MODULE - REWARD MANAGEMENT Ipmz 2016

IPMZ
DIPLOMA
REWARD MANAGEMENT
MODULE
COURSE DESIGN LENGTH: 200 HOURS
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© THE INSTITUTE OF PEOPLE MANAGEMENT OF ZIMBABWE 2010
TABLE OF CONTENTS
Study Guide……………………………………………………………………………… 6
CHAPTER 1 : MEANING AND IMPLICATIONS OF REWARD
MANAGEMENT………………………………………………………
8
1.1 Introduction………………………………………………………………………. 9
1.2 Amount of rewards payable………………………………………………………. 9
1.3 Form and manner of remuneration payment……………………………………… 10
1.4 Circumstances under which remuneration can be paid in kind ………………….. 11
1.5 Reward management considerations in modern society………………………….. 11
1.6 Employer’s objectives in wage and salary administration……………………….. 14
1.7 Benefits of a sound remuneration prorgamme……………………………………. 15
1.8 Wage and salary criteria………………………………………………………….. 16
1.9 Principles of wage and salary administration…………………………………… 17
1.10 Motivation and pay: pay satisfaction…………………………………………… 17
CHAPTER 2: JOB CONTENT AND MEASUREMENT

(INTERNAL EQUITY)……………………………………………….
26
2.1 Introduction………………………………………………………………………. 27
2.2 Job analysis and Job description………………………………………………….. 28
2.3 Job Evaluation…………………………………………………………………….. 29
2.4 When should management engage in job evaluation?............................................. 30
2.5 Traditional methods of job evaluation……………………………………………. 32
2.6 Job evaluation methods use in Zimbabwe……………………………………….. 38
2.7 Requirements for job evaluation………………………………………………….. 47
2.8 Benefits of job evaluation………………………………………………………… 50
2.9 Job structure………………………………………………………………………. 50
CHAPTER 3 : THE INFLUENCE OF MARKET VALUE AND LEGISLATION
ON SALARY LEVELS (EXTERNAL EQUITY)…………………… 52
3.1 Introduction………………………………………………………………………. 53
3.2 Market value theory………………………………………………………………. 53
3.3 Salary and benefit surveys……………………………………………………… 56
3.4 Legislation on wages and salaries………………………………………………… 63
CHAPTER 4: SALARY PLANNING AND POLICY………………………………. 66

4.1 Introduction………………………………………………………………………. 67
4.2 Salary structure…………………………………………………………………… 67
4.3 Employee appraisal……………………………………………………………….. 68
4.4 The 360 degrees feedback………………………………………………………… 73
4.5 The current performance management system – the balanced score card system.. 74
4.6 Salary planning…………………………………………………………………… 83
4.7 Salary policies and procedures………………………………………………….... 84
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CHAPTER 5 : SUPPLEMENTARY PAYMENTS…………………………………. 97
5.1 Introduction………………………………………………………………………. 98
5.2 Wage incentives for individuals………………………………………………….. 98
5.3 Group incentives………………………………………………………………….. 100
5.4 Remuneration for salesmen, managers and professionals………………………... 101
5.5 Incentives for blue collar workers by George De Swardt……………………….. 102
CHAPTER 6 : FRINGE BENEFITS…………………………………………………. 111

6.1 Introduction………………………………………………………………………. 112
6.2 Why adopt fringe benefit programmes?................................................................... 112
6.3 Types of fringe benefits………………………………………………………….. 113
6.4 The cost of fringe benefits……………………………………………………….. 114
6.5 Advantages of fringe benefits…………………………………………………….. 115
CHAPTER 7 : THE ROLE OF THE HUMAN RESOURCES OFFICER IN

MANAGING SALRY ADMINISTRATION………………………. 117
7.1 Introduction………………………………………………………………………. 118
7.2 Who is responsible for remuneration?..................................................................... 118
7.3 How many staff are required?................................................................................. 119
7.4 A systems and strategy approach………………………………………………… 120
7.5 Recording, controlling and up-dating the remuneration
management programmes………………………………………………………… 121
7.6 Managing unionised groups………………………………………………………. 123

7.7 Practical pay problems……………………………………………………………. 123
7.8 A look to the future……………………………………………………………….. 124
CHAPTER 8 : PRACTICAL REWARD PROCESSING AND PAYMENT………. 128

8.1 Introduction………………………………………………………………………. 129
8.2 The steps in the reward process…………………………………………………... 129
8.3 Major pitfalls to avoid when processing salaries…………………………………. 129
8.4 The outputs of the process………………………………………………………... 130
8.5 Statutory deductions and procedures for remitting them and the cut off dates…… 131
8.6 Additional salary payment matters……………………………………………….. 132
CHAPTER 9 : OCCUPATIONAL COMPENSATION AND

EMPLOYEE PENSIONS…………………………………………….. 134
9.1 Introduction………………………………………………………………………. 135
9.2 History of employee compensation……………………………………………….. 135
9.3 Circumstances where compensation is due………………………………………. 135
9.4 Procedure for claiming compensation……………………………………………. 135
9.5 Benefits payable to the employee or the dependants…………………………….. 136
9.6 Compensation scheme for civil servants…………………………………………. 136
9.7 Pensions as a form of remuneration………………………………………………. 136
9.8 Private sector pension arrangements……………………………………………… 137
9.9 Formalities, registration and administration of the fund…………………………. 137
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9.10 Refunds of employee contributions………………………………………………. 137
9.11 NSSA – pensions and other benefits scheme…………………………………….. 138
9.12 Benefits payable under the scheme……………………………………………….. 138
9.13 Procedure for claiming benefits………………………………………………… 139
REFERENCES………………………………………………………………………… 140
REWARD MANAGEMENT
Course Objectives
By the end of the course, you should be able to:
1. Outline the importance and implications of reward management
2. Outline the relevance of job content and measurement
3. Describe the influence of market value and legislation on salary levels
4. Describe the basis on which remuneration is based and the various considerations
before employee levels of remuneration are fixed.
5. Identify the role of supplementary payments in an organisation
6. Discuss the importance of fringe benefits in reward management
7. Discuss the methods and procedures used in wage and salary administration
8. Administer wage and salary administration within an organisation
9. Design a compensation policy for an organisation
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STUDY GUIDE
Firstly we would like to welcome you to this course and particularly to the “Reward
Management” module. We further congratulate you for taking this module, which covers
modern tools that every manager worth his or her salt must have.
Reward management is a discipline concerned with the formulation and implementation of

strategies and policies geared at consistently , fairly and equitably paying people in
accordance with their worth to the organization and within the legislative framework. The
objective is to design, implement and maintain best practices which improve organizational,
team and individual performance.
A sound reward management program has benefits for employers, employees and all other
stakeholders including the economy at large. Certain principles of wage and salary
administration have been developed and will be discussed. Under the heading wage and
salary criteria, those factors that help establish wages and salaries within an individual
organization will be examined.
Literature
Prescribed books
McBeath and Rands Salary Administration, Business Books limited, London.
Recommended reading
Beach, D.S (1985) The Management of People at Work McMillan New York
Armstrong, M. (2003) A Handbook of Human Resources Management Practice, Kogan Page,

London.
Gwisai, M. (2006) Labour and Employment Law In Zimbabwe: Relations of Work under Neo
– Colonial Capitalism, Zimbabwe Labour Centre, Harare.
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Use of prescribed books
We assumed most students would not be able to access the prescribed books and ensured the
module covers all the key information that is required for the student to pass the exam.
However students are recommended to purchase the prescribed book in order to fully
comprehend from an HR practitioner’s perspective, the complexities of systems delivery to
achieve real and lasting benefits from technology solutions.
In order for you to fully understand reward management, we encourage you to access the
referenced materials.
Method of study
This module is your primary learning resource. You may refer to the prescribed and reference
books in order to improve your knowledge and understanding of the material in the course
and enrich your learning experience.
As reward Management is in a constant state of change you should attempt to remain up to

date with current developments regarding statistics that are relevant to the HR service. You
should read journals (hard copy or online) that cover Reward Management as often as
possible.
Review questions and exercises are given at the end of each Study Unit. These are meant to
test your understanding of the concepts covered in the module. In addition, the exercises are
meant to test your capability to apply the theoretical knowledge you have gained to real
world scenarios.
Please attempt all the questions to test your understanding.
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CHAPTER 1: MEANING AND IMPLICATIONS OF REWARD MANAGEMENT
Chapter Learning Objectives
Upon completion of this chapter, you should be able to:
1. Identify the main reward considerations in modern society
2. Describe the major employer’s objectives in wage and salary administration
3. Outline the benefits of a sound reward management program to employees
4. Discuss the wage and salary criteria that help establish pay levels in individual
organisations
5. Outline the principles of wage and salary administration
6. Examine the model of the determinants of pay satisfaction
7. Identify the three manifestations of pay dissatisfaction among employees
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1.1 INTRODUCTION
Reward management is a discipline concerned with the formulation and

implementation of strategies and policies geared at consistently , fairly and equitably
paying people in accordance with their worth to the organization and within the
legislative framework. The objective is to design, implement and maintain best
practices which improve organizational, team and individual performance.
Reward Management should be strategic and underpin the business strategy,

integrated to other Human Resources strategies and improve employer - employee
relationships through the adoption of the total reward approach. It should recognize
differential contribution which leads to different rewards based on what each
individual invests in the company.
Remuneration Management should support the achievement of organizational goals

by facilitating the retention of appropriate skills required by the organization to create
sustainable competitive advantage.
Remuneration is broader than wages as it includes wages and any allowances,

bonuses and other benefits that the employee receives. At common law, wages and
salaries are distinguishable from allowances and bonuses with the employer having a
duty to pay wages and salaries but not necessarily bonuses and allowances unless
these have become vested. Bonus payment is discretionary while wages and salaries
are mandatory
The organization‘s philosophy will determine whether it is a high payer, average

payer or lower level payer but complying with the statutory minimum. The reward
policy will depend on performance expectations, market competition for skilled
people, organizational history, organizational culture and ability to pay the amounts
promised to employees.
A balance should be struck between external equity and paying for performance or
competence. The reward strategy determine the direction the organization‘s rewards
should take to support the business strategy.
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An organization should take into account the following in its salary structure:
1. Base pay which represents the minimum payment for the job thereby
determining the organization’s market stance.
2. Contingent pay which is dependent on an employee‘s length of service,
performance, skills and contribution.
3. Variable pay which is paid in the form of bonuses which is dependent on
either individual or company performance.
1.2. AMOUNT OF REWARDS PAYABLE
The agreement between the employer and employee should determine the amount of
remuneration to be paid in terms of common law. However, Section 12 (2) of the
Labour Act requires that the employer should put in writing the particulars of
remuneration, benefits and bonuses payable. If the contract is silent, the amount
should be based on the doctrine of quantum meirut which refers to fair and reasonable
remuneration for services rendered.
The employer may also pay to avoid him being enriched at the expense of the
employee but is also important to note that the employer pays for the availability of
the worker’s service and not for the actual work done. The employer is free to grant
different wages to different employees using his own criteria and any increases are at
the discretion of the employer. Any job evaluation results are not binding unless both
parties accept them (Chiremba & Ors Vs RBZ 2000(2) ZLR 370 (S).
1.3. FORM AND MANNER OF REMUNERATION PAYMENT
Under common Law remuneration can be paid in both money and kind if provided for
in the contract. Section 12 (2) of the Labour Act require every employer to provide in
writing the following information to every employee.
1. The particulars of the remuneration, basis of its calculation and intervals at

which it will be paid.
2. Particulars of any bonuses or incentive production scheme.
3. Particulars of vacation leave and pay.
4. Particulars of any other benefits under the contract of employment.
When the payment is effected, Section 12A (5) of the Labour Act require the
employer to provide a pay slip which shows the following information.
1. The names of the employer and employee.
2. The amount of remuneration and the period for which it is being paid.
3. The component of remuneration representing bonus or allowance.
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4. The deductions made.
5. The net amount received and how it was paid.
The remuneration should be paid in legal tender in cash, cheques or electronic transfer
to the employee‘s bank account. Payment of wages using promissory notes, vouchers
and coupons is prohibited.
1.4. CIRCUMSTANCES UNDER WHICH REMUNERATION CAN BE

PAID IN KIND
1. The payment should be for the employee’s use, not for resale.
2. The value should be fair and the employer should not unilaterally determine
the value.
3. Equipment and clothing required for health and safety cannot be computed as
part of the employee‘s remuneration.
4. Remuneration cannot be in the form of liquor or drugs.
5. Remuneration in kind cannot substitute entirely for remuneration in money as

the major portion should be in money.
1.5. REWARD MANAGEMENT CONSIDERATIONS IN MODERN SOCIETY
At first glance, Reward Management (or salary and rewards) appears to be a fairly
straight forward transaction – a straight buy/sell transaction. An employer needs the
services and is prepared to pay for them. A person has his time, motivation and
abilities (skills and knowledge) to offer and wants payment for these. A closer
analysis will, however, show that reward management has more to it than meets the
eye.
Reward Management, in an industrial society, often serves as a substitute for personal

recognition. Furthermore, pay plays a major role in determining the worker’s way of
life including his social position (for an increase in pay may move a person from one
social bracket to another).
Determination of rewards may also involve questions of power and influence –

political considerations. Pay is considered to be one of the elements of motivation,
thus involving psychological considerations.
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Finally, no pay question in our society is solved without careful examination of
fairness, which, of course is an ethical consideration. An examination of these reward
management considerations serves not only to explain the complexity of pay
questions, but also the difficulty of developing standards against which to test
answers.
Economic elements in rewards.
To the employer, pay is a cost factor; rewards are the price you must pay for the
employment of a factor of production. In this sense, payments for employee services
is an economic transaction governed by the same logic as any other purchase, in
which the purchaser attempts to obtain the greatest quantity and the highest quality
possible for his money.
In this sense, also, the worker is selling his services to obtain income and he holds out
for the highest price he is able to command. These transactions are supposed to set the
price in terms of the demands of the purchasers (Employers) and the supply of the
sellers (potential employees). Thus the economic resource (i.e. labour) is allocated to
the employment where it has the most value. If, for example, the worker was a sheet
of steel the price would be reached in the same way.
Unfortunately for the potential employee, however, his labour is perishable in that if
today’s labour is not purchased today, it has no value tomorrow. Also, labour is not a
simple commodity like a sheet of steel that can be bought according to any
specifications of size, weight, strength and chemical composition.
Labour is not only perishable: since it varies with the ability of a person to work, it
may be a different commodity from day to day or hour to hour, and is affected by all
manner of things. Management recognizes that part of the price may go toward
promoting the feeling of loyalty to the organization and enthusiasm for work, thereby
stimulating the employee to be a more efficient worker.
The total income of most of our adult population comes from the sale of their labour
services. These payments have a great importance in the operation of the total
economy. Rewards are expected to play a major role in creating both an efficient
allocation of human resources and the utilization of the resources in the best interest
of all stakeholders.
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At the same time, total rewards play a major part in maintaining a satisfactory level of
purchasing power. This purchasing power should be balanced with the country’s total
output of goods and services to ensure the smooth functioning and stability of the
entire economy. The social assignments to the pay system underline the importance of
reward management decisions.
Sociological aspects of reward management
To the recipient, pay serves as a symbol of status as well as a means to purchasable

ends. As work - life tends to become separate from the balance of our lives, as
continued division of labour makes identification by occupation difficult, and as the
values become monetized, pay becomes symbolic of other standards of value.
If status is measured in terms of salary, it is possible to understand why even small
differences in pay assume great significance and why methods of payment and
frequency of payment have symbolic value without reference to the amount paid.
Salary carries a different status value than wage, yearly than monthly salary and
hourly wage rate than piece rate.
Understanding salaries as status symbols helps to explain the force of custom and
tradition in pay matters. The protection of present status gives force to custom defined
as:” What is right”. Custom and tradition require justification of change.
The employer as an institution, the union as an institution, and the action groups (e.g.,
employees) operating within the restrictions set by custom and traditions have strong
influence on pay.
Psychological aspects of salaries
Salaries or rewards provide a means for satisfying needs. Needs motivate people and
the extent to which the salary becomes a means for satisfying needs, it may serve to
motivate employees.
Human needs have complicated origins which are both physiological and social. It is
also recognized today that motivation is highly complex. Not only are there many
factors in motivation, but they do not seem to operate in simple linear fashion – such
as “more money equals more work.”
If it is desired that money operate as a motivator , it is necessary that the organization
be designed to foster such motivation, This requires that employees see how they can
accomplish their own goals by directing their efforts toward organization objectives
and that salaries be geared to performance.
Psychological considerations are also involved in the balance struck between financial
and non financial rewards. Use is made of the psychology of motivation in
establishing the extent to which job satisfaction, participation and authority influence
an employee’s desire to work harder. Privileges and non financial incentives may be
substituted for financial rewards.
Schein, in Organizational Psychology provides us with a link between rewards and

