WAGE DIFFERENTIALS

CONTENTS 

1.   INTRODUCTION OF WAGE DIFFERENTIALS
2.  DEFINITION  OF WAGE DIFFERENTIALS
3.  WAGE DIFFERENTIALS
4. TYPES OF WAGE DIFFERENTIALS
5.   IMPORTANCE OF WAGE DIFFERENTIALS
6.   CONCLUSION
7. BIBLIOGRAPHY

INTRODUCTION 

Wage differential refers to differences in wage rates due to the location of company, hours of work, working conditions, type of product manufactured, or other factors. It may be the difference in wages between workers with different skills working in the same industry or workers with similar skills working in different industries or regions.

For example, wage differentials may also be used to compare wages between genders, union and non-union jobs, or wages of employees with and without college degrees.

DEFINITIONS

The difference in wages between workers with different skills in the same industry or between those with comparable skills in different industries or localities 

         Wages differ in different employments or occupations, industries and localities, and also between persons in the same employment or grade. One therefore comes across such terms as occupational wage  differentials, inter-industry, inter-firm, inter-area  or  geographical differentials and personal differentials. Wage differentials have been classified into three categories:

              Firstly, The differentials that can be attributed to imperfections  in  the employment  markets, such as the limited knowledge of workers in regard to alternative job opportunities available elsewhere; obstacles to geographical, occupational or inter-firm mobility of workers; or time lags in the adjustment of resource distribution and changes in the scope and structure of economic activities. Examples of such wage differentials are inter-industry, inter-firm, and geographical or inter-area wage differentials. 

             Secondly,   The  wage  differentials  which  originate in  social  values  and  prejudices  and  which  are deeper  and  more  persistent  than  economic  factors. Wage differentials by  sex, age, status  or  ethnic origin belong  to  this  category.

             Thirdly,  Occupational  wage  differentials, which would  exist  even  if  employment  markets  were  perfect and social prejudices were absent.

 TYPES  OF WAGE DIFFERENTIALS

1) (A)Occupational differentials

      (B) Inter-Occupational differentials               

2)   Inter-firm differentials;

3)   Inter-area or regional differentials;

4)   Inter-industry differentials;

5)   Differentials based on sex.

(A) Occupational Differentials 

         Occupations in  an   organization  widely  differ  from one another in terms of skill requirement and   the extent of requirement and the extent of  responsibility. Accordingly, wages vary from occupation. Such differences in occupations induce people/workers to undertake more challenging jobs, encourage workers to develop their skills by way of education and training. It is varying  skill requirement for different occupational  that  shapes the  manpower  planning  in an  organization-be   it an industrial  organization  or  educational institution.       

(B) Inter Occupational Differentials 

                 Inter occupational differentials may comprise  skilled, unskilled and manual wage  differentials;  non-manual and manual (white and blue-collar); and general skill differentials.  Occupational wage differentials generally follow the changes in the relative supplies of labour to various occupations.

(2)  Inter-Firm Differentials

              There are  wage differentials of workers in  different  plants in the  same  area  and  occupation.  Factors  like differences  in quality  of  labour   employed  by  different  firms, imperfections  in  the labour  market  and  differences  in  the efficiency  of equipment  and  supervision  result  in  inter-firm  wage   differentials .  Added   to these  are  differences in  technological advance, managerial  efficiency,  financial  capability,  firm’s  age and  size,  availability  of raw  material,  power   and  transport  facilities  also account for  differences  in  wages  among  firms. 

(3) Inter Area Or Regional  Differentials 

         Not only  wages  differ  among  occupations,  but  these also  differ in  case  of  workers  working  in the   same  occupation  at  different  geographical  regions.   These  differences  are  the  result  of  working   conditions  prevalent  in   different  regions  of  the  country.  For  example,  the  Central  Government   employees  serving  in  the  remote  and  disturbed  areas  like  the  North Eastern  States of  India  are  paid   additional  remuneration  in  the  form  of  the  Remote Area  Allowance. 

   Sometimes,   such wage differentials  are  used  to attract  people to serve  in  particular  regions. “The  industry mix varies from one  area  to  another, and for  this  reason  alone, the    general  average of  wages   would  be  expected  to  vary.”       

