Salary system mechanism

Category: Employment, Salary
Last Updated: 04 Jul 2021
Pages: 4 Views: 417

This is a mechanism by which a company plans its means to attract, retain, reward and motivate its salaried employees. The management evaluates jobs and arranges them into job levels or grades and assess the performance of the staff employees. For them to comply with the scales in the market or over something attractable and motivating they carryout surveys and comparisons with other employers. The management then establishes salary grades and progression rules.

This involves big incremental and merit systems and a consideration of employee benefits for the employee to move form the bottom of the scale to the top. The cost of living is taken into account either as a percentage or a flat rate (Storey J. 1995). Merit- Is an attempt to reward an employee for the individual contribution he or she makes over and above the minimum job performance that can be reasonably be expected from a person for a basic rate received for performing the same job.

It includes all other factors which are considered desirable in the person holding a particular job (Storey J. 1995). Incremental salary system – Here the salary scales are salary ranges with several pay points or steps that every employee has to alight on as the job holder progresses through the maximum after appointment. The employees performance is assessed using efficiency bar introduced somewhere up the range. The increments are meant to reward experience and stability (Storey J. 1995).

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Advantages (Lundy O. & Cowling A. , 2000)

1. They are simple to operate since the procedure is predetermined and clear

2. They are easily understood by the staff

3. No appraisal system is required under incremental system

4. Staffs are able to reliably forecast their salary growth

5. It focuses an individual performance hence motivating them

6. Provides scope of rewarding extra work or results 7. Merit system is flexible as it allows salaries to be adjusted easily.

Disadvantages (Lundy O. & Cowling A. 2000).

1. Merit system requires appraisal system

2. Staff may not view merit system as equitable

3. Incremental system is inflexible as salaries can not be adjusted

4. In merit system, employees cannot predict the amount or level of merit to expect

5. Under incremental performance, high performance is not taken into account.

This method is commonly used allover the world. This is because paying salaries to the staff is a legal obligation, but the difference is as to how much is to be paid and in what manner becomes a matter of judgment and negotiations because every company will wish to retain and attract high performing employees for its success.

Therefore the management prefers this method because it acceptable to most of the employees and they are used to it as other companies use it. Under this method employees can clearly predict their rewards and on how to grow from one level to the other. Also the management finds it easy to apply as the scale is already in the market to influence employees and adding something extra than what is overfed in the market (Robbins S, 2005); .

4. Pay by time In this mechanism, employee payment is associated to the hour at work and not to the work done.

Employees who work extra hours are paid extra or double the rate. This motivates them to work for long hours in a day and overtime. This practice effectively recognizes and gives rewards immediately the desired behavior has been achieved which motivates employees and makes them understand the best effort rewarded (Du Brin, 1974).

Advantages (Pfeffer J,1992).

1. It is simple to operate since pay is calculated based on hourly rate to hours worked

2. Employee can predict his or her earnings since he can easily establish the number of hours worked in advance.

3. Easy to control labor costs as employees hours worked can be limited to the required of the firm

4. Encourages employee’s cooperation as there is no intergroup competition to create conflicts.

5. Encourages labor flexibility as it can be easily adjusted.

Disadvantages (Pfeffer J, 1992);

1. Employee performance will be poor as they will strive to work for more hours than to produce more.

2. The bonus is not long term that is to say extra reward is available when there is a lot of work.

3. It requires a lot of supervision for employees to produce

4.It may be costly considering the nature of the task performed.

This method is not commonly practiced in other parts of the world since it might have failed in the past, the nature of task to be performed if rewarded by this method may be costly to the company or may not motivate the employees and it may not be accepted by the staff because of their personal reasons, In addition if the nature of work requires that employees work anytime such that they work in shifts, then this method will not work for instance working at the hospitals (Du Brin, 1974).


Whatever method used in any part of the world should be one that maintains the organizational values, goals, mission and vision and puts them into action. This practice must accommodate the organization workers and their environment and take into account the cost involved for it to be effective (Shim J, 1999);. Further, it must be specific, meaningful, achievable, reliable and timely for it to be effective. The reward to be offered must be accepted by the staff and appreciated.

The management should strive to use that practice that will attract, retain and motivate employee top performance and reinforce good behaviors. This practice must encourage high production and should be of good quality at minimal cost and must be capable to encourage the staff to make full use of their ability and develop their potential for optimum productivity. Good collaboration at workplace is important tool and as such the management should use that practice which makes them recognize the value of work in relation to each other (Storey J. 1995).

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Salary system mechanism. (2018, Aug 04). Retrieved from

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