motivation. He points out that the problem of motivation has traditionally been
attacked by searching out and classifying the motives and needs of workers, and
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relating these to the incentives and rewards offered by the organization. Schein feels
that this complex problem can be better conceptualized in terms of a psychological
contract entered into by both the individual and the organization.
The notion of the psychological contract implies that the individual has a variety of
expectations of the organization and vice versa. The expectations not only cover how
much work is to be performed for how much pay , but also involve the whole pattern
of rights privileges and obligations between the worker and the organization. One of
the major psychological problems of organizations therefore involves the nature and
effect of the psychological contract between the organization and its members. Issues
such as the nature of authority, the possibility of influencing the system, the patterns
of motivation and expectations of employees and managers, the incentive systems
generated by management, etc, are all part of the problem.
The fairness of the psychological contract forms the basis of our next considerations.
Ethical considerations in rewards management
Most people agree that salaries should be fair but opinions differ widely on what
justice, fairness and equity mean in that respect. There are no absolute, universally
accepted yardsticks of equity. In modules 2 and 3 we shall discuss what methods are
available in attempting to obtain internal and external equity.
In this way rewards questions always involve ethical considerations. Pay decisions are
made to correct inequities and results that discriminate against employers, employees,
unions, groups and individuals.
With economic, psychological and political considerations to be balanced, it should

surprise no one that ethics also become important considerations. If absolute standards
or yardsticks are unavailable, what remains to justify any agreement on the fairness of
the decisions by the parties involved?
Political considerations of remuneration
Within communities and economies, standards of living (largely determined by

remuneration) may affect political stability and influence which certain individuals
may exercise over others within the society. Political stability or instability may on
the other hand affect the structure of power and influence.
Political leaders may use remuneration to control and influence certain constituencies
and may pay different rates to different groups within society as a strategy to harness
their allegiance. Senior staff is usually well remunerated so that they are used to
control junior staff.
The Legal provisions relating to remuneration payment
The Labour Act requires that the employer complies with certain labour standards and
these impose a duty on the employer to pay the prescribed remuneration in terms of
Section 6 (1) (a) of the Act.
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In Tel One Vs Nyambirai & Ors LC/MS/09/04 it was stated that failure to pay
contract workers the minimum wage stipulated in the Collective Bargaining
Agreement was an unfair labour practice.
1.6. EMPLOYER’S OBJECTIVES IN WAGE AND SALARY ADMINISTRATION
When the employer introduces remuneration packages, he is doing it with certain

objectives in mind. The purpose of salary and wages administration is to harmonise
the various elements involved. The employer should reconcile the economic,
psychological, political and ethical elements.
Various stakeholders with different interests who in some cases may be mutually
exclusive should be considered in remuneration administration. There is need to map
the different stakeholders and their interests so that these can be reconciled in the
process of implementing the remuneration strategy.
Stakeholder mapping
The interests of employers, employees, trade unions, workers committees, the state,
the tax authorities, the press, the business community and the society in which the
people live should all be considered with their various interests being taken into
account. The remuneration paid and how it is administered should be a reflection of
the interests of these social groups’ interests.
Beach clearly articulated the interests of the employer clearly by emphasizing the cost
aspect:
“Employers consider wages as a cost of doing business. They are interested in labor
cost per unit of output (whether the work is a unit of product or a unit of
service).Wages viewed broadly constitute the largest single cost item for most firms.
Through experience, employers have learned that to attract and hold competent
employees in a free labor market, they must pay adequate wages and pay one worker
properly in relation to other workers within the establishment.”
The objectives of the employer can be summarized as follows.
(a) Wage and salary control to ensure they are neither too high nor too low
compared to the market.
(b) Maintain consistency within the organization by establishing rational standard

remuneration for comparable occupations.
(c) To ensure external equity through pegging salaries against the labor market.
(d) To pay remuneration depending on job complexity and level of responsibility

to guarantee equity.
(e) To recognize merit in compensating individual employees depending on their

contribution and proficiency.
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(f) Empower supervisors and executives to deal with remuneration matters raised
by employees at the lowest level.
(g) To rationalize the adjustment of wages and salaries so that these are based on
principles which are understood by all stakeholders?
1.7 BENEFITS OF A SOUND REMUNERATION PROGRAMME
An organization should adopt a total reward management approach which should be

designed to assist the organization to fulfill its vision through creation of extra
ordinary value thereby allowing employees to participate in the challenges and the
rewards of success. Total remuneration includes both monetary and non monetary
rewards offered to employees. It also includes the emotional rewards experienced
from working in an organization with a competitive corporate culture and a variety of
employee benefits.
A sound remuneration programme will benefit both the employees and the employers
thereby helping all the organization’s stakeholders.
BENEFITS TO THE EMPLOYEES
1. The programme will address the financial needs of the employees thereby
improving their standard of living and that of their dependants.
2. It enables the employee to appreciate the importance of equity in remuneration

issues thereby reducing their perception about inequity.
3. It enables the employees to retain their jobs and avoid job hopping thereby
allowing them to accumulate valuable experience which makes them more
marketable.
4. The system will reduce pay secrecy which creates perceptions of inequity.
5. The programme will motivate the employee if he understands the details

pertaining to the rewards.
BENEFITS TO THE EMPLOYERS
1. A sound remuneration programme will facilitate the attraction and retention of

scarce talent within the market thereby reducing labour turnover.
2. A system which is understood by employees will act as a motivator thereby

improving employee performance for the benefit of the organization.
3. A good system will also ensure pay fairness which will contribute to
employee satisfaction. Employees who feel that they are under rewarded may
engage in behaviours which are generally detrimental to the organization like
stealing, restricting output and reducing quality.
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4. Sound system improves productivity thereby improving the company’s
capacity to reward its employees.
1.8 WAGE AND SALARY CRITERIA
There are various factors which have to be taken into account when establishing or
determining remuneration in individual organizations. According to Beach these
factors include the following.
1. The prevailing wages in the market which may be established through market
surveys.
2. The ability to pay on the part of the employer which will guarantee continuous
payment.
3. The cost of living in the respective centre with rural areas requiring low
figures compared with urban set ups.
4. The productivity on the part of the organization and individual employees.
5. The bargaining power of unions with the economy and specific industry.
6. Job requirements which are measured through the process of job evaluation.
Additional factors which may also influence wages are as follows
1. The sector in which the organization operates as this influences the level of
salaries.
2. Legislation and government policy which is represented by the Collective

Bargaining Agreement for the sector.
3. The history of the sector and salaries will also influence their level.
4. The organizational culture which influences how many increases can be in the
market.
5. Supply and demand for certain skills within the market.
1.9 PRINCIPLES OF WAGE AND SALARY ADMINISTRATION
The last three sections (1.2, 1.3, and 1.4) are well integrated in the principles of wage
and salary administration, as set out by Beach:
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1. A definite plan for differences in pay should be based upon variation in job
requirements.
2. Wages and salaries should be in line with the labour market.
3. The plan should carefully distinguish between jobs and employees.
4. Equal pay for equal work.
5. Individual differences in ability and contribution should be recognized on an

equitable basis.
6. An established procedure for hearing and adjusting wage complaints.
7. Employees, workers’ committees and unions should be adequately informed

about the procedures used to establish wage rates.
1.10 MOTIVATION AND PAY: PAY SATISFACTION
The first basic question that we will attempt to answer in this section is “Why do
individuals work?”
Once we have established that fact, we will turn our attention to the “Money Motive”.
Pay will then be viewed as a satisfier of needs.
Another crucial question follows “When will pay motivate good job performance?”
Then the determinants of pay satisfaction will be analysed through a model, followed
by the consequences of pay dissatisfaction to both the employee and the employer.
Why individuals work.
In this book, Management and Motivation Vroom covers this question fully.
Individuals are willing to work (i.e. to accept organisation membership) when their
activity in the organisation contributes directly or indirectly to their own personal
goals. Individuals work for an organisation in return for inducement that the
organisation offers them.
To an employee of a non-volunteer organisation the most obvious personal incentive

that the organisation offers is a salary or wage. It is a peculiar and important
characteristic of this relation with the organisation that, in return for his inducement
he offers the organisation not a specific service but his undivided time, attention and
effort.
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In our modern society money (salary and rewards) is one of the major means of
satisfying our basic needs. (Refer to Beach for more details on basic needs.) With
the increasing complexity and industrialisation of society, work for many people has
become more and more simply a means towards the end of earning a living. However,
we must be careful of over-generalising this trend. In a USA study, the results
indicated that for most people, working does not simply function as a means of
earning a livelihood; even if there was no economic necessity for them to work, most
would work. During the hyper inflationary period in Zimbabwe most salaries and
wages could not buy the basic necessities of life but people still continued going to
work. Why? It is through the producing role that most people tie into society and, for
this reason and others, most people find the producing role important for maintaining
their sense of wellbeing.
The money motive
Because money is used to pay wages and salaries, it is essential that personnel people
and management understands how money motivates man. Saul Gellerman does an
excellent job in describing the money motive in his book Management and
Productivity. Money derives the unique power as a motivator from the fact that its
symbolising power is not confined to market value. Money can symbolise almost
every other value that people are motivated to pursue.
“That is money, money can represent achievement, prestige, power or security; it can
represent cynic’s only trustworthy companion or idealist’s devil.
Money means whatever people want it to mean and therefore, reflect the ambiguously
logical and emotional nature of man”.
It would seem that the power to multiply has its own motivating effect dependent on
whether or not it makes non-financial goals accessible. This in turn depends to a large
degree on whether an individual has been able to accumulate some capital or has been
spending all his income.
People with little or no capital have little reason to be optimistic and are not likely to
be especially responsive to monetary incentives, despite the fact that they have a
greater need for purchasing power than anyone else. To be without money is not
necessarily to be “hungry” for it.
For a man who has always felt himself to be at the mercy of his environment, money
is no substitute for security, and security lies not in his own savings but in a continued
need for his services. This theory of Gellerman, should help us a great deal to
understand the unskilled worker’s attitude to money and productivity.
On the other end of the scale- the symbolic, rather than financial role of the money
motive is nowhere as well illustrated as in the upper tax brackets. Here a sizeable
proportion of earnings is never at the disposal of the earner at all and where additional
earnings are largely taxed away.
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Precisely because it symbolises highly priced values-leadership, responsibility and
authority-this “badge” can be almost as effective a motivator as it would be if the
money itself were not taxed away.
This money motive varies from person to person as a function of his life history.
The important point is that money derives its compelling power to motivate most
people some of the times, and some people all the time, from the fact that it has no
intrinsic meaning of its own. It can, therefore, absorb whatever meaning people want
to find in their lives.
The fact that it also has a rational economic function helps to obscure the deeper
sources of its strength as a motivator.
Pay as a need satisfier
In his book, Pay and the Organisational Effectiveness, Lawler concludes that from
research:
“….the data suggest that pay can be instrumental for the satisfaction of most needs
but that is:
(a) most likely to be seen as instrumental for satisfying esteem and physiological
needs
(b) secondary for satisfying autonomy and security needs and
(c) least likely for satisfying social and self-actualisation needs”
This suggests that unless esteem, physiological and security needs are strong in an
individual, he is not likely to value pay. He fees one would expect pay to vary in
importance from situation to situation and, typically, to be ranked relatively high in
importance. Lawler thereby contradicts a number of other authors who had tended to
give pay only an average position in the scale of importance.
When will pay motivate good job performance
From the aforegoing section we can conclude that pay does not always motivate.
When does pay then motivate people to perform better? Lawler describes what
conditions should prevail if pay is to motivate good job performance.
1. Employees must attach a high positive valence to pay.
2. Employees must believe that good performance does in fact lead to a high pay.
3. They must feel that they control the quality of their job
performance and can influence it.
74
4. Employees must see the positive outcomes tied to good job performances as
greater than the negative ones.
5. Employees must see good performance as the most attractive of all possible
behaviours. Only then will they be motivated to direct their effort towards
performing well.
In order for pay to motivate performance, it must appear to be related to performance,

but we must remember that employees are not likely to believe that pay is related to
performance if it is actually not.
A pay plan should be tailor- made or be adjusted to suit the requirements of each
organisation. The pay plan must fit the characteristics of an organization. If it is to be
effective; it must be individualized in terms of an organization’s size, management
style, organisation climate and culture, etc.
Determinants of pay satisfaction
When will employees be satisfied with pay and when will they be dissatisfied?
At a first glance it appears to be a simple question of the size of the pay packet.
However, if the question is analysed more fully, it appears to be a rather complex
problem.
Lawler uses a model to put together the various factors that play a role in determining
pay satisfaction or the alternatives. In column A of the model the employee inputs
and job characteristics are listed while the column B consists of employees perception
of his inputs, compared to the inputs and outcomes of other employees, his perception
of job characteristics and his perception of his own and others’ pay. These
perceptions result in two concepts (Column C):
(a) the perceived amount that he should be receiving and
(b) the perceived amount of pay received.
Only if these two perceived concepts are equal to each other, does pay satisfaction
result. If on the other hand what he should receive is larger than what he actually
receives in terms of his perception, he feels underpaid and pay dissatisfaction arises.
If on the other hand he perceives his pay as larger than he should receive he is
overpaid and a feeling of guilt, inequity or discomfort results. (Column D).
A good way to understand the model or diagram is to take yourself as an example and
look at each column in terms of yourself and your perceptions.
74
Perceived personal
Job inputs
Perceived inputs
and outcomes of
Skill referent others
MODEL OF THE DETERMINANTS OF PAY SATISFACTION
Experience
A
Training
Effort
Perceived job
Age characteristics
Seniority
Education
Company Loyalty B
Past Performance
Present Performance
Perceived non-
monetary outcome
Level
Difficulty
Time span Wage History C
Amount of responsibility
Perceived pay of
referent others
Status 74
Security Actual pay rate
Perceived a
amount
that
should be
received
`
D
a =b pay
satisfaction
a>b
dissatisfaction
a<b guilt,
inequity
discomfort
Perceived amount of
pay received b
Consequences of pay dissatisfaction
From the previous model it is safe to conclude that many employees will be
dissatisfied with their pay, because of a perception of underpayment. It is essential
that the Human Resources officer and management should be aware of the
consequences of pay dissatisfaction to both the employer and employee. In the
following model Lawler portrays the various manifestations of pay dissatisfaction.
Most of these are well known to Human Resources Practitioners. With regard to the
employee’s perception of overpayment, we should mention that this could be a real
problem, although probably to fewer employees. They normally adjust their
perceptions and rationalise after a short while that they are not really overpaid.
Model of the consequences of pay dissatisfaction
Performance
Desire for more

Strike
pay
Absenteeism
`
Pay dissatisfaction
Turnover Psychological
withdrawal
`
Grievances Job
dissatisfaction
Absenteeism
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Search for a
higher paid Dispensary
job visits
Lower
attractiveness Poor mental
of job health
Remuneration sub-system.
In order to understand the role of compensation, the following sub-system has been extracted
from the Total Personnel System (refer to the course “Introduction to Personnel ,Training,
Labour and Business”).
Inputs Process Output
Employee System - time Satisfaction of

- motivation individual and group
- abilities needs
Personnel System – salary Compensation