(4) Inter- Industry Differentials 

        These  differentials  arise  when  workers  in  the same  occupation  and  the  same  area   but  in  different  industries  are  paid  different   wages.  Inter-industry differentials reflect skill differentials. The industries paying  higher  wages have mostly  been industries  with  a  large  number  of  skilled workers,  While  those  paying  less  have  been industries  with a large  proportion  of  unskilled  and  semi-skilled  workers. Others  factors  influencing  inter-industry differentials  are  the extent  of  unionization, the structure  of  product   markets,  the  ability  to  pay, labour-capital  ratio,  and  the  stage  of  development  of  an  industry. 

(5) Personal Wage Differentials 

        These   arise  because  of  the  differences  in  the  personal  characteristics  (age  or  sex ) of  workers working  in the same  unit  and  occupation. Though provision  of  ‘equal  pay  for  equal  work’ is certainly  there,  but  it  is  still  not  the  reality. Instances  are   there  when  woman   worker   is  paid   less  than  her  male  counterpart    for  doing  the  same   job. Of  course,  there  are  other   reasons  also  which  cause  wage  differentials   between  male  and   female  workers. 

   After all, What is the rationale behide wage differentials ?

     There are two views about it.

(1) In view of the principles of socialistic pattern of society in which the object of the representative Government is to minimize inequalities in incomes and distribution of wealth. 

(2) Wage differentials are  justified given  the wide differences in   demand  and  supply  of  jobs along with wide variations  in   job  requirements like skill, ability, aptitude, knowledge,  experience  and  so on. That wage differentials ensure rule   exploitation of the national resources is  yet another   justification given in support of  wage  differentials.

 

IMPORTANCE OF WAGE DIFFERENTIALS 

        Wage differentials have a great economic and social significance, for they are directly related to the allocation of the economic resources of a country, including manpower,  growth of the national income, and the pace of  economic development. Social welfare activity depends, in a large measure, on such wage differentials as will:

•       Cause labour to be allocated among different occupations, industries and geographical areas in the economy in such a manner as to maximize the national product;

•       Enable full employment of the resources of the economy to be attainted; and

•       Facilitate the most desirable rate of economic progress.

CONCLUSION 

      The wage differentials in India tend to be higher in rural as compared with urban areas, and are higher among women than among men. The wage differential also tends to be higher for low-skilled workers. There is considerable evidence of an increase in the wage differential between 1993-94 and 1999-2000. Wage differentials are the result of occupational differentials, inter-firm differentials, regional differentials, inter-industry differentials and personal differentials. 

BIBLIOGRAPHY

PERSONNEL MANAGEMENT

            BY   C.B.MAMORIA

   (HIMALAYA  PUBLISHING HOUSE)

HUMAN RESOURCE MANAGEMENT

         BY    S.S.KHANNA

   S.CHAND & COMPANY LTD.(NEW DELHI) 

HUMAN RESOURCE MANAGEMENT

         BY   Dr. C.B.GUPTA

    SULTAN CHAND & SONS

MEANING, DEFINITION AND CONCEPT OF PERFORMANCE APPRAISAL

MEANING, DEFINITION AND CONCEPT OF PERFORMANCE APPRAISAL 

BY

SMART LEARNING WAY 

              

CONTENTS 

• INTRODUCTION TO PERFORMANCE APPRAISAL.
• MEANING 0F PERFORMANCE APPRAISAL.
• DEFINITION OF PERFORMANCE APPRAISAL.
• CONCEPT OF PERFORMANCE APPRAISAL.
• OBJECTIVES OF PERFORMANCE APPRAISAL.
• ADVANTAGES OF PERFORMANCE APPRAISAL.
• LIMITATION OF PERFORMANCE APPRAISAL.
• METHODS OF PERFORMANCE APPRAISAL.
• CASE STUDY OF PERFORMANCE APPRAISAL.
• CONCLUSION.
• BIBLIOGRAPHY.

INTRODUCTION TO PERFORMANCE APPRAISAL

      Performance appraisal is widely used in the society. The history of performance appraisal can be dated back to the 20^th century and then to the second world war when the merit rating was used for the first time. An employer evaluating their employees is a very old concept. Performance appraisal is an indispensable part of performance measurement.

