Because pay is a complex issue, there are several ways
in which businesses determine how much to pay, and which methods to use:
• Job evaluation / content; this is usually the most important factor. What
is involved in the job being paid? How does it compare with similar jobs?
• Fairness – pay needs to be perceived and be seen to match the level
• Negotiated pay rates – the rate of pay may have been determined elsewhere
and the business needs to ensure that it complies with these rates.
• Market rates – another important influence – particularly where
there is a standard pattern of supply and demand in the relevant labour market.
If a business tries to pay below the “market rate” then it will
probably have difficulty in recruiting and retaining suitable staff
• Individual performance – increasingly, businesses include an element
of “performance-related” reward in their pay structures.
it is important to remember that pay is only one element of motivation
and will work best where management also give attention to:
Developing good management and supervision;
Designing jobs and organising work groups to make them as satisfying as possible;
Providing feedback to staff about their performance and training and development;
Making effective arrangements for communications and consultation.