- administration
- policies
- procedures
- practices
Company System – money Achievement of

company objectives
From the employee’s point of view extrinsic rewards are discussed in Chapters 4, 5 and 6,
while intrinsic rewards are referred to in this module under the section motivation. The
rewards package offered by organisations is a mixture of extrinsic and intrinsic rewards.
74 Poor
mental
health
Extrinsic rewards are those controlled by the organisation (i.e. wages, salaries, pensions,
promotions, praise and employee achievements).
Intrinsic rewards are those an employee gives himself for good performance through
enjoying the work he is doing and receiving recognition.
Internal equity forms the basis of Chapter 2, while external equity will be discussed in
Chapter 3. The following diagram portrays the employee’s point of view.
Intrinsic
Rewards Perceived internal
equitable rewards
Employee
Employee inputs satisfaction
Extrinsic Rewards
Perceived
external
equitable
Conclusion rewards
Now that the meaning and implications of remuneration have been covered in detail, we have
a sound foundation to move to the more practical aspects of remuneration in the modules that
follow.
CHAPTER 1: MEANING AND IMPLICATIONS OF REMUNERATION
SELF TEST
1. List the five main remuneration considerations in modern society.
2. State five of the factors that help establish pay levels in individual organisations.
3. Explain the symbolic role of the money motive for the highly paid executive.
4. What are the seven main principles of wage and salary administration?
5. State five conditions under which pay will motivate good job performance.
6. List five consequences of pay dissatisfactions to employees and three consequences to

employers
7. List four of the employee inputs that form part of the determinants of pay satisfaction.
8. Which three systems form the inputs in the remuneration sub-system?
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CHAPTER 2: JOB CONTENT AND MEASUREMENT (INTERNAL
EQUITY)
1. Describe Human Resources functions for which job descriptions can be used.
2. Explain the concept of job evaluation
3. Outline the four traditional methods of job evaluation
4. Discuss the newer methods of job evaluation
5. Explain why the “job family” concept is important in salary administration
74
2.1 INTRODUCTION
In Chapter 1 we saw that Remuneration is influenced by many aspects, i.e. economic,

sociological, physiological, political and ethical. We cited employers’ objectives and
the resulting benefits of a sound Remuneration Programme to both employers and
employees. You then examined the factors that help establish wages and salaries in
an organisation and a set of principles of wage and salary administration was given.
From this we can now conclude that a formal approach to wage and salary
administration is necessary for any large or progressive organisation.
We then looked at the reasons why people work, followed by a discussion of

motivation and pay, as well as pay satisfaction and dissatisfaction. This underlined the
importance of pay as a motivator when it is tied to performance. Increased
performance is essential for greater productivity.
Now that we have established that a formal approach to wage and salary
administration is most desirable, we will devote the rest of the course to explaining
how it can be done.
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Wages and salaries should be fair – within the organisation and also when compared
with other organisations. This Chapter is concerned with Jobs within an organisation
– their content, and how they relate to each other, both of which can be measured. If
we can determine the relationship between jobs within an organisation, and base the
pay system on the job hierarchy thus determined, that system will be perceived as
being fair internally, and internal equity will have been achieved. However, wages
and salaries should also be fair when compared to other companies (the market). In
Chapter 3, we will examine what the market influences are and how external equity
can be achieved.
We have to examine how internal equity can be achieved when managing rewards in
an organization. Because this problem is part of any industrial society we are
fortunate that various methods have been developed to help us determine the content
of jobs and how they can be measured.
1. In the first section of this module we will be studying the methods of how to
analyse and describe jobs – the methods of job analysis and job description.
2. In the second section we will examine various job evaluation methods. This is
the method whereby various jobs are compared and evaluated. Most methods
were developed in America and Britain. Limited research has been carried out
in Zimbabwe on job evaluation methods. The source of reference is the
Riddell Commission’s enquiry into prices and incomes completed in 1982.
3. Finally, we will classify related jobs into families and give attention to job
titles. This process is called job structuring.
2.2 JOB ANALYSIS AND JOB DESCRIPTION
This section deals with the basic steps of how to analyse and describe jobs. McBeath
and Rands covers this section well except for the fact that they do not distinguish
clearly between job analysis and job description.
NOTE 1
There is a considerable confusion in Human Resource management literature as to

what job analysis/job description really is. In order to obtain uniformity of these
terms in our course the following descriptions are given –
Job This is “a recognised, normal, recurring set of duties and responsibilities,

assigned to a particular employee or to a number of employees as their part in the
whole work or service function”.
Job Analysis “this is the process of collecting and obtaining pertinent job
information to enable drafting of a job description” This is done after appropriate
74
information about the job has been gathered using various methods. This information
collection process is what job analysis is all about.
Job Description “a statement of the duties, responsibilities and job conditions

(as it is now – not as one would like it to be)”.It describes in detail what the jobholder
is expected to do for him to accomplish what is required.
Job Specification “a statement of the human qualities required to fill a job, usually
derived from the job description” This is also referred to as the person specification.
The following sub-headings from McBeath and Rands are helpful and form the basis
of this section:
1. The Value of Job Information and Analysis.

2. The Collection Exercise – obtaining job facts.
3. Means of Collection – interview and questionnaire.
4. Format - job descriptions and position guide.
5. Application to Organisation Planning, Succession Planning and Career
Planning.
NOTE 2
It is important to note the relevance of job analysis and job description to the other
Human Resources functions. Refer to Beach for more detailed description of the uses
of job analysis:
“A comprehensive job analysis (job description) programme is an essential ingredient

of sound Human Resources management. Job information derived from such a
programme has many important applications. These are as follows.
Organization and Manpower Planning

Recruitment, Selection and Placement
Establishment of Proper Rates for Employee Compensation (i.e. Basis for Job
Evaluation)
Engineering Design of the Operation and the job
Employee Training and Management Development
Performance Appraisal
Safety and Health”
2.3 JOB EVALUATION
Bates (1996: 185) defined job evaluation as a means of measuring jobs relative to
other jobs within the organization, rating / ranking them, and grouping them
according to similar criteria in terms of the job evaluation system used.
Beach gives a more comprehensive definition than McBeath and Rands.
74
“Job evaluation is a formalized system for determining the relative money
value of jobs in an organisation. It involves the analysis of jobs for the
purpose of writing job descriptions and specifications, rating of these jobs
through the use of a job evaluation plan and conversion of relative job values
to define wage rates”.
The Aims of Job Evaluation
The job evaluation is a process that aims to achieve the following objectives.
1. Provide a basis or rationale for a more objective and rationale wage structure
for the organization.
2. Correct wage and salary inequalities.
3. Provide the means for the ranking of new jobs and changing jobs.
4. Reduce pay dissatisfaction by providing procedures for appeals and for
grievances.
5. Provide basic information for remuneration negotiations and determination.
Uses of Job Evaluation Information.
1. The information is used in job based approaches to remuneration

management.
2. The information is also used in recruitment, establishing training needs,
performance management, career development, human resources planning and
organizational development.
3. It provides a promotional ladder within the organization.
4. It provides a means of ranking and grading jobs within the organization.
2.3.1 Considerations in implementing Job Evaluation.
Certain considerations should be examined before deciding to implement job

evaluation and according to Bates A. (1996: 186) these should include the
following.
1. Management should define the reasons for the exercise.

2. Consideration should be given to the possible methods of
implementing job evaluation.
3. Examine the job evaluation systems available and define their merits
and select the most appropriate for the organization taking into account
its size and nature of the work undertaken.
4. Consider the attitudes and feelings of workers and involve them in the
selection of the system by engaging the workers” representatives.
2.4 WHEN SHOULD MANAGEMENT ENGAGE IN JOB EVALUATION?
74
Should each and every company now embark on a formal job evaluation
exercise? The answer is clearly NO.
Job evaluation has been adopted in many companies just because it is the
“proper” or “in” thing to do. Those responsible for its administration are often
more concerned with developing a technically perfect product than in
measuring its impact on people or finding out whether it is accomplishing
what it is designed to do.
Job evaluation is always expensive to administer and to keep up to date. It

almost invariably leads to headaches for management and to friction with
workers and unions. The real question is therefore whether job evaluation will
improve matters enough to be worth the trouble – or whether it will actually
make matters worse.
Following is a list of circumstances under which job evaluation has the best
chance of success.
1. When a qualified person like a Human Resources officer or Human

Resources manager is available to undertake overall coordination. In
fact, it will usually be such persons that would initiate the idea of job
evaluation.
2. When it does not cause undue disruption of either traditional wage

patterns or established promotional ladders.
3. Employees must accept and understand the selected system.
4. The exercise should consider job content and evaluate the job not the
personalities.
5. When the company’s overall wage level is relatively high so that not
too many adjustments or exceptions must be made to meet market
pressures, or when the company is so isolated from other firms (either
in terms of geography or job requirements) that comparisons with
wages elsewhere are difficult to make.
6. When there is a broad participation in administering the programme

throughout all levels of management.
7. When relations with employee representatives are generally good when

employee representatives accept an active role in administering the
programme.
8. When a feeling of trust exists between employees and management.
9. The job analysts and evaluation committee members must be

adequately trained to use the chosen method correctly.
The Principles of Job Evaluation.
74
There are certain fundamental rules which should be respected during the job
evaluation process and Beach D.S. (1985: 467 – 68) stipulated these as
follows.
1. Rate the job and not the job holder.

2. The combined judgments of many people should be employed in
evaluation jobs.
3. As job rating is primarily determined by the accuracy of the basic job
facts available, so job analysis must serve as a basis for any job
evaluation programme.
4. The principle of equal pay for equal work, i.e. pay people performing
similar work equal pay.
5. Give equal pay for work of equal value to the organization even when
the jobs are dissimilar in content.
The Elements of Job Evaluation
JOB ANALYSIS
The process of obtaining job facts
JOB SPECIFICATION
JOB DESCRIPTION A statement of the human qualities
A statement of duties, required to fill the job.
responsibilities and job conditions
JOB RATING/EVALUATION
Using a predetermined system or
plan, study the job description and
specification and assign a relative
74
MONEY ALLOCATION
Assign a monetary rate of pay to each
job according to a definite system or
scale
EMPLOYEE CLASSIFICATION
Classify all employees under proper job title
based upon the content of the work they
actually perform
Source: Beach D.S. (1985:468)
2.5 TRADITIONAL METHODS OF JOB EVALUATION
It is necessary for any Human Resources officer to understand the basic

methods of job evaluation as well as the advantages and disadvantages of
each.
For a brief overview of these methods it is suggested that you read

Beach/Bates. This should be followed by studying McBeath and Rands’ more
detailed description or Principles of Compensation.
Non-Quantitative Methods
These are subjective ways of determining a rank order for jobs using simple job
ranking or classification. They are ideal for small organizations and need subjective
decisions. Job ranking involves a selected committee placing jobs in rank order
according to what they perceive to be their value to the organization. The system is
simple and faster but is very subjective.
The following positions may be ranked with the highest on top and the lowest at the
bottom. Please practice ranking them and discuss your ranking with friends.
1. Cleaner, 2.Manager.3. Bookkeeper.4. Accounts Clerk.
2. Teacher.6. Driver.7. Tea maker.8. Assistant manager.
74
The methods are simpler to apply and consist of comparing “whole jobs” with each
other. Many of its disadvantages are found in its simplicity.
Advantages of Job Ranking
1. It is easy to apply and understand.
2. It provides or produces a hierarchy without analyzing the job content.
3. The evaluation and implementation processes are quick to apply.
4. It can be used to confirm the effectiveness of the other.
Weaknesses or disadvantages
1. It is difficult and cumbersome when used in organisations with many different

jobs.
2. Jobs are ranked in accordance with current rates of pay which may not be
correct.
3. Ranking jobs does not give an idea of how far apart the jobs may be in terms
of content and difficulty.
4. The procedure does not provide any means of recording on paper the
substantiations or reasons for the ratings.
5. It is difficult to find raters who know all the jobs and can rate them
objectively.
6. The procedure relies on rater judgement, so can be biased.
7. It is difficult to discriminate between the jobs in the middle rankings.
Grade Description (Classification) Method
Job classification involves dividing jobs into groups according to which jobs and
associated job descriptions are compared with one another. The predetermined
evaluation scale is used into which jobs have to be slotted.
It is applicable to bureaucratic type of organization such as government, military and

local authorities. It focuses on clerical and lower-grade technical jobs. Higher level
jobs vary more widely in job content than can be covered by generalized descriptions.
The job hierarchy (from lowest to highest0 is broken down into a number of grades or
classes or levels. Each grade is given a written description or definition, and then
assign every job to a particular grade/class.. The definitions are based on the
differences in the level of duties, responsibilities and skills that are essential for good
performance of the jobs. The grades represent different pay levels ranging from low
to high.
Job descriptions are examined against grade descriptions and the job is graded where
it fits best. An example of grade/level descriptions is as follows:-
74
LEVEL TYPING CLERICAL
5 Supervises a large typing pool Directs and supervises the work of a
probably using audio equipment clerical section. Carries
out more complex work
personally.
4 Carries out more complex typing Carries out more complex

work such as preparation of duties under infrequent
involved direction only. May supervise
statements, and under occasional the work of a few clerks.
supervision only.
3 Supervises a small group of Carries out a number of routine
typists and assigns and checks clerical tasks working under
their work. Carries out more occasional supervision. May guide
complex work personally. the work of a junior clerk.
2 Carries out routine copy typing, Carries out routine clerical work,
working from a number of source requiring some training and
documents, Works under experience. Works under frequent
frequent supervision and routine supervision.
checks.
1 Carries out simple copy tying Carries out simple, routine clerical
such as completing one or two tasks such as operating duplicating
simple forms, under constant machines, filing and sorting mail
supervision. under constant supervision.
Source: McBeath G & Rands D.M.
Strengths
1. As something is written down as a standard, so it is superior to the ranking

method.
2. Has a fixed written scale (definition) against which to compare all jobs.
3. As jobs change in content over a period, therefore, the use of a scale is more
durable and standardized/
4. Jobs are grouped into pay grades for administrative simplicity.
5. Simple to implement and control.
Weaknesses
1. Does, not allow for the weighting of job factors.
2. Grade descriptions must be general so as to accommodate all jobs that fit the
grade
74
3. The difficulty of preparing class/grade/level specifications
4. The difficulty of determining the classification of many jobs, i.e. some jobs may
belong to two or more class definitions.
5. Not appropriate to senior jobs because of the generalized grade descriptions.
6. It is inflexible to changes in the nature and content of jobs.
Quantitative Method
The process involves identifying compensable factors and determining the degree to
which they are required for a particular job. Points are then allocated for every degree
of the factor and a total is calculated which then determines the rank order. The
system has the factor comparison and point allocation method.
The quantitative methods involve the use of a series of factors against which the
requirements of individual jobs are assessed. McBeath and Rands then discuss the
result of job evaluation – i.e. Job Classification Schedules.
Factor Comparison Methods
Factor comparison involves comparing each job against others using factors like
mental requirements, skills, physical requirements, responsibilities and work
circumstances.
1. It is mostly used for evaluating white-collar professional and managerial

positions.
2. It is essentially a combination of the ranking and point systems.
Example
1. First identify key jobs in the organization
2. Conduct a pay survey to ensure that the key jobs are being paid correctly in
the job market as a whole.
3. After the rate of pay has been established, the hourly or daily rate of pay is
broken down into how the job evaluation committee feels it best fits the
identified compensable factors.
4. Factors usually used are mental requirements, skill requirements, physical

requirements, responsibility and working conditions.
5. After doing the above for the key jobs, all other jobs are compared with the
key jobs. A money value is assigned to each of the compensable factors
74
according to how that job compares with the key jobs. The total money added
up for each of the factors is then the rate of the job.
Strengths
1. It is flexible
2. It has no upper limit on ratings awarded for ach factor (the point system has
ceiling on the factors).
3. It utilizes few factors (only five) thereby reduces the likelihood of overlap (i.e.
two factors measuring the same quality)
4. The procedure of rating new jobs by comparing them with other standard or
key jobs is logical and not too difficult to accomplish.
5. It directly translates ranks into monetary values.
Weaknesses
1. The use of current wages/salaries for the key jobs may build in errors into the
system/plan.
2. The content and therefore value of the key jobs, may change after some time,
and this will lead to future errors. It means the standard is not fixed.
4. It relies heavily on the job evaluation committee judgements
5. It depends strongly on the use of key jobs.
Point Allocation Method
Point allocation involves giving each compensable factor some points at different
levels which are then added.
The system is more complicated than the job ranking and grade description systems.
Every point system (plan) consists of a number of compensable job
factors/characteristics classified under factor categories of skill, effort, responsibility and
job conditions.
Under each of the above four categories, individual organizations examine such factors as
education, experience, judgement, mental dexterity, alertness and adaptability,
health/safety hazards etc. it is useful to use between 6 – 12 factors.
Each of the factors used is subdivided into different degrees/levels and some points are
assigned to each category of degrees.
Example: Source – Beach D.S. (1985: 471-472)
Factors Degree/levels and points
1 2 3 4 5 6 7 8
Education & Training 20 40 60 80 100 120 140

Experience 10 30 50 70 90 110 130 150
74
Decisions 10 30 50 75 100
Responsibility for loss 5 15 25 35 45 60 75
Relations with others 10 30 50 70 90
Job conditions 5 15 25 40
Education can be broken down into 2 years secondary, 4 years Secondary ‘A’ level,
certificate, diploma and degree courses. Points are then awarded to each of the levels
of education, starting with the lowest number and progressing to the highest number
of points. After awarding points to each factor, these are added and the total number
of points for the job corresponds to a particular wage/salary grade and rate of pay.
Strengths
1. It breaks down into factors/attributes, which is an aid to evaluation.

