within the firm
Definition of Contract
Oral or written, express or implied, agreement
specifying terms and conditions
Every employee is under the obligation to
carry assigned duties, or the employer's
instructions to the best of his or her abilities.
The employer is under the obligation to
protect the employee from harm or injury,
and make fair compensation for any loss or
damage resulting from any job-related
Payment or Salary
a fixed amount of money
or compensation paid to
an employee by an
employer in return for work
An employee who is paid
a salary is expected to
complete a whole job in
return for the salary.
Definition of Productivity
Productive workplaces are
built on teamwork and a
shared vision of where a
business is heading.
There's willingness at all
levels to keep learning and
investing in skills. In a
everyone's role is valued
and all staff is encouraged
to contribute ideas.
Important of Payment
To the employer
To the employee
To the Government
• a set wage based on a set of expected duties to
• Incentives can work in a number of ways.
Important of Motivating
Motivating your employees is vital to any
A motivated workforce means a highly
productive staff, all of which will help you achieve
your business goals. And this should be a main
objective in your organizational and business
Types of Motivation:
An intrinsic Reward
An Extrinsic Reward
Scheme to Increase Worker
Types of Compensation
Monetary & Non monetary Pay
Group Incentives & Productivity gain
Long Term Incentives
Problem & Issue in work place
The failure of compensation and some of the
problems and issues facing employers flow from a
variety of circumstances:
The absence of regular feedback on
Non-recognition of the fact that performance,
especially profit, is sometimes (even often)
dependent on factors outside the control of
e.g. management decisions, exchange rates,
Productivity & The basis of
Time wage system:
wages are calculated on the
basis of time worked
irrespective of the quality of
2)minimize material wastages
3)work best on artistic jobs
has no positive inducement
It requires continuous
under this process the
workers generally adopt the
policy of go slow
Piece rate system:
the wages are paid to a worker on
the basis of output produced by him
without considering the time taken
in performing the work.
1)work as an inducer for workers to
2)here reward is related to efforts
3)fairs to all.
In an effort to produce more and
earn more workers may exert
themselves to fatigue.
workers feel insecure in this system
because they will lose wages for the
period of absence.
requires an up-to-date record of
output produce by workers.
2) Types of piece rate pay?
o Piece-rate pay gives a payment for each item produced.
The piece rate system is of the following types:
(a) Straight Piece Rate:
This is the simplest and the most common type of piece rate
system. Each operation, job or unit of production is termed as a
piece. The wage rate fixed for each piece is called piece rate.
(b) Piece Rate with Graduated Time Rate:
Under this system, workers are actually paid on the basis of output
and if the piece rate wages fall below the time rate wages, the
worker is paid on time rate basis.
(c) Differential Piece Rate System
Under the differential piece rate system, the payment of wages is
made to labor on the basis of piece rates varying with the level of
efficiency of workers.
Productivity & The level Pay
Does increasing pay increase
While many workers claim
that job satisfaction and a
sense of purpose drive their
productivity, salary also
plays a distinctive role in how
well your employees
Salary usually connotes a set
wage based on a set of
expected duties to be
Piecework is common
among a home-based
workforce, such as freelance
writers and seamstresses.
Increasing salaries in the hopes
of encouraging higher
productivity can backfire on
To effectively motivate workers
to increase productivity, you
need to employ a set of tools
that incorporates salary
increases while placing added
emphasis on non-monetary
What are efficiency wages?
Higher than market wage paid
to encourage higher output and
to raise worker morale, and to
discourage absenteeism and
Productivity and the
Sequencing of Pay
Wages acceptance by workers is based on the
criteria of the PV of wages/ promotions/ benefits
over time are more than PV of the market wage.
Vice versa, the firm would be willing to offer these
wages as long as the compensation scheme
The possibility is whether to underpay earlier in
career and overpay later, which also known as
delayed compensation plan.
The advantages of delayed
Age-earnings profiles (sample)
Age-earnings profile shows that increases in earning
happen in the early years, a peak around middle age,
and a decline thereafter.
The constraints upon delayed compensation:
a) PV of delayed compensation plan to the worker
must be more than the PV of the market wage
for the worker to accept.
b) In return, the firm will not offer delayed
compensation unless the PV of career marginal
productivity is more than PV of career
a)Risks to the firm and workers:
Worker’s risk is that firm reneges on paying higher
compensation later in career.
Firm’s risk is that workers do not retire as agreed
to but continue to work.
Application of the theory
1. Promotion Tournaments
Uncertainty about the winner
Winner is based on relative productivity
Rewards increased productivity largely go to the winner
Worker compensation paid based on:
Person effort + random error affecting person output +
random error affecting all workers’ output.
Time and attempt to monitor output
The factors of successful or unsuccessful of tournament
Winning based on luck is not successful whether winning
based on effort or productivity is called success.
If you win and disparity increases, the marginal benefit also
rise and Job Tenure
• According to human
increase will bring to
increase in wages.
• As mentioned earlier,
productivity increase is
interrelated with the job
satisfaction they get.
Therefore it is important to
increase worker’s wages
to increase productivity.
MECCABELLA MOIDIN BB11110311
ERIKA WONG BB11110143
NORLIANAH AMINUDIN BB11110408