of employee compensation: salary or wage, incentive pay, allowances, and benefits. Salary or wage is the basic compensation wile incentive pay is designed to encourage the employee to render extra effort over normal production. Allowances are given to meet employee needs during temporary situations. Benefits are rewards for belonging to an organization, in a period of inflationary pressures and economic uncertainties; compensation assumes an overriding importance not only to management but also to the community (Noreen, 1988). Many problems about salaries and wages arise because several groups have interests in employee compensation, such as the following:

The employees who work primarily to earn a living for themselves and their families.
The company that pays its employee attractive salaries and wages in order to retain them but is at the same time concerned with the cost of production and its competitive position in marketing its products in order to make profits for its investors.
The community that is concerned with the cost of commodities and services in relation to the income level of the people in the community.
The state whose economy will be adversely affected by inflationary wage levels (Noreen, 1988)
The pay that an employee receives from his employer is the primary reason for his being on his job. He works to earn a living. His pay provides him with a strong incentive to do his job well. The employee’s rate of pay often indicates his status in the company. His wages determine not only his standard of living and the comforts that he and his family can have but also his standing in the community. It also determines what he can contribute to community development and social welfare. His pay determines his purchasing power. With higher wages he can acquire more goods and services for his family. High purchasing power for the workers stimulates the production of more goods and increases the need for more services. Hence higher pay may lead to greater production (Noreen, 1988)

     An employee’s pay must be commensurate with his efforts. It must be equitable in relation to what the other employees get for what they do, otherwise, he or the other employees will feel that they are being cheated. Most industrial disputes concern wages because wages affect the very lives of the workers and their families. If the employee’s salary is either lower than what he expects for his services or else than what he expects for his services or less than what other employees receive for similar jobs, he either quits the company or stays on but dissatisfied with his employment and the firm itself (McGregor, 1960).

     One way to retain competent employees and keep their morale high is to plan salary levels so as to establish uniformity of pay in relation to the jobs in the company and to those in the other business establishments in the community.

Workers compare their work and their pay

     Workers have a practice of comparing jobs and their wages with those of other workers, and judge the equity or inequity of their pay. They consider their pay either commensurate or not with the work they do in comparison with the wages paid to other workers within the firm. And they can make an assessment of the fairness of the firm that pays higher salaries for jobs involving greater responsibility or are more difficult to do and therefore require higher degrees of ability and skill (Noreen, 1988).

     There is no single factor that has a greater impact on employee’s morale than the pay they receive from their work. The amount of the pay and how this compares with the amount received by his co-workers mean more to an employee than almost any other factor in his job. How employees feel about the equitableness of their pay can influence to a large extent their level of performance (Noreen, 1988).

     Management should therefore adhere to the rules of strict equity in its pay scale, so that the employees will feel that their pay is fair in relation to the work they do and in comparison with the pay that others get. Although pay rates must be adequate for the services each employee renders, they must however, be realistic, based on the company’s capacity to pay and to compete in the labor market so that it can attract and retain the desired personnel. The worker trades his labor for the highest possible price in the market (Noreen, 1988).

Basic Determinants of salary

     Jobs differ in many ways. Some are quickly learned but others require long periods of training and considerable experience. Some jobs require mental ability; others require mainly physical or manual effort. Some jobs are more complex than others. Differences in difficulty and complexity, and the responsibilities inherent in particular jobs, must be considered in determining the proper compensation for the jobs (McGregor, 1960).

     In arriving at an equitable salary rate for each employee, the following essential factors are involved;

-          The relationship between jobs and wage rates.

-          The recognition of individual differences

-          The level of pay existing in the community

-          The company’s ability to pay

-          The type of industry

-          Labor costs

-          Cost of living

-          Collective bargaining (McGregor, 1960).

Difficulties in Wage Administration

     The implementation and administration of the company’s wage and salary program have never been more difficult than at present. Employers and personnel managers are constantly frustrated external factors beyond their control, such as inflationary trends and the impact of new legislation which restricts the scope for voluntary grant of employee benefits (McGregor, 1960).

-          Difficulty in determining what is inadequate and fair pay for a particular job.

-          Desire of workers to earn more money and management to operate at greater profit;

-          Dissatisfaction of employees owing to inequalities in pay.