2. It increases objectivity since all jobs have to be measured in the same way and
using the same factors.
3. The margin for differences of opinion (great in ranking and grade descriptions
methods) is greatly narrowed.
4. The likelihood of continuing errors over a period of time is minimized because
new jobs are rated against a fixed scale rather than against other jobs.
5. Points permit a ready and logical conversion to money
6. The evaluation of jobs is clearly recorded for initial inspections and further
analysis.
7. Has clearly defined items by means of which the value of jobs is assessed.
Therefore the yardstick for measuring job worth is known and is usually
acceptable to all parties as expressing the worth of jobs to the organization.
Weaknesses
1. Costly to develop and install (as compared with the ranking and grade
description methods).
2. It is time consuming to introduce
3. Lack of clear principles for the selection of the evaluation items or factors.
2.6 JOB EVALUATION METHODS USED IN ZIMBABWE
These are newer methods of job evaluation. They often use variations and
combinations of the non-quantitative and quantitative methods. The three most
widely used/popular systems in Zimbabwe are the Paterson Method (DBM), The
Castellion Method and the Peromnes Method.
Some of the other systems also used in Zimbabwe include the Hay Guide Chart
Profile System, the Q-(Questionnaire) System, the TASK system, the Zimplest
System.
The less frequently used ones are the Time Span and Discretion and the NIPR
systems.
74
The Paterson Method (Decision Band Method/DBM)
It is a grade definition system. It is widely used in government and the mining sector.
All jobs are measures and compared in terms of one factor, i.e. decision making. Jobs
are differentiated according to the kinds of complexity of decisions made.
A. Paterson Method
Paterson’s Decision-band theory had its basis on “the recognition that what is
common to all jobs is decision-making and that all jobs are differentiated
according to the kinds of decisions made. “ Six basic kinds of decisions that
define the full spectrum of jobs in an organisation from the Managing Director
to laborer were identified. In turn, all decision bands except for the lowest one
were divided into two levels – upper and lower, giving eleven grades in all. In
common with the Time-span and Peromnes/Castellion methods, the Decision-
band method successfully covered all job universes at all job levels by
restricting itself to job-oriented qualities common to every job. It has been
criticised for placing heavy reliance on the judgment of a single analyst, and
also for having a very rigid grade structure.
PATERSON DECISION MAKING BANDS
Decision Job Grades Definition Grade Sub

Band grades.
F Policy Higher Level 11 F5
Formulation
Policy Lower Level 10 F4
Formulation.
E. Programming Higher E 9 E4-E5

Coordinating.
Senior Lower-E E1-E3
Management. Programming 8
D. Interpreting Higher-D. 7 D4-D5

Coordinating
Middle Lower D. 6 D1-D3
Management Interpreting
74
C. Routine Higher C 5 C4-C5
Coordinating.
Skilled Lower C 4 C1-C3
Workers/ Routine
Supervisors
B. Automatic Higher B 3 B4-B5

Coordinating.
Semi Skilled Lower B. 2 B1-B3
Automatic
A Unskilled LowerA only. 1 A1-A3

workers Defined
Decisions.
Strengths
1. It is understood with ease at all levels

2. It can be implemented quickly
3. It works well across a wide variety of activities (i.e. covers all job universes at
all job levels).
Weaknesses
1. Places heavy reliance on the judgement of a single analyst

2. It uses one factor, i.e. decision making
3. It has a rigid grade structure.
B. The Castellion System
 It is the second commonly used method after the Paterson system in

Zimbabwe. It was devised in South Africa for the South Africa Breweries.
The name was derived from the brand names of tow of the brewery products,
i.e. castle and lion lagers.
 It is based on the differentiation of the kinds of decisions in terms of the

thinking that is required. It is used by mining, industrial, commercial and
parastatal organizations in Zimbabwe.
 It is a combination of the factor comparison and points rating methods. The

six factors that are measured are:-
1. Decision making
2. Pressure of work
74
3. Controls and checks
4. Consequence of error
5. Education
6. Experience
Each of the above factors is then defined, broken down into many levels and points
are allocated to these levels (refer to the point methods). The job descriptions are then
compared with the definitions and points are awarded for each factor.
For each job, the total number of points is calculated, and grades are awarded
according to the total score. This methods uses 16 grades with grade one (1) being
the highest, but can use the reverse format i.e. grade 16 being the highest.
Example:
Grades Categories
1. Top Executive
4-2 Executive
8- 5 Senior
12-9 Standard
16-13 Labourer
Strengths
1. Jobs are not measured on one factor alone

2. It is simple to use
3. It covers all jobs available
Weaknesses
 The definitions and factors are difficult to explain to the lower level
employees.
C. The Peromnes System
 Peromnes means “for all”. It was derived from the Castellion System. It is
the third commonly used system in Zimbabwe. It evaluates eight factors
which can be applied to any job in an organization. It is also a combination of
the factor comparison and points methods. It uses 21 grade levels with grade
being the highest level
The factors that are examined are:
1. Problem solving’
2. Consequence of error
3. Pressure of work
4. Job knowledge required
5. Job impact
6. Comprehension
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7. Education
8. Experience
The first 6 factors are job factors and the last 2 are job requirements. The system
operates the same way as does the Castellion method and has similar advantages and
disadvantages.
Example
Grade Categories
1 Senior Executive, corporate or national level

3.2 Other top management, very senior specialists
6.3 Senior management, high level specialists
9.7 Middle management, low level specialists
12.10 High level skilled, supervisory/clerical]
16.13 Low level skilled, low level clerical
19.17 Very low level skilled labour
21-20 Unskilled labour
D. The Hay (Factor) Guide Chart Profile Method
It examines three factors which are responsible for the successful execution of a job.
They include:
1. Accountability – Freedom to act, job effect on result and size of the job
2. Know-how – Specialized technique, practical procedures, management scope
and human relations skills
3. Problem-solving – Deals with the amount of thinking required.
It is important to know that the kinds of decisions required for the job holders are
important in differentiating the jobs from one another.
Example
1. Break-down each factor into measurements.

2. Plot the measurements on a matrix
3. Allocate scores/points in relation to the different levels of application of the
measurements/dimensions.
4. Calculate the total scores/points for each job evaluated
5. No grades are used; remuneration is based on the points/.scores calculated.
Matrix
Factors Levels of Application and points
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1 2 3 4 5 6
Accountability 20 40 60 80 100 120
Know-how 10 20 30 40 50 60
Problem solving 5 10 15 20 25 30
Strengths
1. it combines other methods

2. it uses few factors
3. easy to use/apply
Weaknesses
1. The method is discriminatory i.e. it is used for the most senior positions only,
with another method for lower level jobs.
2. The use of two methods of job evaluation is expensive.
NEWER METHODS OF JOB EVALUATION
Problem areas relating to the range of jobs which an evaluation system could handle
and to the choice of job factors have received considerable attention from researchers
overseas as well as in Africa. We will now briefly examine five newer methods.
A. Time-span of Discretion
Elliot Jacques of the Tavistock Institute in London claimed in his Time-span of

Discretion theory that the complexity of all jobs in an organisation, relative to one
another, could be determined accurately by an assessment of the period of time during
which an incumbent could exercise his own discretion in work performance before
having his results reviewed by his immediate superior. He stated that the higher up the
organisational ladder a man functions, the longer would be the lapse in time before
marginally substandard work would be recognised by the man’s superior. Though
implemented with apparent success in a number of companies, the method has been
criticised for having strong subjective overtones in its measurement, in spite of claims
to the contrary by Jacques.
B. N.I.P.R Method
At present the NIPR has two systems of job analysis and job evaluation available for
use in industry. The systems are based on a common set of principles and are both
intended for the classification and grading of jobs. They cater for different levels of
functions within an organisation. The systems are referred to as:
1. The Low Level Job Analysis Method
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2. The Questionnaire Method (Q-Method)
The Low Level Job Analysis Method is intended to cover all jobs found in an
organisation up to approximately the level of frontline supervisor. Four factors are
utilized.
Decision-making
Controls
Education
Experience
The Questionnaire Method is explained in the following extracts from Technical

Information for Industry Vol. 10, pp 1-4 June 1972.
Results obtained by the two methods can be linked together to yield a rank order
classification of all jobs in an organisation in terms of their relative job demand level.
The NIPR is continuing research to integrate the two systems into one total system.
ARTICLE ON JOB EVALUATION TAKEN FROM TECHNICAL

INFORMATION FOR INDUSTRY (Vol. 10, No 6).
INTRODUCTION
As a result of extensive experience in the development and application of job

evaluation techniques in a variety of organisations, the NIPR has developed a system
which adequately meets the demands of industry. Requests for assistance in this field
have indicated that, e.g., for the purposes of selection and wage and salary
administration, the basic requirement for a job evaluation system is to obtain a rank
order classification of all the jobs in an organisation in terms of their relative job
demand level, irrespective of the level at which employees function (e.g., as labourer
or as Managing Director), and the nature of the job (e.g. technical or administrative).
This essential requirement posed great problems for traditional job evaluation systems
since they were confined to application on a specific section of an organisation.
The need existed for a universal system; that is the system which could be applied to
all the jobs in an organisation in terms of common criteria. In this respect the various
factors used by earlier more conventional systems proved to be inapplicable and
misleading. For example, work condition factors such as physical demands or work
surroundings did not meet the universal requirements.
In the early sixties, the NIPR outlined an approach based on specific mental demands
that are common to all jobs. This approach centered round the Decision Factor since
it was reasoned that every individual no matter on what job level, is required to solve
problems and make decisions concerning his work.
A comprehensive job evaluation system was evolved along these lines, and the
practical application in a wide variety of organisations (industrial, financial and
government), proved that the whole theory for a universal system was both sound and
feasible.
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A SHORTER SYSTEM
Over the past ten years the NIPR job evaluation system has been consistently refined
and improved, but until recently the chief criticism against It has been its cumbersome
and time consuming application. The main reason for this is that rapid change and
growth of a dynamic organisation requires accurate but essentially economic
techniques.
The grade structure in any organisation is consistently subject to change and, for
example, when wages and salaries have to be adapted accordingly, a concise,
economical job evaluation system is needed to establish as rapidly as possible where
changes in the grade structure have occurred and what the nature of the change is in
order to supply a rational basis for salary determinations.
C. THE QUESTIONNAIRE METHOD (Q-METHOD)
The Q-Method has been designed specifically to cope with these demands and
therefore aims at drastically reducing the time involved in the implementation of the
system without necessary loss of accuracy. The Q-Method is not a short-cut package
deal but, a practical approach based on the decision making process. Three basic
factors utilized in the previous system have been retained but whereas the decision-
process is seen as the key variable in the relative complexity of the jobs, the
supporting factors, Controls and Checks and Contact with People, are included in the
Q-Method approach as additional dimensions of the quality and complexity of a job.
RATIONALE
All job holders need to take decisions or solve problems irregardless of the level of
the jobs or the nature of the work. However, it is the quality or complexity of
decisions taken that reflects the complexity of a job. For example, a very low level
job will only produce an occasional small problem which is easily perceived as a
deviation from the normal result. This type of problem is easily solved, usually
involving a mere adjustment and it does not, for instance, require great skills or
experience on the part of the job holder to find an answer.
On the other hand, the higher the level of the job the more involved the typical job
problems become, since the individual must now frequently interpret several clues
before he can identify the problem. The solution may also not be so obvious since he
might have a choice of several lines of action and need to weigh them up against each
other before making a decision.
Decisions cannot be taken at random, however, since there normally are rules or
regulations, or perhaps company policy which prescribe the individual’s use of
discretion and limit his choice of action. These limits of individual functioning
comprise the factor Controls and Checks. The extent and nature of supervision
exercised over a job holder’s actions is therefore also covered by this factor.
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Decisions are typically taken within a given job framework that may either be strictly
defined or may allow greater freedom of action. Seen in this light the Controls and
Checks factor is an essential part of the decision-making process and has been
incorporated as such into the basic Decision Model.
Contact with People is an additional dimension of job complexity since it determines

the extent and the nature of the job holder’s influence both inside and outside the
organisation. Contact on a low level is usually limited to elementary routine
information exchange while higher level jobs frequently imply extended influence on
the grounds of knowledge or experience.
PROCEDURE
The procedure followed in the Q-Method falls into three broad categories:
Training
Individuals from an organisation attend a three-day training course in the principles

and techniques of the Q-Method. The training comprises personal instruction, the use
of closed-circuit television and practical exercises.
Job Analysis
A systematic job analysis programme is then planned with the organisation concerned
and short preliminary job description questionnaires are sent to all job incumbents for
completion. The information given in these questionnaires is utilized by the job
analysts in the planning of their interviews. The analysts now move into the
organisation and describe all jobs from the lowest to the highest levels.
Job descriptions are done in an interview situation with each job incumbent by means
of a semi structured job description schedule. This means that the analyst is guided by
the schedule to obtain:
 relevant information on job content; and

 actual examples of job behaviour which are indicative of the job demands (in
terms of three factors)`
Evaluation
When all jobs have been analysed and rated they are placed in numerical order
ranging from the lowest to the highest (based on total score obtained from every job),
by a panel of raters. Using this rank order classification as a guideline, the paned can
then determine the cut-off points which define the division between grades. The
information on job content is utilized to group jobs on similar demand levels, with
similar characteristics, into specifically define grades.
Subjectivity
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The element of subjectivity is an inevitable part of any jot evaluation system since
reliance must be place on the interpretation and rating of the analyst of what
constitutes relevant information. To minimize the effects of subjectivity, the system
has been designed with certain built-in controls in each step of the Job Evaluation
procedure.
For example:
 Standard training for all analysts to provide a common frame of reference.

