FACTORS DETERMINING  PAY  RATE        

The amount of compensation attained by a worker should reflect the attempts put in by the worker, the degree of complexity experienced while enhancing his energies, the demand-supply position within the country and the competitive rate offered by others in the industry etc. These are explained below.

• Job needs: Jobs vary highly in their complexity, difficulty and challenge. A number of requirement high levels of knowledge and skills while others may be handled by almost anyone. Simply, routine tasks that may be done by various people with minimal skills attain relatively low pay. Or else, challenging, complex tasks that can be done by less people with high skill levels receive high pay generally.
• Ability to pay: Projects determine the paying power of a firm. Elevated profit levels enable companies to pay higher wages. It partly explains why computer software industry pays better salaries than product based industries (cement, steel, aluminium, etc.). Similarly, multinational companies also pay comparatively high salaries due to their earning power.
• Cost of living: Inflation drops the purchasing power of workers. To overcome this, unions & workers prefer to link wages to the price of living index. While the index rises due to increasing prices, wages follow suit.
• Prevailing wage rates: In competing firms within an industry Prevailing wage rates are taken into account when fixing wages. A company that does not pay equivalent wages may discover it difficult to attract and retain talent.
• Unions: Generally highly unionised sectors have higher wages because fine organised unions may exert presence on management and get all sorts of benefits & concessions to employee.
• Productivity: It is the current trend in most of the private sector companies while workers' wages are associated to their productivity levels. If your job performance is good, you obtain good wages. A sick bank, for instance, can't hope to pay competitive wages, in tune having profit making banks.
• State regulation: The legal stipulations in respect of minimum bonus, wages, dearness, allowances, etc., decide the wage structure in an industry.
• Demand and supply of labour: The demand for and the supply of definite skills determine prevailing wage rates. Great demand for software professionals, R&D professionals in, telecom, drug industry and financial analysts, electronics engineers, management consultants make sure higher wages. Oversupply kills demand for a sure category of workers leading to a steep fall in their wages as well.