-          Lack of measuring device which can establish to the satisfaction of all concerned what a man’s services are worth in dollars.

-          Individual and group pressure for higher pay

-          Lack of sound policy

-          Lack of communication on the salary program (Hackman, 1971).

The Godly businessman

     What were discussed so far are realities in the workplace specifically on the administration and management of compensation program in both the public and private entities. When it is a Christian enterprise though, not only do employees get the most generous package they can get to the best of their abilities, they must also be regarded not just according to their identity based on their individual capacities for work. This is only when the Christian employer understands the perspective where he is coming from as a believer in the Lord Jesus Christ. His godly example cannot be underestimated. He is expected to manifest the same qualities that Jesus Christ possesses. God’s moral attributes, his justice, fairness, kindness and goodness, all these must find their place in the life of Christians since they touch all his relationships including his business relationships. The teachings of the apostles have established these as part and partial of the Christian’s relations in the context of church and community. God is just and kind. This he shows to his creation especially man both to the wicked and the godly. The goodness that he showers on the Christian is enough bases why a Christian businessman must see to it that his manner of handling the business reflects God’s care and provision (Nash, 2000).

     Employers who are Christians are to hold in esteem their workers such as to show them love and appreciation. They are also expected to require their employees to deliver excellent work output. Scriptures show that an employer must pray for their employees that they may become godly workers; make them accountable as well of their performance hence the need for regular evaluation of their job execution; serve the workers making extra efforts and thoughts to make sure there is a right balance between pursuing gains and providing proper treatment of employees’ needs and concerns (Nash, 2000)..

  “[The Lord will judge] those who oppress the wage earner in his wages” (Malachi 3:5).                                                 “You shall not oppress a hired servant….You shall give him his wages on his day before the sun sets” (Deuteronomy 24:14-15).

     The worker must not be made to work that which is debasing or be driven to do work so rigorous like that of a slave (Leviticus 25:39-43; Wagschal, 1990). This goes to imply as well that there should not be a very wide disparity between wages of employees within the workplace among the workers and executives reminiscent of today’s battle of compensation by CEOs both in the church and in the secular organizations. These are passages that ensure godly employers are to make sure that just and fair wages are given to workers within the schedule that is agreed. Faith must make a difference in practice of employment and in the leadership of business. Workers are to receive from his Christian employment more than the paycheck, and the incentives that are constants in the world of competition (Nash, 2000). The godly employer must provide more for the employees including the following:

     1. Promotion of service oriented rather than a profit oriented marketplace.

     2. Sharing monetary gains with employees on a regular basis.

     3. Redefine work and self-identity attached to the kind of work an employee has. This means the worker is made to understand his place as worker according to his talents and capabilities as well as how God values him not only basing on his traits and contribution to the workplace and society.

     4. Provide opportunities for employees to find faith in God (Nash, 2000).

Conclusion

     The Christian employer has this Biblical imperative which is to make God wholly known to the employees and represent Him in ways that the workers will know the difference faith brings into the workplace. When a godly employer determines to make this his practice, it will be no wonder that as Justin Martyr would try to persuade the VIPs of his time, the only good employees are the Christian employees, that the only good employers will be Christian employers.

Reference:

Hackman, Richard and E. E. Lawler 1971, "Employee reactions to job characteristics", Journal of Applied Psychology, Vol. 55, pp. 259-286.

McBride AM, Benítez C & Sherraden M. 2003.  The Forms and Nature of Civic Service: A Global Assessment, Research Report. St. Louis: Center for Social Development, Washington University.

McGregor, Douglas. 1960, The Human Side of Enterprise, McGraw Hill, New York.

Nash, Laura, 2000. Can Faith Make A Difference in Business Leadership? Retrieved June 2, 2008 http://www.christianentrepreneur.org/resources/lauranash/believersinbusiness-print.html

New King James Version of the Holy Bible. Power BibleCD is Copyright 2001 by Online Publishing, Inc. 127 N. Matteson Street PO Box 21, Bronson, MI 49028

Noreen, E. 1988, "The economics of ethics: A new perspective in agency theory", Accounting, Organization, and Society, Vol. 13, pp. 359-369.

Wagschal, S. 1990, Torah Guide for the Businessman, Feldheim Publishers, New York.