 Assistance given by NIPR staff members and spot checks conducted
throughout the job evaluation project
 Describing the job content in factual terms through the use of critical incidents
 Final control exercised by the evaluation panel
APPENDIX 1
IMPLICATIONS ON JOB EVALUATION
Job Evaluation provides an organisation with the following.
A. A grade structure according to which all jobs in the organisation are grouped
into respective grades on the basis of their complexity and essential
characteristics.
B. Information on job content which show up anomalies in the organisational
structure and subsequently indicates the direction of corrective action
The grade structure and relevant information yielded by job evaluation can be
analysed in terms of organisational needs and serve as a basis for the implementation
of personnel procedures such as salary determination, selection and training
requirements or guidelines for career planning and promotional paths.
ORGANISATIONAL CLIMAT
Organizational climate is an all-important element in determining the value of any job

evaluation programme to the organisation. The information supplied by job evaluation
is an essential guideline for healthy growth and development within a company. If
management is not prepared to permit optimal development of the available human
resources, job evaluation can become a straightjacket and a rigid structure into which
people and jobs are forced.
2.7 REQUIREMENTS FOR JOB EVALUATION
Patterson suggests in his book “Job Evaluation” that there are three main categories of
requirements of any method that will satisfy most, if not all objectives of Job
evaluation. These requirements are acceptability, operational principles and
theoretical principles.
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For the purpose of this course we will discuss only some of the main requirements
and at the same time cite some of the pros and cons of the various methods – the
traditional newer methods.
1. The method must have simplicity: it must be readily understood by most

employees. One of the drawbacks of the Factor-comparison and Time-span
methods is their complexity.
2. Because there will always be a subjective element, it becomes essential to

involve employees by participation in application of a method. The
employee is the first source for analysis of his job.
3. There must be comparability with a sense of justice and fairness. Justice in

the sense that all jobs are graded and assessed in the same way. All the new
job evaluation methods discussed do this.
4. The method must produce a guideline for change to a pay structure which is
not too far from the existing structure. If the methods end by requiring
drastic alterations then, however, logical these may be, there will be resistance
to such change. It is difficult to alter the pay structure based on the Point
method without manipulating factor degrees and their weighting, and so the
logic.
5. A method must lead to a pay curve for which the company has the ability to
pay – it must not cost too much. The factor comparison method is the best to
ensure this.
6. Because of advancing technology and rapid changes in the markets, job

content alters frequently. A method is more acceptable it if permits quick
reaction to such changes i.e. adjustability.
7. A method should be time-saving. Most existing methods require a long period

of time in committee work because of their subjectivity.
8. A method should be such that it cannot be easily manipulated. The non-

quantitative methods and also, particularly, the Point method lend themselves
to manipulation.
9. The factor of working conditions cannot be objectively scaled and this is one
which shop floor employees regard as of considerable importance. Working
conditions can change; if, in the quantitative methods this factor is given a
heavy weighting of points, the managers will tend to improve the situation in
order to reduce the pay.
10. Job content is what is evaluated, not the man and what he brings to the job
(the man is evaluated in performance appraisal), but what he does and what is
the result. The Ranking and Classification models do not give a measure of
job content. They are all subjective guesses, intuition, about relative
importance or difficulty of jobs without definitions of importance and
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difficulty. Quantitative methods are more objective in that they usually rely
on criteria which are related to job content.
Conclusion
We have covered various techniques and their uses in this module – job analysis, job
description and job evaluation. Job evaluation, which forms the basis of a salary
structure, was discussed in more detail under the headings of traditional and newer
methods.
Non-quantitative methods are rather crude and should only be used for very small
organisations.
In commenting upon the quantitative methods, Paterson suggests that the adding of
points for weighted factors and degree factors is like adding numbers to different
kinds of fruit and using only the total as a basis for comparison. He poses the
question whether there is not one common denominator for them all such as calories
or vitamins for the fruit. He feels that for job evaluation
there is and this emerges in the following methods:
Time-span
Peromnes/Castellion
Hay’s Guide-chart Profile
Paterson Method
NIPR method
All have one thing in common – they are concerned with decision-making as the basic
criterion of job comparability. Because none of the job evaluation systems have been
covered in sufficient detail for ready implementation, you should contact the
appropriate experts for further advice. As a general guide the following steps should
be followed when implementing a job evaluation system.
PRACTICAL STEPS IN IMPLEMENTING JOB EVALUATION
1. Establish that a need for job evaluation does in fact exist

2. Obtain approval and support from top management
3. Decide which job evaluation method to use
4. Train your own staff as job analysts
5. Select which jobs are to be evaluated
6. Obtain supervisors’ and managers’ acceptance by explaining the reasons, the
method and the advantages it holds for them.
7. Inform employees of your intention by means of a letter from the MD or
meetings.
8. Involve as many employees as possible by getting them to participate
9. Be open and avoid secrecy to ensure full participation and acceptance
10. Obtain board approval of the salary structure
11. Advise managers, supervisors and employees as soon as possible of the final
outcome and how if affects them personally.
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The results of a job evaluation method are not binding unless the parties agree to the
outcome of the exercise and accept its implications. (Chiremba (duly authorised
Chairman of Workers Committee) and Ors Vs RBZ 2000 (2) ZLR 370 (S).
In National Foods Laboratory Assistants Vs National Foods LC /H/42/05 the

employer changed its grading system to the Patterson system but left the laboratory
assistants, but the employer was ordered to regrade them and pay wages in arrears.
Common And Tactical Problems / limitations associated with the Introduction of

a job evaluation Plan.
There are various challenges associated with job evaluation and some are as follows:
1. The judgments on which job evaluation is based is subjective and this makes
it difficult to comprehend the principles
2. Job evaluation does not determine the total pay and should be integrated into
the wider range of pay decisions.
3. It may face resistance to the implementation of its results from various
stakeholder groups.
4. Attempts to maintain the new pay structure may give rise to claims of rigidity.
5. As labour market conditions may change, it is questionable if wage decisions
should be based on unstable labour market conditions.
6. The job evaluation method should be flexible to accommodate changes in the
environment.
2.8 BENEFITS OF JOB EVALUATION
Where job evaluation is correctly implemented various benefits will accrue to the
organization and these include the following.
1. A just and fair remuneration system will be implemented.

2. There is greater control over remuneration as salaries and wages are tied to
grading results.
3. A properly used system will harmonize the industrial relations climate.
4. The promotional ladder becomes clear for employees.
5. Job descriptions produced during the process may be used for other Human
Resources activities covering Recruitment and selection, equal employment
opportunity, redesigning jobs, training and development, performance
management and health and safety issues.
6. It provides a means of solving existing inequalities and for avoiding the
creation of new inequalities.
7. A framework for management – union bargaining is created.
8. Pay levels of newly created jobs can be determined systematically without the
danger of creating new inequalities.
9. Employees can comprehend their prospects for higher earnings in their present
situations and know which jobs to choose in order to get higher pay.
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2.9. JOB STRUCTURE
The logical grouping of jobs into “families” is called job structuring. The Job Family
concept has important applications in salary administration. This is because economic
pressures (supply and demand) on salary levels tend to affect certain job families at
any one time rather than all jobs.
Job titling is another important aspect of job structure. In any job evaluation
exercise, attention should be given to rationalizing job titles. In many organisations
titles have simply grown over the years and are often non-descriptive and rather
meaningless from job evaluation point of view. For example, in a large chain
organisation, more than 50 titles have developed in one section for 10 jobs.
Although little use is made of national or international job codes in Africa, it is still
important to understand what job coding is.
McBeath and Rands or Principles of Compensation covers job structure in sufficient

detail for our purposes.
SELF TEST
1. Give definitions for :

Job Description
Job Specification
2. For which seven Human Resources functions can job descriptions be used?
3. Under which circumstances will job evaluation have the best chance of success?
4. List four traditional and five newer methods of job evaluation?
5. What do the newer methods of job evaluation have in common?
6. List eight requirements for job evaluation
7. List the eleven practical steps suggested when implementing job evaluation.
8. Why is the “job family” concept important in salary administration?
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CHAPTER 3: THE INFLUENCE OF MARKET VALUE AND LEGISLATION ON
SALARY LEVELS (EXTERNAL EQUITY)
1. Outline the main value of the Market Value Theory
2. Explain what the “concept of absolute values” means
3. Indicate the main differences between national, industry and local salary and benefit
surveys.
4. Discuss the main advantages of a survey conducted by a consultant
5. Describe the main disadvantages to a company paying either too high or too low
salaries.
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3.1 INTRODUCTION
In Chapter 2 we viewed jobs from a content and measurement point of view,

evaluated and then classified them. We used the methods of job analysis, job
description, job evaluation and job structuring to obtain internal equity of our wages
and salaries.
However, wages and salaries are also influenced by outside factors. In Chapter 1 we
considered such outside factors as economic, sociological, political and ethical. In
this Chapter we will concentrate on the influence that wages and salaries of other
organisations, in other words, the market, have on our company’s salaries and
rewards.
1. First of all, we will have a closer look at the market value theory, which
explains how wages and salary levels are determined and how they change.
2. Secondly, we will look at what the Human Resources officer can do to find
out more about other organisations’ wages and salaries. The method you will
examine is called salary and benefits surveys.
3. Lastly, we will focus on another outside factor – the influence of legislation on

wages and salaries.
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When we have studied the influence of the market and legislation on wages and
salaries, we will be in a position to determine the external equity of our employees’
wages, salaries and benefits.
3.2 MARKET VALUE THEORY
Before looking at the wage and salary levels of other organisations or that our own
organisations, it is necessary to try and explain what determines the general wage
level in a country. Several wage theories have been developed in an attempt to
answer this question, for example “The Subsistence Theory of Wages”. “The Wages-
Funds Theory of Wages”. “The Marginal Productivity Theory of Wages”. These
theories are not completely acceptable today because the assumptions they are based
on are not wholly realistic.
The “Market Value Theory”, based on the law of supply and demand does, however,
produce a concept which provides a rational explanation for the wage and salary
patters we find. A good example of how the law of supply and demand operates in
practice is the inflated value of such items as motor vehicles in Zimbabwe during the
Zimbabwe dollar era. The extremely high prices vehicles attracted were a reflection
of the scarcity of such commodities. The same applies to scarce categories of
employees, such as Chartered Accountants or graduate engineers, who can demand
higher salaries because of their limited numbers rather than their contribution to the
organization.
Law of Supply And Demand
Market value theory (of job value determination) assumes that the economic law
which applies in other commodity markets with variable supply and demand will also
apply to the evolution of salary values. In the case of salaries, there are supplies of
individuals with widely varying abilities and demands for wide varieties of people.
The actual market value of a job in a specific situation is indicated where the asking
or acceptance salaries of individuals and the salaries offered by employers coincide.
It is likely to be an ‘area of money’ or a range rather than a precise figure.
Individuals’ values arise from the demands for the particular package of skills which
individuals have, the demand for these skills and the willingness of individuals to
offer their skills (supply) for the various possible uses, to the users requiring their
services.
We must remember that it is individuals who have market values, It is through their
availability and willingness to do various types of jobs that job market values emerge
and it is the combined pattern over large numbers of people with related skills and
abilities which produce the market group.
How Market Values Change
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The actual values within the market are constantly changing. As we have said, there
is no absolute scale of values as relative levels alter and the supply and demand
picture changes. In any one year, values for those categories with small demand may
move by only a small amount or not at all, while high demand categories in very short
supply may rise considerably in value.
Let’s look at a practical example of how tight market situations can change the market
value. The demand for computer programmers was very high a few years ago. The
rise in their salary levels built up through a series of steps. As demand grew (faster
than the supply), one employer raised his salary levels out of desperation. He gained
an immediate slight advantage and was able to recruit computer programmers again.
Other employees found that they had to match his new rates in order to retain their
staff and compete in the market. They, therefore, made immediate adjustments to the
salaries of the relevant staff they wished to retain. It would then be some months until
pressure built up to the next stage and the surge was repeated.
Movements in market values tend to take place separately for each job family rather
than throughout all types of identical jobs at any one time. Human Resources
Officers should be aware of local shortages for example the shortage of secretaries a
short while ago, as a sharp local rise in a market rate which is unobserved may lead to
an equally sharp rise in staff turnover of this particular job family.
Environment And Individual Values.
There are many factors in the environment that might influence individual values.
One example is the organisational climate or attitude of the Board.
Let us consider the situation of a Human Resources officer who is required to operate
with a Board who belittle the Human Resources function. They consider it has
nothing to offer them, but accept it as a necessity. In filling the post there are two
possibilities. More than likely they are going to attract an individual who will provide
a routine service, but make no creative appraisal of their problems and needs. In other
words, he will fulfill their requirement and be paid accordingly.
Alternatively they may attract an individual who is trained and is a creative-thinking

Human Resources Officer. Finding himself in this post, he will be immediately
frustrated. His only hope of success will lie in him educating his Board – in getting
across the concepts of his function and obtaining acceptance of the impact that these
may have on the future of the business. If he is able to do this successfully and alter
the attitude towards his function, then his value as a pioneer is clear- cut and he
justifies his salary level. Otherwise, his value is related to what he might achieve in
some other environment, and he is then overpaid in his present post.
Concept of Absolute Values
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Market values are not precise and the ‘market’ is far from perfect, largely because it is
not understood. Some companies take an old-fashioned view of ‘equity’ linked to
traditional salary differentials but jobs change and as the availability of newer skills
lags behind the demand, pushing up values. The change in market value relationships
may be very marked over quite short periods. Anomalies in the system do exist in
substantial numbers, usually in the form of overpayment in over-valued posts.
The market produces not a precise value, but usually an ‘are of money’ or a range
within which agreement between employer and employee may be reached. It covers
specifically remuneration, but assumes certain standards of related benefits.
SUMMARY
A difficulty many people have in understanding market value concepts is that values
are not precise and that market group boundaries are not precise. There must always
be exceptions and other anomalies because the whole pattern is built on personal
choice and by no means every man chooses to go to the highest bidder, or to follow
the normal, traditional career paths. Furthermore, job content and environment are
infinitely variable and values too.
We do not have a concrete structure, but rather a concept which provides a rational
explanation for the patterns we find.
3.3 SALARY AND BENEFIT SURVEYS
In the previous section this module we had a brief look at the market value theory and
saw how, in theory, a concept was outlined which provides a rational explanation for
the general salary patterns we find.
We are now ready to have a close look at the practical side of how to determine the
external equity of our company’s salaries and rewards.
The purpose of salary and benefit surveys is to obtain current, competitive

remuneration (compensation) data for a number of jobs (called “bench-mark” jobs)
across the whole job spectrum so as to establish a basis for maintenance of pay and
benefits position relative to that of comparable competitive organisations. This can be
done on three levels.
 Survey of local organisations, e.g., Gweru Industrial Sites

 Survey of an industry, e.g., the motor industry
 National surveys for the whole of Zimbabwe
The first two surveys are usually initiated and conducted by members of
organization’s Human Resources departments, while national surveys are usually
conducted by consulting companies or universities.
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1. The article in “Salary Surveys” Lowe and Wallis gives good overviews of
salary surveys.
2. McBeath and Rands goes into more detail on the scope, range approach and
basis for such surveys. It also gives practical examples and tells one how to
utilize the data you obtain from salary and benefit surveys with a British
flavor.
3. An American flavor is added by an extract from a large oil company’s
“Questionnaire on Benefit Plans, Pay and Other Compensation”.
Notes on Zimbabwe Salary Surveys
Price Waterhouse Coopers carries out a major National Salary Survey each year.
The survey is designed to guide practicing managers in the application of

remuneration and strategies. If it is to be of any benefit, the information provided
must be reliable. The survey in the past has covered over 90 000 employees and
produces a highly detailed survey, covering 143 organisations and over 300 positions.
The data is collated from participating companies from salaries and benefits of certain
“bench-mark” jobs which consist of a job title and brief description of the main
duties. For example:
“Training Manager” Graduate or Diploma holder, at least four years training

experience, - responsible for identifying company training needs, developing
programmes to meet these needs and planning and scheduling training programmes.
Monitors training results, assesses suitability for external courses, responsible for
evaluation and development of managers and senior personnel.
The job holder may conduct training courses at this level. Training Officers will
report to him. Usually reports to Human Resources Manager or Human Resources
Executive”.
In addition, all jobs are graded in terms of the Paterson job evaluation method.
There are two sections to this survey.
i) a definitive study of general staff remuneration and benefits
ii) a definitive study of to executive remuneration and benefits
In order to keep abreast of changes in salary markets, a midterm remuneration survey

may be conducted.
There are various other salary surveys conducted – some are formal like the Peromnes
Executive Compensation Survey by MBB (Private) Ltd, and others are informal or ad
hoc, done by employment agencies at client’s request or by individual Human
Resources managers or by phoning a network for their colleagues and sharing
information on wage and salary trends and increases.
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SUMMARY
Salary surveys provide the maximum benefit only after internal equity has been
established from job analysis, job description and job evaluation. Looking at the
market before getting your own house in order can only have a limited effect.
It is also very important to establish the correct market survey. Salary surveys are
useless unless they include data on the people with whom the company’s employees
actually compare themselves. Salary surveys that are based on inaccurate
assumptions, about which comparison groups are used, are worse than useless. They
are positively dangerous since they can give a company a false sense that everything
is all right, when in fact it is not.
Salary Surveys – (By A W Lowe and D C Wallis)
The idea of a company approaching other companies in the same area, operating in a
similar field, to exchange information on salaries is by no means new and is an
established feature of Human Resources Management practice in Zimbabwe. The aim
of Salary Survey is to check salaries paid in a company against those paid in the
community for similar work and a well conducted survey will enable its participants
to ensure that they are paying salaries that are competitive and, equally important, not
too high for the community.
The company wishing to enter the survey arena can do so either by conducting its
own survey or by participating in one or more surveys conducted by other firms. The
latter, of course is less demanding in terms of time and effort but the firm conducting
the survey is able to determine the span of jobs to be covered, the manner of
presenting the information and the firms who will be invited to participate, which may
be important. However, serious consideration must be given to the time and technical
skill involved in the conduct of a survey and if either is not available, or cannot be
spared, one must be content to be a participant. Serious thought must, in any event,
be given to the desirability of introducing new surveys since those concerned about
whom to exchange any information with may appear most beneficial but may
probably already participants in existing surveys and may be reluctant to be involved
in any more.
Surveys once successfully undertaken usually become established as a regular event

