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Pay them Right!

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Employers across the world want to optimise the pay for their employees and expect the best results. And similarly, employees on the other hand try to maximise their earnings while being vigilant of potential exploitation by the employer. Economists, social scientists, psychologists, human resource experts have been studying the mechanics of these forces and yet haven’t found the right formula that applies for all.

Pay is said to be dependent upon demand-supply issue. We see this in organisations : skills which are hard to find are always prized. Parents and teachers encourage children to show interest in professions involving such unique skills. While these are economic reasons, people with leaning towards socialistic thinking find this hard and protest. However, the nature around us shows us the answer. Every region in the world aren’t made equal in terms of the natural resources; they are endowed with different and unique resources which we learn to leverage upon and live our lives. This could be a bit of capitalistic behaviour that nature promotes. So, pay will always be a factor of demand and supply; it’s not going to be decided by the kind of work that one does and is expected to do. So, bigger the pay, lesser is the availability! Hence, the salary of a person with 2 years’  experience in skills like car driving, plumbing, electrician, mechanic, construction work could be higher than that of a person with the same experience in selling, servicing customers, teaching school children, pharmacy, nursing! In some of our cities in India, this is not far from being a reality. This is because of gaps in supply and demand.

Having said this, innovation is catching up and people are thinking of alternate methods to get a piece of work done. Hence, it’s important to learn skills that are difficult to get obsolete. These are skills which need high levels of intelligence and emotional stability will always stay premium and be governed by the economists’ laws of demand of supply. ‘Right pay’ for such jobs will always be dependent upon what the employer in the next door pays and the demand that they place on the employee.

Secondly, pay is dependent upon performance and the impact that one produces vis-a-vis other peers. A driver with high level of skills earns more pay than the person with limited skills. Between two salespeople, the person delivering bigger impact is rewarded better. This has been an age-old principle that governs industry and economics. No doubt at all! However, the absolute value that gets paid to an employee has been a topic of discussion since time immemorial. Employers try to minimise their spending while employees try to maximise their earnings. In the process, employees leave for employers who pay more and care better for the same level of performance.

Again this is a case of ‘right pay’ : employees leaving the job leads to disturbance and additional costs. Hence, one has to either structure the job in such a way that the disturbance caused due to attrition doesn’t impact the business or pay at a level that produces a bearable level of interruption.

Thus, ‘Right pay’ is a function of demand and supply of skills, impact of performance and the level of chaos that the business is designed to withstand. So, here is a model of ‘Right pay’ that works!

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