  

    By focusing the attention on performance, performance appraisal goes to the heart of personnel management and reflects the management’s interest in the progress of the employees.

 

Performance appraisal is composed of two words:

1.  Performance.
2. Appraisal.

     

     Performance indicates how the management of an enterprise has been accomplishing the goals which they had set for the enterprise. Performance is the measure of the degree to which an organization fulfills its purpose and its purpose is to achieve its objectives.  

     Appraisal refers to a critical review with a view to improving performance. It includes the act  to examine, to measure, to interpret and to draw conclusions.

MEANING 0F PERFORMANCE APPRAISAL

             People differ in their abilities and their aptitudes. There is always some difference between the quality and quantity of the same work on the same job being done by two different people.

    Performance appraisals of employees are necessary to understand each employees abilities, competencies and relative merit and worth for the organization. Performance appraisal rates the employees in terms of their performance.

 

        Performance appraisal is necessary to measure the performance of the employees and the organization to check the progress towards the desired goals and aims.

     The latest mantra being followed by organizations across the world being- “ get paid according to what you contribute”- the focus of the organizations is turning to performance management and specifically to individual performance. 

       Performance appraisal is the systematic evaluation of the performance of employees and to understand the abilities of a person for further growth and development. Performance appraisal is generally done in systematic ways which are as follows:

• The supervisors measure the pay of   employees  and compare it with targets and plans.
• The supervisors analyses the factors behind work performances of employees.
• The employers are in position to guide the employees for a better performance. 

DEFINITION OF PERFORMANCE APPRAISAL

1)      Performance appraisal takes into account the past performance of the employees and focuses on the improvement of the future performance of the employees.

2)      Performance appraisal is a systematic way of reviewing and assessing the performance of an employee during a given period of time & planning for his future.

3)      According to FLIPPO, a prominent personality in the field of human resources , “performance appraisal is the systematic, periodic and an impartial rating of an employees excellence in the matters pertaining to his present job and his potential for a better job.”

4)      Performance appraisals are employed to determine who needs what training, and who will be promoted, demoted, retained or fired.

5)      Performance appraisal is the process of obtaining, analyzing and recording information about the relative worth of an employee. The focus of the performance appraisal is measuring and improving the actual performance of the employee and also the future potential of the employee. Its aim is to measure what an employee does.

6)      Performance appraisal is a powerful tool to calibrate, refine and reward the performance of the employee. It helps to analyze his achievements and evaluate his contribution towards the achievements of the overall organizational goals.

7)      According to NEWSTORM “It is the process of evaluating the performance of employees, sharing that information with them and searching for ways to improve their performances.” 

8)      According to DOUGLASS “performance appraisal is a method of acquiring and processing the information needed to improve an individual employees performance and accomplishment.”

9)      Appraisals are a shared assessment of performance, where performance is appraised jointly and goals are agreed together. The individuals goals need to be aligned with those of the team or organization.

10)   Performance appraisal is the procuring, analyzing and documenting of facts and information about an employees net worth to the organization. It aims at measuring and constantly improving the employees present performance and tapping on the future potential.

11)   The process by which a manager or consultant:

·         Examines and evaluates an employees work behavior by comparing it with preset standards .

·         Documents the results of the comparison.

·         Uses the results to provide feedback to the employee to show where improvements are needed and why.          

                   

12)   Performance appraisals should be based on trust and mutual respect. An appraisal works best when manager and employee know each other and there is mutual respect between the two. Such conditions need to be built over time with the manager taking the lead.

13)   Appraisal are a part of the performance management cycle. Appraisal are an important part of performance management, but an appraisal in itself is not performance management. Performance management is a broader process of which an appraisal is only one stage.

E.g: In the performance management cycle, the review and planning elements typically form an appraisal. However, the development and performance stages are part of the broader performance management process. 

14)   Performance appraisal is the process of obtaining, analyzing and recording information about the relative worth of an employee to the organization.

15)   Performance appraisal is an analysis of an employees recent successes and failures, personal strengths and weakness, and suitability for promotion or further training. It is also the judgment of an employees performance in a job based on considerations other than productivity.