and the same firms will conduct further surveys following the pattern of the first at
intervals of one, two or three years depending on the size and scope of the survey and
the pace of economic change being experienced. There are two kinds of survey
commonly conducted by business concerns in Zimbabwe. First there is the direct
exchange of information between one company and a selected group of firms of
similar size and standing. The company conducting the survey obtains a wide range
of information from which to draw conclusions. Each of the participants may, in fact
conduct its own exchange not necessarily with exactly the same selection of firms or
they may be satisfied with the original exchange with the company which initiated the
survey. A company of good reputation in the field of Human Resources practices
may well receive enough invitations to exchange information to ensure its being able
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to keep its finger on the salary pulse over the years without becoming involved in
either conducting or participating in more formal surveys. The particular
characteristics of this kind of exchange are an absence of preconceived structure
involving job specification, pro-formas and questionnaires and freedom from the
restriction and responsibility imposed by the obligation to publish a survey report for
the benefit of other participants.
These features are all present in the more formal type of survey which the purist
might well refer to as the only true survey. The conducting company, recognizing
that in inviting participation it involves those accepting in expending considerable
time and labour in preparing the information and submitting it in the required form,
offers to prepare a detailed summary of all the information obtained and to distribute
this to all participants. Such a survey must specify particular jobs likely to be found
in the establishment of a majority of participating firms. All information collected
must be on a comparable basis hence the need for forms and questionnaires. The
report must be prepared with care to hide the identity of individual contributors while
setting out a detailed comparison of the salary levels and relevant fringe benefits of all
the organisations participating.
Whatever form the survey takes, certain rule of conduct have become accepted. These
ensure the preservation of confidence without the continuation of this invaluable form
of exchange would be seriously jeopardized. Briefly, these rules are.
1. Every possible step must be taken to prevent identification of participants in

the report.
2. Information obtained from one Participant will at no stage and in no
circumstances be revealed either verbally or in writing in identifiable form or
any other participant.
3. The report or any part of the information obtained will be made available only
to those who have participated in the survey.
Consultants
The entry of consultants in the salary survey is of comparatively recent origin. The
advantages of a survey conducted by a consultant are as follows.
1. The number of participants that can be included in the survey is very much
larger with resultant benefit of a wider sample of jobs.
2. Potential participants may be much less reluctant to supply confidential

information to an independent consultant than they would be to possible
competitive organisations.
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3. For all but the most sophisticated companies, the survey should be more
effectively and reliably conducted as a result of the greater expertise possessed
by the consultant.
4. In theory, at any rate, a company should be able to participate in one

consultant survey per annum and obtain all the information that it requires.
The advantages assume of course that the consultant has specialized

knowledge of how to conduct a survey and of the dangers inherent in it. This,
unfortunately, is not always the case and it compels participants to be selective
in agreeing to participate in surveys. Even though the consultant may be an
expert at his task he is inevitably at something of a disadvantage in that he is
not intimately familiar with the problems and peculiarities of individual
concerns. This may make it more difficult for him to carry out an effective
survey.
The rules of conduct set out earlier should in our opinion apply equally to consultants
who conduct surveys. Sometimes survey reports are offered to non-participants for an
additional fee. Apart from the danger of killing the goose that cannot be expected to
go to the trouble of laying golden eggs for the privilege of buying them at half-price,
there is the danger of misuse in the wrong hands.
THE MAIN PROBLEMS OF SALARY SURVEYS
The key to an exchange of information on salaries that will be of value lies in finding
answers to two questions namely.
1. how to equate jobs in different organisations
2. how to compare remuneration in different companies on a standard basis
Any survey that fails to find a satisfactory answer to these questions will be
unreliable.
Equating Jobs
We are all aware of the difficulty of equating the same job in different organisations.
The Works Manager of a small factory producing a single product does not have the
same degree of responsibility as the Works Manger of a large factory, producing a
multiplicity of products with complex processes and to expect the salaries of these
individuals to be comparable is unrealistic. For this reason title are a poor guide to
the equating of jobs and other methods have to be found.
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A method employed by at least two surveys in Zimbabwe is to apply a grading
system, in terms of which all jobs included in the survey are classified into a number
of grades by the participating companies, all using the same evaluation process.
Comparisons are then made only between jobs of the same grade. If the grading is
properly done this method provides a very accurate comparison between jobs.
However, grading of this sort requires expert knowledge and skill to carry out, and
there is no guarantee that the same standards and the same degree of technical skill
will be employed by all participants. To some extent, this can be overcome by the
consultant or a member of his staff carrying out sample grading for each of the
participants.
Another method that has been employed in an attempt to measure the responsibility of
various jobs is to place the emphasis on statistical information about the job. In other
words, the important thing becomes the number of employees supervised by the
incumbent of the post , the annual budget for which he is responsible, or output in
terms of quantity or value and so on. This has the advantage that such information is
readily available and is easily comparable. However, only the most optimistic person
would feel satisfied with this means of measurement. It can very easily happen that
two managers in different concerns have exactly similar responsibilities, in terms of
budgets, number of subordinates, value of output, etc and yet have entirely different
responsibilities because of the organisational structure of the two companies
concerned.
A variation of what might be called the statistical method can be profitably employed
when comparing salaries for qualified persons with special reference to the actual jobs
which they are performing. For example, the salaries paid to qualified Accountants or
Engineers can be compared during their younger years on an age or “experience since
qualifying” basis.
There have also been attempts to establish a basis of comparison by dividing

organisations into horizontal slices from top to bottom and comparing the salaries of
employees in corresponding slices. The first would consist of those Managers
reporting directly to the Chief Executive, the second slice of those reporting to
Managers in the first slice and so on.
This method is used in conjunction with statistical information on the size of the
respective companies in terms of numbers employed, turnover and capital employed.
It is, however, far from satisfactory because of the wide differences between
organisation structures in different companies. It is doubtful; however, whether this
method can be used with any validity, except for the very top level and even then the
span of management can vary enormously.
It is also possible to use specialized techniques of evaluating responsibility such as

Elliot Jacques’ “Time Span of Discretion”. Unfortunately, methods of this kind
require a very high degree of technical skill in carrying out the grading and can only
be used where all participants are highly sophisticated in their management.
Comparing Remuneration
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The problems relating to defining remuneration for all purposes of comparison are
mainly concerned with the assessment of a cash value for fringe benefits.
While it is comparatively easy to total up what a man receives in terms of basic

salary, commission and bonus, there are frequently other items to be taken into
account. Obvious examples are company cars and tax free entertainment allowances.
It may also be necessary to allow for such items as company contribution to Pension
Funds and Medical Aid Benefits although these are often ignored on the grounds that
such provisions are pretty well universal and it is, therefore a waste of time to attempt
to place a cash value on them. On the other hand, policies in regard to free holidays
overseas for the employees and/or his family, club membership and so on vary widely
and their worth must be accounted for.
The method adopted for assessing such hidden additions to a man’s remuneration is
less important than ensuring that the basis is consistent throughout all the participants.
It is usual practice to compare the actual salaries being received by the incumbents of
the posts covered by the survey. This has inherent disadvantages in that it takes no
cognizance of the fact that a man may be new in the job or, alternatively, have been
occupying the same seat for twenty years. Similarly, he may be very good at his job
or on the point of being fired for incompetence. It is difficult in a survey to take such
factors into account. For this reason, it is a pity that more companies do not employ
the job value method, in terms of which an absolute maximum salary (or job value) is
determined for each post in an organization. It is then possible to compare the job
values between companies and so eliminate the variations caused by individual
differences in performance and length of service. However, comparison of job values
is not possible where participating companies avoid the use of structural grading
systems and requires an understanding of each company’s philosophy or salary
progression. Some companies for example, consider the job value as a mid-point (or
some other point in the salary range – and some may regard their ranges, theoretically
at least as having no top limit.
The Survey Report
Having found the answers to the basic questions posed earlier on, the survey
conductor proceeds to accumulate his data, process it and prepare a report on his
findings. Even at this stage he is faced with certain difficult decisions. Should he, for
example, present his findings for a particular position as a straight arithmetical
average of the replies, either weighted or unweighted, should he present the median,
should he break his results down into qualities or what should he do?
There are almost unlimited choices open to him. In the main, he must be guided by
the information that will be of most value to his customers and it would seem that
with the average level of sophistication not being very high, he is almost forced into
offering an arithmetical average.
There are still further complications.

Should any account be taken in the presentation of the report of possible regional
differences between salary levels?
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Should the conductor of the survey eliminate figures which are grossly above or
below the mean?
Should he delete results where the number of replies is too small to make the sample
valid?
Using the Survey Report
It is essential to remember that a salary survey, however, well conducted, is no more

than an aid to assessing the appropriateness of the salaries being paid in a company
may be too low, if not all round, then perhaps in a particular area, such as marketing,
but slavishly to follow the averages published in the report would be nonsense. Every
business has its special requirements. A marketing-oriented company, for example,
may need better marketing people than the average company and so must be prepared
to pay higher salaries to attract and keep them. It is necessary, therefore, to bear in
mind, at all times, the requirements of the particular organisation.
One must beware, too of drawing conclusions on invalid information. For example it
may appear from the samples included in a particular survey that for those jobs
covered by the survey and in those companies covered by the survey that salary levels
are higher in Harare than in Bulawayo. This may not be the case for other jobs and
other companies and to make sweeping generalizations on the basis of survey
information which is necessarily circumscribed in the extent can be very misleading.
Further Developments – A Suggestion
There is a tendency for salary surveys to be undertaken on a large scale, in that very
many individual jobs are surveyed. This results in the work of contributors to a
survey being onerous and the task of sifting the results confusing.
A suggestion is for top level salaries, an examination of a small number of jobs should
be made in depth. Without elaborating on this suggestion, it merits a great deal of
consideration in that it should be adequate for most companies to check their salary
levels against a comparatively small number of bench-mark jobs. For example, to
select twelve jobs at different levels and in different parts of a business would provide
sufficient fixes to check the general level of salaries in the business. The Hay M.S.L.
organisation conducts a survey along these lines in Britain. A limited number of jobs
in a select group of companies are actually evaluated by the consultant who also
carries out an in depth study of the organisations within which the Jobs are
established.
While this method of depth evaluation of a small number of jobs might, in the long
run, not save much time in preparation of material for a survey, it would enable a very
much better comparison to be made for the results to be much less confusing. It must
be admitted that such a method would be of greater value to the sophisticated
company than to others, but it is nevertheless a fruitful field for further investigation.
3.4 LEGISLATION ON WAGES AND SALARIES
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It is essential that each and every Human Resources officer or salary administrator
acquaint themselves with the relevant legislation in their industry. Here we are not
referring to the numerous returns that the paymaster (usually responsible for the
Company Secretary) sends to the Ministry of Labour.
As each industry and branch of commerce operate within different legislation, i.e.
regulations and industrial agreements, it is not practical to provide a full list.
However, all regulations and agreements provide the following.
 Minimum wages and salaries for agreed grades

 Definitions of various Jobs and job categories
 Other statutory requirements such as leave, sick leave etc.
Many companies recently have experienced a ripple effect on wages when new
minimum wage rates were determined for lower level employees. Not only did they
have to increase wages of those below the new minimum wage but also those earning
more because of long service,
Merit etc should ensure the need to maintain an equitable difference. In most
companies it would be the Human Resources officer who should ensure that no wages
are paid below the stipulated levels in the relevant regulations or collective bargaining
agreements. This would prevent industrial relations officers and inspectors from the
various national employment councils from finding employees who are paid less than
the minimum which could cause embarrassment to the company and its directors.
By maintaining contact with the relevant bodies, the Human Resources officer should
be in a position to forewarn management of any anticipated changes. It is essential
for Human Resources officers to be fully informed about prevailing legislation.
In Zimbabwe, National Employment Councils exist for most sectors – agriculture,

mining, industry, commerce services and N.G.Os. These are formed by
representatives from their relevant Trade Union and corresponding Employers’
Organisation, which negotiate annual Collective Bargaining Agreements (CBA’s)
setting out wages, salary increases and working conditions for lower-level workers.
CBA’s are published in the weekly Government Gazette and then have the force of
law, binding all employers in a given sector.
CBA’s for the period 1-7-98 to 30-6-99 were analysed in a series of articles in the
Human Resources Journal of Zimbabwe in 1999 (Volume Four, Numbers 1 and 3)
which also reproduced a sample CBA.
NOTES FOR THE CHAPTER:
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CHAPTER THREE: THE INFLUENCE OF MARKET VALUE AND

LEGISLATION ON SALARY LEVELS (External Equity)
SELF-TEST
1. Why is it important to understand the Market Value Theory?
2. Think of an actual example where the demand exceeded the supply for a
particular job and explain the effect this had on the salary level
3. How can the climate in an organisation influence the value on an employee?

Relate to the quoted example of the Human Resources officer or a similar
experience you have had.
4. Explain briefly – local, industrial and national salary benefit surveys and who
usually undertakes them.
5. What are the three rules of conduct for salary surveys to ensure the
preservation of confidence?
6. State the disadvantages to a company of paying either too high or too low
salaries
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7. List the legislation applicable to wage, salary and benefits in your industry.
CHAPTER 4: SALARY PLANNING AND POLICY
1. Identify the three main types of salary scales.
2. Describe the four steps necessary before arriving at a salary structure
3. Outline the main purpose of employee appraisal from Remuneration Management

point of view
4. Discuss the major types of appraisal systems
5. Describe the six basic rules applicable to the salary planning process.
6. Discuss the six criteria that should be effective for salary planning.
7. Outline the factors of considered in budgeting payroll costs.
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4.1 INTRODUCTION
The methods through which internal equity can be achieved were discussed in
Chapter 2. Chapter 3 dealt with obtaining external equity by understanding the
market value theory and through salary surveys to “read” other companies’ wages and
salaries.
This Chapter is concerned with implementing what we have learnt so far by

determining the salary structure and then maintaining, planning and controlling salary
administration.
Chapter 4 is divided into four sections
1. Firstly, determining a salary structure by pricing the job structure or the grades
and arriving at salary grades with money ranges for each.
2. Secondly, determining what each individual should be paid within the range of
this particular salary grade by means of performance appraisal.
3. Thirdly, why individual’s salaries are adjusted and how this forms the basis of
salary planning.
4. Lastly, we will cover the operational procedures for reviewing budgeting and
controlling salaries as well as the development and communication of the
salary administration policy.
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4.2 SALARY STRUCTURE
When the job structure is available from application of some method of job
evaluation, the next step in deriving the salary structure is pricing the job hierarchy.
Pricing job structures and grades is not covered adequately by McBeath and Rands;
therefore, the following note has been prepared.
NOTE:
It is in pricing the job structure that solutions to the problems of level and structure
come together. The salary structure consists of wages and salaries assigned to jobs.
The salary level is the average salary structure consisting of wages and salaries
assigned to jobs. The salary level is the average salary for the organisation or the
level of the salary structure. The concepts are separate but related. Pricing the job
structure results, in not only the salary structure but the salary level as well.
For pay purposes, similar jobs are grouped into pay grades or pay scales. These
grades are priced by employing present salary rates and salary survey results. Dollar
values are then assigned to each pay grade (called the range) and all the pay grades
will emanate from the salary structure.
Establishing the salary structure for an organisation consists of bringing together most
of the facets we have discussed so far and includes the following steps.
1. Wage and salary criteria – present salaries, ability to pay etc (Discussed in
Chapter 1).
2. The job structure, based on job evaluation which ensures internal equity (See
Chapter 2).
3. Market rates as determined through salary surveys which ensures external
equity.(See Chapter 3)
4. Pricing the job structure where money values are assigned to each grade.
McBeath and Rands discuss the main types of pay scales adequately.
 Flat rate
 Time progression scale
 Incremental salary scales
 Merit salary scales
4.3 EMPLOYEE APPRAISAL
From the previous section you will recall that a salary structure consists of salary
grades or scales, each with its own salary range. The next step consists of
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determining where an individual employee will fall within this salary range of the
grade.
Let us take the example of a senior clerk (remembering that clerks may fall into say
three grades – i.e. junior, middle and senior) and assume that he falls in grade X
where the salary range is between $2000 and $3000. If the company’s policy is to pay
for performance, the system whereby we determine where our senior clerk should be
paid in this range is called the performance appraisal system.
McBeath and Rands does not cover various systems of employee appraisal in either
sufficient detail or systematically enough. After reading this chapter as an
introduction, it is recommended that you study Beach or Bates. Keep in mind that
employee or performance appraisal is a basic personnel management tool that is used
for many other personnel functions besides salary administration.
Concentrate on the appraisal methods and the problems in appraisal. Marion Kellogg,
in their book “What to do about Performance Appraisal”, 1965, feels strongly that
salary review should be tied to performance, but should not be discussed at the same
time as when discussing how the employee can improve his performance.
In order to obtain a wider understanding of performance appraisal, the following

three articles from the Harvard Business Review are recommended.
1. An Uneasy Look at Performance Appraisal – Douglas McGregor. Harvard

