Factors that seriously considered in selecting method of remuneration

Factors that seriously considered in selecting method of remuneration

Factors that seriously considered in selecting method of remuneration

Remuneration has been defined as the reward for labor and services rendered. All business organizations should have a proper method of remuneration for their employees. The remuneration for labor is wages. The workers put effort & get wages in exchange for that.

(a) Easy Understandability:

An average worker must easily understand the remuneration method; otherwise, there arise labor unrest due to misunderstanding and suspicion. In simple remuneration method; less clerical cost is involved in the preparation of wage bills and costs records.

(b) A choice between quality & quantity:

A method of remuneration by result must be selected by organizations where quantity is considered more important than quality because, under this method, there is a direct relationship between worker’s earnings & output. On the other hand, a method of remuneration by time should be selected by organizations which consider quality much more important than quantity.

(c) Effect on overhead:

Over the units produced, the fixed overhead is spread. Thus, if the output is higher, the incidence of fixed overhead per unit will be lower. Fixed overhead per unit will obviously be reduced by the method of remuneration on the basis ‘of result while the incidence of fixed overhead per unit will be higher in case of a method of remuneration on the basis of time.

(d) Workers satisfaction:

The workers must be satisfied by the method of remuneration otherwise labor turnover will be high & resulting in the preventive & replacement cost of labor turnover. Efficient workers from outside the organization will get attracted by the method which creates satisfaction.

(e) Conformity:

The remuneration method selected by the organization must confirm with the methods used by similar-organizations in a similar sphere.

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