CONCEPT OF PERFORMANCE APPRAISAL

Performance  appraisal system in any organization depends substantially on five factors- 

o        Concept.

o        Criteria 

o        Culture.

o        Context

o        Contingency. 

CONCEPT:

The performance dimensions are several. They include duties, responsibilities , behavior and traits. For each of the relevant dimensions and sub- dimension thereof standard will have to be fixed based on past performance, industrial engineering principles or any other base. Relatives  weight ages have to be assigned to each of these in turn.

Performance appraisal involves at least two persons/ parties: the appraised ( who does the appraisal and the appraise, whose performance is being appraised). The appraise should know the following aspects of performance appraisal: what, why, how, when and by where? In the context of performance appraisal, the appraise expects the following from the appraiser.

Proper appreciation of the mutuality and reciprocity in the roles is vital for clarity about the concept of the performance. This has indeed been highlighted in the recent,  for example memorandum of understanding which is a framework instrument  to analyze the performance of chief executives of public sector organizations in India.

“who” of the appraisal?

   The appraisal can be accomplished by one or more individual  involving a combination of the immediate supervisor, other managers acquainted with the assesses work, a higher level manager, a personnel manager, the assesses peers, the assesses himself and  the assesses subordinates.

“what” of  the appraisal?

   The “what” of the performance appraisal consist in appraising non- supervisory employee for their current performance, and managers for future potential. It also includes evaluation of human traits.

“Why” the appraisal?

         “Why” an appraisal is concerned with:

           a) Creating  and maintaining  a                                               satisfactory level of performance of                        employee in their present jobs.

           b) Highlighting employee needs  and                                 opportunities for personal growth and                   development.

           c) Aiding in decision- making for                                        promotions, transfers, lay-offs, and                                        discharge.

           d) Promotion understanding between                               the supervisor and subordinates.

“where” the appraisal?

    The “where” indicates the location where an employee may be evaluated. It is usually done at the place of work or office of the supervisor.

   Informal appraisals may take place anywhere  and everywhere , both on the job in work situation and off the job. 

“ when” the  appraisal?

   The “ when” answers the query about the frequency of appraisal has been suggested informal counseling should occur continuously. The managers should discuss an employee’s work as soon as possible after he has judged it.

“how” the appraisal?

   under “ how” the company must decide what different methods are available  and which of  these may be used for performance  appraisal. On the basis of the comparative advantage and disadvantage  it is decided which methods would suit the purpose best.

o        The main characteristics  of performance appraisal are as follow :

1)      Performance appraisal is a process consisting of a series of steps.

2)      It is systematic examination of an employee’s strengths and weakness in terms of the job.

3)      Performance appraisal is a scientific  or objective study. Formal  procedures  re used in this study. The same approach is adopted for all jobholders so that the results are comparable.

4)      It is an ongoing or continuous process wherein the evaluation are arranged periodically according to a definite plan.

5)      Performance appraisal is to secure information necessary  for making objective and correct decisions for employees.

OBJECTIVES OF PERFORMANCE APPRAISAL

Performance appraisal can be done with the  Following objectives in mind: 

• To maintain records in order to determine compensation packages, wage structure, salary raises, etc.
• To identify the strength and weakness of employees to place right men on right job.
• To maintain and assess the potential present in a person for further growth and development.
• To provide a feedback to employees regarding their performance and related status.
• It serves as a basis for influencing working habits of the employees.
• To review and retain the promotional and other training  programmes.
• To enable an organization to maintain an inventory of the number and quality of all managers  and to identify and meet their training needs and aspirations.
• To determine increments rewards, and provide a reliable index for promotions and transfers to positions of greater responsibility.
• To maintain individual and group development by informing the employee of his performance standard.
• To suggest ways of improving the employees performance when he is not found to be up to the mark during the review period.
• To identify training and development needs and to evaluate effectiveness of training and development programmes.
• To plan career development, human resources planning based on potentialities.
•   To assess its capacity and ability to repay short-term and long-term loans.
•   To estimate and examine the possibilities of its future growth.
•   To estimate the administrative efficiency of    its management.
•   To assess its earning capacity.