Business Review, September/October 1972
This famous article was first printed in 1957, but is as pertinent today as when
it was first printed.
“Managers are uncomfortable when they are put in a position of ‘playing God’
says McGregor in explaining their resistance to undertaking the conventional
kind of appraisal of employee performance. Instead he advocated an approach
in which the subordinate establishes personal short-term goals and evaluates
his performance himself. As a consequence, interview with his manager
concentrate on the employee’s strengths and achievements rather than his
shortcomings and they tend less to digress into personalities.
2. Performance Review – a mixed bag – G A Rieder

Harvard Business Review July/August 1973
In this article Rieder looks at performance appraisals through the eyes of a
practical Human Resources manager. In so doing he first discusses the
apparent deficiencies of current performance appraisals, both in programme
design and in practice. Then he suggests how we can return to successful
fundamentals. And finally, he offers the basic elements from his own
organisation’s ‘result management’ approach for coming to grips with the
realities of the multi-purposes performance appraisal. He feels that profitable
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business practice dictates more effective use of human talents and sees an aid
in performance appraisals.
4. Make Performance Appraisal relevant – W Oberg

Harvard Business Review January/February 1972.
Oberg states that performance appraisal programmes can be made

considerably more effective if management will fit practice to purpose when
setting goals and selecting appraisal techniques to achieve them. He presents
a list of the strengths and weaknesses of nine of these techniques; then he
shows how they can be used singly and in combination with different
performance appraisal objectives.
It is suggested that you study a range of current magazine articles. These are
available in both the IPM monthly Reader Service and HR News from the Internet.
Following are the major pros and cons of nine techniques:
1. Essay Appraisal.
The biggest drawback to essay appraisals is their variability in length and

content. Moreover, since different essays touch on different aspects of a man’s
performance and personal qualifications, essay ratings are difficult to combine
or compare. For comparability some type of more formal methods, like the
graphic rating scale is desirable.
2. Graphic Rating Scale.
This technique may not yield the depth of an essay appraisal but it is more
consistent and reliable. The graphic scale has come under frequent attack but
remains the most widely used rating method. In a classic comparison between
the “old fashioned” graphic scale and the much more sophisticated forced-
choice technique, the former proved to be fully as valid as the best of the
forced-choice forms and better than most of them. It is also cheaper to
develop and more acceptable to raters than the forced-choice form. For many
purposes there is no need to use anything more complicated than a graphic
scale supplemented by a few essay questions.
3. Field Review.
When there is reason to suspect rater bias, when some raters appear to be
using higher standards than others, or when comparability of ratings is
essential, essay or graphic ratings are often combined with a systematic review
process. The field review is one of several techniques for doing this. A
member of the Human Resources central administrative staff meets with small
groups of raters from each supervisory unit and goes over each employee’s
rating with them to:
(a) Identify areas of inter-rate disagreement
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(b) Help the group arrive at a consensus and
(c) Determine that each rater conceives the standards similarly
This group judgment technique tends to be fairer and more valid than
individual ratings and permits the central staff to develop an awareness of
varying degrees of leniency or severity – as well as bias – exhibited by raters
in different departments. On the negative side, the process is very time
consuming.
4. FORCED-CHOICE RATING.
Like the field review, this technique was developed to reduce bias and
establish objective standards of comparison between individuals but it does
not involve the intervention of a third party.
The rationale behind this technique is difficult to find. It is the same rationale
used in developing selection tests batteries. In practice however, the forced -
choice method tends to irritate raters, who feel they are not being trusted.
They want to say openly how they rate someone and not be second-guessed or
tricked into making “honest” appraisals.
An additional drawback is the difficulty and cost of developing forms.

Consequently the technique is usually limited to middle and lower
management levels where the jobs are sufficiently similar to make standard or
common forms feasible.
Finally, forced-choice forms tend to be of little value and probably have a

negative effect when used in performance appraisal interviews.
5. Critical incident appraisal.
The discussion of ratings with employees has in many companies proved to be

a traumatic experience for supervisors. Some have learned from bitter
experience, people who receive honest but negative feedback are typically not
motivated to do better – and often do worse after the appraisal interview.
Consequently, supervisors tend to avoid such interviews, or if forced to hold
them, avoid giving negative ratings when the ratings have to be shown to the
employee.
The critical incident technique looks like a natural to some people for
performance review interviews because it gives a supervisor actual, factual
incidents to discuss with an employee. Supervisors are asked to keep a record
- a “little black book”, on each employee and to record actual incidents of
positive or negative behaviour. There are, however, several drawbacks to this
approach. It requires that supervisors to jot down incidents on a daily basis, or
at least, a weekly basis. Furthermore, the critical incident rating technique
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may cause a supervisor to delay feedback to employees. It is hardly desirable
to wait for six months or a year to confront an employee with a misdeed or
mistake.
Finally, the supervisor sets the standards. If they seem unfair to a subordinate
he might not be more motivated if he at least has some say in setting, or at
least agreeing to, the standards against which he is judged.
6. Management by Objectives.
To avoid, or to deal with, the feeling that they are being judged by unfairly
high standards, employees in some organisations are being asked to set – or
help set – their own performance goals.
It should be noted, however, that when MBO is applied at lower organisational
levels, employees do not always want to be involved in their own goal setting.
7. Work- Standards Approach.
Instead of asking employees to set their own performance goals, many

organisations set measured daily work standards. In short, the work-standards
technique establishes work and staffing targets aimed at improving
productivity. When realistically used, it can make possible an objective and
accurate appraisal on the work of employees and supervisors. It is not clear in
every case that work standard have been integrated with an organisation’s
performance appraisal programme. The most serious drawback appears to be
the problem of comparability. If people are evaluated on different standards,
how can the ratings be brought together for comparison purposes when
decisions have to made on promotions or salary increases? For these purposes
some form of ranking is necessary.
8. Ranking methods.
For comparative purposes, particularly when it is necessary to compare people

who work for different supervisors, individual statements, ratings or appraisal
forms are not particularly useful. Instead, it is necessary to recognize that
comparisons involve an overall subjective judgment to which a host of
additional facts and impressions must somehow be added. There is no single
form or way to do this.
Comparing people in different units for the purpose of say, choosing a service
supervisor or determining the relative size of salary increases for different
supervisors requires subjective judgment, not statistics. The best approach
appears to be a ranking technique involving pooled judgment. The two most
effective methods are alternation ranking and paired comparison ranking.
Both ranking techniques, particularly when combined with multiple rankings

(i.e.) when two or more people are asked to make independent rankings of the
same work group and their lists are averaged), are among the best available for
generating valid order-of-merit rankings for salary administration purposes.
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9. Assessment Centres
So far we have been talking about assessing past performance. What about the
assessment of future performance or potential? In any placement decision and
also even more so in promotion decisions, some prediction of future
performance is necessary. How can this kind of prediction be made most
validly and most fairly? There is a good deal of evidence that people chosen
by assessment centre methods work out better than those chosen by these
methods.
4.4 THE 360 DEGREES FEEDBACK
This is defined as “……the systematic collection of feedback of performance data on

individuals or groups derived from various stakeholders on their performance.” It
focuses on multi source assessment and rater feedback resulting in performance
improvement and award of possible merit increases.
MANAGERS
INTERNAL
PEERS INDIVIDUAL CUSTOMERS
DIRECT
REPORTS
SOURCE: UNPUBLISHED MATERIAL
The feedback should come from all stakeholders in the form of ratings against agreed
performance dimensions.
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360 degrees appraisal is used for the following.
1. Supporting learning and growth for the employees.
2. Supporting various human resources activities like performance management,

resourcing and succession planning.
3. Supporting pay decisions.
The feedback may be anonymous or open depending on the organizational culture and
management style.
Steps to implement the 360 Degrees Appraisal.
1. Define the objectives and articulate the relationship with development and
pay.
2. Decide the recipients of the feedback.
3. Decide on who provides the feedback and whether it will be anonymous or
open.
4. Decide the work and behaviour areas that should be covered by the
feedback.
5. Decide on data collection techniques.
6. Decide on the data analysis and presentation.
7. Plan initial implementation programme and use a pilot group.
8. Analyse the outcome and make adjustments.
9. Plan and implement the full programme
10. Monitor and evaluate the programme.
Criteria for Success of 360 Degrees Appraisal
1. Top management support and participation is a prerequisite.

2. A clear understanding of benefits by all stakeholders is required.
3. Questions linked to expected behavior and events experienced by individuals.
4. Outcomes should be followed by actual action.
5. Feed back should be anonymous.
6. Questionnaires should be easy and simple with bureaucratic tendencies being
minimized.
Formal systems for appraising performance are neither worthless nor evil, as some
critics have implied. Nor are they panaceas, as managers might wish. A formal
appraisal system is, at the very least a commendable attempt to make visible and
hence improvable a set of essential organisation activities. Personal judgments about
employee performance are inescapable and subjective values and fallible human
perceptions are always involved. Formal appraisal systems can help to recognize and
remedy at least some of the inherent bias and errors.
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4.5 THE CURRENT PERFORMANCE MANAGEMENT SYSTEM – THE
BALANCED SCORE CARD SYSTEM
Most organizations are moving towards remuneration schemes whereby remuneration

is performance based. This necessitates the introduction of a performance
management system which facilitates the evaluation of an employee’s contribution in
an objective manner.
There are various methods used by organizations to evaluate performance so as to pay

employee merit based remuneration. One of the popular method currently used by
most organizations is the Balanced Score Card which was developed by Kaplan and
Norton as a tool to implement an organization‘s strategy.
The main advantage of the Balanced Score Card is its ability to be linked to the
organization‘s strategy implementation efforts thereby merely cascading this down to
individual employees within all levels within the organization.
The Balanced Score Card
At the highest conceptual level, the Balanced Scorecard is a framework that helps
organisations translates strategy into operational objectives that drive both behaviour
and performance.
Robert Kaplan and David Norton were part of a year long research project with 12
companies. Since publishing their results in 1992, the Balanced Scorecard has made a
major impact on the design of performance measurement and management systems.
“No single measure can provide a clear performance target or focus attention on the
critical areas of the business. Managers want a balanced presentation of both financial
and operational measures.”(Kaplan & Norton)
The Balanced scorecard identifies four areas of organizational performance which

have to be measured at every level so that the strategic goals may be realised. The
Corporate balanced scorecard is implemented by the CEO who has to cascade it down
to the lowest level resulting in individual scorecards. These scorecards at individual
level are the basis of each employee’s performance which will then be measured as
part of the performance management system.
The perspectives include the internal business processes which focuses on the
delivery channels of the organization, the learning and growth whose focus is on
employee skills, the customer perspective which concerns itself with customer care
and satisfaction and the financial perspective which is a result of all the other
perspectives being achieved.
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FINANCIAL
PERSPECTI
VES.
VISION
CUSTOMER INTERNAL
BUSINESS
PERSPECTIV
E. PROCESSES
LEARNING
AND
GROWTH
SOURCE: ADAPTED FROM KAPLAN AND NORTON (1992)
The goals and benefits of the Balanced Scorecard
The balanced scorecard is a performance measuring system which allows the

organization to realise its goals and objectives through utilisation of its human and
material resources. The specific benefits include the following.
1. Facilitates implementation of strategy.
2. Strategy becomes part of everyday actions whose implementation can be

tracked measured daily.
3. Strategy becomes the property of every employee as it is cascaded to

individual scorecards which employees have to take personal responsibility for
their achievement.
4. Communicates targets throughout the whole organization.
5. Increases efficiency by clarifying targets of each employee and how

achievement is going to be measured.
6. Increases motivation when connected to bonus system and performance

related pay where employees are remunerated basing on their tangible
contribution toward organization goal realization.
7. Increases commitment as employees become aware of what it is that they are

expected to achieve - if you don't understand, you can't be committed
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8. Target-setting is done from every perspective of the scorecard ensuring that all
areas of organizational performance are monitored with corrective action
being taken whenever necessary.
9. A Balanced follow-up on performance of the organization and individual

employees is made possible with constructive feedback being given on a
timeous basis.
10. Identifies business drivers:

The adoption of the scorecard moves the focus from financial figures to
figures that really guide the business to generate the financial returns.
11. Focus is transferred from has-been-done management to will-be-done

management
12. It enables fast reaction to changes which occur within the organization.
13. All components of the strategy – objectives, measures, initiatives – are linked
and aligned thereby ensuring compatibility of the various levers which drive
performance.
Steps in the development of the Guiding Corporate Scorecard
The individual scorecards are an outcome of the corporate scorecard which is then
cascaded down the various levels until each employee creates his own scorecard.
Once the corporate scorecard is clearly articulated, the departmental cards are
developed which are cascaded to sectional scorecards until each individual has his
own scorecard.
The six step for coming up with the corporate scorecard are as shown below starting
with the articulation of the organization’s strategic destination and ending with the
cascading the scorecard to the lower levels within the organization.
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Step 1 Step 3
Step 1 Step 3 Step 5
Define Strategic Step 5
Define Strategic Build the Strategic
Destination Build the Strategic Select Priority
Destination Objectives & Linkages Select Priority
Objectives & Linkages Initiatives
Initiatives
Step 6
Step 2 Step 4 Step 6
Step 2 Step 4
Cascade & Get to
Identify Key Themes Determine Measures Cascade & Get to
Identify Key Themes Determine Measures First Report
Driving the Strategy & Targets First Report
Driving the Strategy & Targets
SOURCE: METROPOLITAN BANK STRATEGY PRESENTATION

DOCUMENT 2010.
The success of the above stages influences the effectiveness of the balanced scorecard
as a management system which will ensure appropriate evaluation of individual
performance on an objective manner.
The basis of the balanced Scorecard is the strategic destination of the

Organization.
The vision statement will articulate what the organization wants to become in the long
term assuming that its constituent’s parts perform as expected. The vision will act as a
road map which can provide guidance to all stakeholders in terms of what has to be
done. The strategy map provides guidance in terms of how we can get to where our
vision is.
Goals and objectives will give us the targets which have to be achieved at every level
including the individual if the vision is to be achieved. These targets have to be set
collectively to ensure ownership by all stakeholders including the scorecard owners.
Actual achievements have to be regularly measured as a way to evaluate whether the
performance is on course and will provide the result s we are expecting. Agreed
measurement criteria should be used which is agreed with the performers.
Performance is action oriented and there is need to continuously take action and
maintain the momentum if the targets are to be achieved. Performance should be
practical so that the results are visible which should lead to a change in the status quo.
The strategy pyramid below demonstrates the various issues to be considered which
have been explained above.
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VISION
Strategy
Objectives
Measures
Action Plans
SOURCE: METROPOLITAN BANK STRATEGY DOCUMENT

