Factors influencing wage and salary structure of an organizationThe wage policies of different organization vary somewhat. A sound wage policy is to adopt a job evaluation programme in order to establish fair differentials in wages based upon differences in job contents. Beside the basic factors provided by a job description and job evaluation, those that are usually taken into consideration for wage and salary administration are: • The organizations ability to pay

• Supply and demand of labour
• The prevailing market rate
• The cost of living
• Living wage
• Productivity
• Trade unions bargaining power
• Job requirements
• Managerial attitudes and
• Psychological and sociological factors
• Levels of skills available in the market

• The organizations ability to pay: Wage increases should be given by those organizations which can afford them. Companies that have good sales and, therefore, high profits tend to pay higher those which running at a loss or earning low profits because of higher cost of production or low sales. In the short run, the economic influence on the ability to pay is practically nil. All employers, irrespective of their profits or losses, must pay no less than their competitors and need to pay no more if they wish to attract and keep workers. In the long run, the ability to pay is important. During the time of prosperity, pay high wages to carry on profitable operations and because of their increased ability to pay. But during the period of depression, wages are cut because the funds are not available. Marginal firms and nonprofit organization (like hospitals and educational institutions) pay relatively wages because of low or non profits. • Supply and demand of labour: The labour market conditions or supply and demand forces operate at the national, regional and local levels, and determine organizational wage structure and level. If the demand for certain sk...

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