ADVANTAGES OF PERFORMANCE APPRAISAL

   The advantages of performance appraisal are as follows:

o        Promotion

o        Compensation

o        Employees development

o        Selection validation

o        Communication

o        Motivation

LIMITATION OF PERFORMANCE APPRAISAL

o         Lack of clarity.

o         Appraisal errors.

o         Unequal performance standards.

o         Very time consuming especially for a  manager with many employees.

o         If not done right can be a complete waste of time.

METHODS OF PERFORMANCE APPRAISAL

            Traditional Methods                                          

1. Paired comparison
2. Graphic Rating scales
3.  Forced choice Description method
4. Forced Distribution Method
5. Checks lists
6. Free essay method
7. Critical Incidents
8. Group Appraisal
9. Field Review Method
10. Confidential Report

  

Modern Methods

1. Assessment Center
2. Appraisal by Results or Management by Objectives
3. Human Asset Accounting
4. Behaviorally Anchored Rating scales

CASE STUDY OF PERFORMANCE APPRAISAL

  CARTER CLEANING COMPANY:

o        After spending several weeks on the job, Jennifer was surprised to discover that her father had not formally evaluated any employee’s performance for all the years that he had owned the business. 

      Jack’s position was that he had “ a hundred higher-priority things to attend”, such as boosting sales and lowering costs, and in any case, many contended Jack, manual workers such as  those doing the pressing and the cleaning did periodically get positive feedback in terms of praise from Jack, if things did not look right during one of his swings through the stores. 

o        Similarly, Jack was never shy about telling his managers about store problems so that they, too, got some feedback on where they stood.

o        This informal feedback notwithstanding, Jennifer believes that a more formal appraisal approach is needed. She believes that there are criteria such as quality, quantity, attendance , and punctuality that should be evaluated periodically even if a worker is paid on piece rate. 

o        Further more, she feels quite strongly that the managers need to have a list of quality standards for matters such as store cleanliness, efficiency, safety, and adherence to budget on which they know they are to be formally evaluated.

CONCLUSION

•          Performance appraisal  is systematic way of judging the relative  importance of an employee in performing his/her task. It is undertaken for variety of purposes such as to consider employee  for salary increase, promotion transfer and transmission of services, to determine training and development needs of the employee and it establish basis for research reference relating to employee matter.

•          An organization goals can be achieved only when people put in their best effort. How to ascertain whether an employee has shown his or her best performance on a given  job? The answer performance appraisal. Employee assessment is one of the  to a detailed discussion of the nature and process of conducting performance appraisal.

BIBILIOGRAPHY

o        HUMAN RESOURCE MANAGEMENT

     BY- H JOHN BERNARDIN

    PUBLISHER- MC-GRAW HILL PUBLISHER CO. LTD.

o        HUMAN RESOURCE MANAGEMENT

      BY- MIRZA. S. SAIYADAIN

   PUBLISHER- MC-GRAW HILL PUBLISHER CO. LTD.

o        HUMAN RESOURCE MANAGEMENT

     BY- DR.TRIPATHI.

    PUBLISHER- HIMALAYA PUBLISHING HOUSE.

o        HUMAN RESOURCE MANAGEMENT

     BY- DR. C.B GUPTA

    PUBLISHER- SULTAN CHAND & SONS NEW DELHI.

o        HUMAN RESOURCE MANAGEMENT & PERSONNEL MANAGEMENT IN INDIAN ENTERPRISES

     BY- K. S DWIVEDI

    PUBLISHER- GALGOTIA PUBLISHING CO. NEW DELHI.

o        PERSONNEL MANAGEMENT TEXT & CASES

     BY- DR. C.B MAMORIA,

            S.V GANKAR,

            DR. UDAI PAREKH.

    PUBLISHER- HIMALAYA PUBLISHING HOUSE.

o        HUMAN RESOURCE MANAGEMENT

     BY- LUIS. R. GOMEZ,

            DAVID. B. BALPIN,

            ROBERT. L. CARDY.

    PUBLISHER- PRENTICE HALL OF INDIA PVT. LTD.

o        HUMAN RESOURCE MANAGEMENT & PERSONNEL MANAGEMENT

     BY- K. ASWATHAPPA

    PUBLISHER- MC-GRAW HILL PUBLISHER CO. LTD.