PRESENTATIN 2010.
A good Balanced Scorecard should “tell the story of your strategy” and what each
employee should do to achieve the various objectives agreed for the particular period
under consideration.
 Strategy Map specifies relationships and makes them testable
 It also acts as a powerful diagnostic tool for your Balanced Score Card.
 It is a great way to communicate your Scorecard.
The Link between the Four Perspectives of the Scorecard
The three perspectives of learning and growth, customer care and internal business
processes are the drivers of an organization’s profitability. Employees should excel in
the three perspectives for them to contribute towards the organization‘s profitability.
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SOURCE : METROPOLITAN BANK STRATEGY PRESENTATION 2010.
Individual Balanced Scorecard.
Each individual should develop his own scorecard in consultation with his immediate
superior whose scorecard one is supposed to support.
The scorecard is based on the four perspectives each of which should have some
goals, measures and performance standards.
Scorecard Owner: TARISAI MAVETERA

Position: Human Resources Manager

Reporting Period: SECOND Quarter 20==

PERSPECTIVE GOAL
Manage staff costs within industry benchmarks
1. FINANCIAL Generate value from human resources
Manage recruitment costs
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Manage HR Department costs
Manage leave liability

Manage non - performing employees out
Satisfy line managers
Recruit top talent
2. CUSTOMER

Comply with labour statutes

Recruit staff on time
Comply with Approved HR Policies and procedures
3. INTERNAL BUSINESS
PROCESSES

Build a strong employer brand

4. LEARNING & GROWTH

STRETC
MEASURE UNIT RF BASE H ACTUAL
Staff costs to revenue
% M 36 28 12
Return per dollar of Salary paid % M 66 70 64
Recruitment costs to payroll % M 12 8 5
Budget Variance % M 2 0 1
Average leave days per
employee % M 10 5 17

Average
% managed out % M 100 100 25
SLA Compliance % Q 95 100 84
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% of staff passing probation % M 95 100 96

Average
Compliance % M 100 100 65
No: of labour cases lost No: M 1 0 2
Time to fill posts Wks M 2 1 1
Compliance % M 100 100 76

Average
Retention-competent employees % Q 95 100 96
Employee Engagement Index % Q 65 75 66
% of offer letters Accepted % Q 95 100 95

Skills Coverage ratio % Q 70 80 60
Training hours per employee Hrs M 24 48 28
% of top performers % Q 40 55 56
Average

Overall AR
SOURCE: METROPOLITAN BANK PERFORMANCE MANAGEMENT

SYSTEM.
The above two pages show the perspectives, the goals and the basis of the measures to
be done at the end of the reporting period.
The reporting frequency (RF) indicates how often the performance is evaluated and
reported. While performance monitoring should be daily, the reporting frequency is
when the outcome of the evaluation is formalised and reported to the custodians of
the performance management system.
The base is the minimum performance expected of the individual holding that
position. Where one continuously fails to achieve the base performance, then
corrective action has to be taken.
The stretch is performance above the base which is expected from an above average
performer. It is the challenge given to those who would like to be recognized for
exceptional performance.
The actual performance is what is measured by the scorecard owner and his
immediate superior based on performance evidence shown during the period under
consideration. This performance is supported by tangible results of achievement
which is objective and supported by evidence.
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The system will calculate the result from the figures fed in and rate each perspective
as a platinum, diamond, gold, bronze or wooden spoon. The summary of ratings is
shown in the form below:

Summary Of Ratings
Financial Diamond
Customer Wooden Spoon
Internal Business Processes Platinum
Learning and Growth Bronze
Overall Perfomance Category: Bronze

Achievement Ratio: Extent to which the stretch target has been achieved over and above
the baseline. E.g. : If baseline is 60 units, stretch target is 90 units and an actual of 75 units
is achieved – the achievement ratio will be : ( (75-60) / (90-60) ) % = 50% AR
Wooden Spoon <0%

Bronze 0-20%
Gold 21-50%
Platinum 51-70%
Diamond 71-100%
Scorecard Owner's Signature: T.A. Mavetera

Manager's Signature: @@@@@@@@
The system provides five levels of performance for each perspective and the overall
performance ranging from wooden spoon which is the lowest to the diamond which is
the highest.
The organization should then have a policy on what percentage each of the levels of
performance is equated to. Generally, the wooden spoon does not receive any
performance related increases as it is below acceptable performance. Those
employees who score at the wooden spoon level are placed under the Chief Executive
Officer’s watch list under which their performance is placed under surveillance on a
regular basis until they are rehabilitated. Those who fail the rehabilitation process are
then negotiated out of the organization using various legal provisions.
The Balanced Score Card is therefore a performance management system used by

organizations to determine merit remuneration increases for their staff. In other
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organizations, most remuneration benefits are linked to performance and where one‘s
performance is below the bronze medal, the individual will not be eligible to apply or
access any of the benefits available to employees.
The use of the Balanced Score card requires sufficient training of all stakeholders so
that they speak the same language and interpret the results from the same angle.
The Human Resources Officer has to analyse all the forms and come up with a
document which is submitted to Senior Management together with the financial
implications before approval is granted for the merit increases to be factored into
employees” salaries.
4.6 SALARY PLANNING
Section 1 of this Chapter covered salary structure, which is based on job evaluation
and pricing of the job structure. The final result was pay grades that together made up
the salary structure of an organisation.
In Section 2, we examined employee performance appraisal as a system whereby we

could determine an individual’s salary within the range of a particular pay grade.
However, while ranges of pay grades are continuously adjusted to keep in line with
the market value (via salary surveys), the individuals salary progress is also a
continuous process. Various basic rules apply to the adjustment of an individual’s
salary in the salary planning process, and refer to the following when such
adjustments take place.
1. Career salary progress

2. Merit increases
3. Promotion increases
4. Adjustment to correct low payment
5. Adjustment on transfer
6. Incremental salary adjustments
McBeath and Rands outlines these basic rules well.
Salary planning is not so much a difficult operation as one which becomes involved
owing to the number of interrelated factors. McBeath and Rands also discuss the
various criteria that should be studied and guidelines necessary for effective salary
planning. Everything we have discussed so far – methods, structures, schemes and
plans provide only the basic working tools of salary administration. The proper use of
these tools for individual salary planning depends on the attitudes and understanding
of line management. The training of line management in applying the principles of
salary planning and ensuring their attainment of a full appreciation of its concepts,
provides the most stimulating challenge in salary administration.
SUPPLEMENTARY READING
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McBeath in”Organisation and Manpower Planning” 1969, integrates salary planning
with career planning.
4.7 SALARY POLICIES AND PROCEDURES.
Now that we have a salary structure, a performance appraisal system and salary
planning for adjusting individuals’ salary, it is necessary to have definite salary
administration policies and procedures to ensure the implementation , maintenance
and control thereof.
This section consists of three main parts, which McBeath and Rands covers well.
1. Various operational procedures to be used in salary administration

include the following.
 The annual versus flexible salary reviews

 Salary forecasting and budgeting
 Attrition (i.e. process of gradual reduction of average salary levels for
each type of work)
 Inflation
 Control and audit of year-wide salary adjustments including the
delegation of authority.
2. Salary administration statistics – for example, “compa-ratio”. In the last

Chapter of this course salary and records and statistics will be covered
more fully.
3. Policy development and communication – The question arises – who is

responsible for salary administration policy? Once this is established the
policy must be shared with management and employees through both written
and oral communication.
PAY DETERMINANTS AND THEIR MEASUREMENT
By Garry Whyte. Director. Personnel Resources Group
INTRODUCTION
In considering the factors that determine pay and the techniques available for
measuring them, it seems appropriate to emphasise the Employer point of view. In
the Zimbabwean situation, pay is largely determined by the Employer and some of the
most important measuring techniques are the province of one member of the
Employer Group – Human Resources Manager .
It is important to stress that we are involved in a decision process.
When we are looking at determinants, we are looking at factors influencing the

Executive’s Pay Decisions.
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When we look at measuring technique we are looking at Human Resource’s
contribution to Pay Decision Making.
PAY DETERMINANTS
As a framework for discussing the factors that influence pay decisions let us visualize
a decision line drawn through concentric circles and growing outward in scope.
From MAN
to JOB
to UNIT
to COMPANY
to SECTOR
to ECONOMY
to SOCIETY
Not everything that we need to discuss will fit into this framework but it should give
us a logical pattern.
Some words of caution are necessary. No executive will consider all these factors
each time he makes a pay decision. We can go further and say that many will
influence him in the overall decision.
MAN
Let us examine the man factor under four sub-heads, derived from the observation
that we want people to join us, to stay with us and to perform for us and
qualifications.
1. Paying people to join – in establishing a man’s earnings, the most common

considerations are probably: Market Worth as often (but not always) we have
to pay the man at a rate acceptable to him in terms of the market average for
his job.
2. Qualifications, Training, Experience and Skill – which we can combine

because they represent premium payments for the degree of knowledge,
practice or expertise considered desirable for performing a job.
3. Paying people to stay – length of service is frequently a consideration in pay

decisions. This shows recognition of the fact that employees should become
more useful in relation to their length of experience in a job and their degree
of familiarity with the organisation. In the more altruistic sense, it shows
recognition of loyalty.
4. Paying people to perform – few will argue the validity of paying a man for his
performance, The important point to remember is that performance is relative
to “opportunity to perform”
To give some examples –
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 Most of us work in group situations where individual performance is affected
– for good or ill – by consensual performance.
 A man who relies on an item of equipment to accomplish his task cannot
perform above the efficiency of that equipment.
 A physically weak man cannot perform as effectively in some jobs as a
physically strong man.
JOB
A convenient way to characterize the job factor is through the three main value scales
we apply in assessing it.
Contribution Values – all organisations consider that some jobs contribute more to
their well-being and success than others. They pay for this, regardless of other
considerations.
Market Values – we pay according to the availability of people who can, and will do
the job and the competitive demand for the services of these people.
Social Values – we apply our society’s norms to jobs and this influences how much
we are prepared to pay.
The sum of these values can be seen as representing the “job value” on which we base
our pay decisions. The concept of job value is relative to a particular ethos – change
the time, the place, the manager, the business or the society and it may well change
too.
UNIT
Organisational structures comprises two basic elements – hierarchical ranking of jobs

and generic grouping of jobs. Under the previous heading we considered how rank-
values are assigned to jobs. Let us now look at the element of grouping, which
represents an organisation’s concept of how best its jobs can be marshaled to
accomplish corporate objectives.
There are two major groupings in an organisation and we need to examine these
against the notion of contribution value.
Task Groupings – job groups performing tasks regarded as being of major

importance to the organisation will carry higher average earnings than other job-
groups. An example would be the sales jobs in a marketing-intensive operation.
Functional Groupings – the classic groupings in this field are those of Line and
Staff. The distinction is based on the belief that there are two kinds of people in
business – those who produce and those who support. Generally speaking, producer
jobs are seen as having a greater contribution value than supporter jobs.
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COMPANY
Here we used the word “company” in its widest sense, including organisaitions – such
as hospitals, municipalities and government departments – which are not companies
by legal definition. Some examples will help us typify company factors in pay.
Profitability – a profitable company has more latitude in pay decisions. This point
applies, in an inverted sense, to non-profit organisations like government departments
– the less their loss (i.e. the lower their costs) the greater the latitude.
Size – larger organisations tend to be more formalized in their systems, and less
flexible in their decision making. It is generally true that people lose identity in ration
to the size of their company; pay decision become remote and impersonal.
Process – companies whose processes are labour-intensive will be more concerned

with pay than those whose processes are capital intensive. People are much more
important to them as factors in both cost and productivity.
Control – where control is highly centralised, it is difficult to identify the contribution

of individuals and small units. As a result, tend to be evenly distributed.
Style – authoritarian and democratic management styles have different attitudes

towards pay. Factors that strongly influence the one may carry little weight with the
other. The way in which they make and implement decisions is not the same.
SECTOR
Organisations with similar objectives tend to group together into distinct sectors
within the economy. Comparisons between (say) a banks and a pharmaceutical
manufacturer will indicate how Sector can influence pay – they employ different
types of people, their jobs differ significantly, one produces goods, the other services
– and so on. The end result is likely to be fairly different pa structures.
An important element in pay that we can include under this heading is Competition.
Monopolies and quasi-monopolies are often in a position to dictate pay. If a cartel
controls the electronics industry and you happen to be an Electronics Engineer, your
employment opportunities – and thus you pay opportunities will be restricted.
Monopoly is not always a disadvantage to the employee – where competition does not
exist, it is much easier to pass pay costs on to the customer.
ECONOMY
The relationship between pay and the economy is an interdependent one. Economic
factors have a decisive effect on pay and pay –because it is the main source of income
for the majority of people – has a profound influence on the economy. These are
examples of economic factors in pay.
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Economic Climate – a healthy economy has considerably more latitude in its pay
decisions than a sick one. This larger version of the factor we referred to earlier as
Company Profitability – but with significant difference. People can leave an ailing
company – they find it much harder to escape an ailing economy, so they tend to
“stand and fight”. The jump in pay-demand pressure that occurs during inflationary
periods is symptomatic of this.
Fiscal Policy - this has a strong influence on pay, particularly through two controls
commonly used by governments –
Revenue control (i.e. taxation) is the means whereby governments obtain the money
they need to run a country. It is also used to control the incomes of people. For
example, government may make more than it needs to dampen inflation or less than it
needs to counter deflation.
Expenditure control which prescribes spending through devices like Sales Tax
influences the level of supply and demand for goods and services. This affects the
supply/demand factor for labour and thus, the cost of labour.
Government Spending – the way in which a government spends its revenue has a
marked influence on pay. Government, at local and national levels, is itself a major
employer of labour particularly for the provision of infrastructural services.
Government can create additional employment opportunities by investing in new
industries.
SOCIETY
Ultimately most things are a reflection of the society we live in. These are a few of
the social factors that help determine pay.
Legislation – laws are codified social norms and may on their own affect pay. In
Zimbabwe for example, we have laws that define the minimum we pay for certain
jobs.
Class – class relationships are social in nature. A significant one in pay is that
between labour and capital. Its influence on pay patterns is clear if, for example, we
compare Industrial Britain with Zimbabwe.
Location – comfort and convenience are important to people. Jobs carry more
incentive if they are favourably located to facilities such as transport, shopping,
education and recreation.
Age – societies usually relate pay to age in one way or another. Many of the elites in
modern society are Youth Elites and this has its reflection in pay. People tend also to
change their pay objectives with age – security displaces opportunity as we grow
older.
Some important factors important in determining pay do not fit into the framework we
have used.
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LABOUR MARKET
Labour is a price and price is a function of supply and demand. Where labour is
scarce it costs more; where plentiful it costs less. In essence that is how pay functions
in the labour market.
A concept of importance, in our view of the labour market, is that of Labour Mobility,
i.e. the notion that Labour is free to seek the highest bidder for its services. This is a
utopian idea. Under the heading “Society” we mentioned some of these barriers.
We sometimes take too holistic a view of the labour market. We need to remember
that it comprises many sub-markets. Pay differs considerably, for example between
the agricultural and industrial markets. Some jobs are so “universal” that they form
distinct markets of their own – for example salesmen and secretaries.
Another principle significant in pay is that labour markets tend to be local. In

Zimbabwe for instance there is a little geographical movement of labour outside the
managerial classes.
PAY MIX
To say “pay affects pay” is not as foolish as it sounds. Organisations find it difficult
to change the pay policies they have embarked upon. For example, a company that
has committed itself to considerable investment in a fringe benefit programme may
find it has little latitude left for direct rewards. The pay mix is important in another
sense. It represents the “tangible form” of our pay decisions Rewards will not
motivate employees unless in a form compatible with their needs. We know, for
example, that lower income groups often have a negative attitude towards deferred-
pay plans – when today is a struggle tomorrow has little relevance.
Employee expectations
Having considered pay determinants from the Executive viewpoint, we have said little
about the Employee. Let us conclude this section therefore, with a reminder that
Employee plays important role in determining pay. This role is very obvious in
countries where Labour is strongly organised.
MEASURING PAY DETERMINANTS
The measurement of pay determinants represents a major contribution area for the
Human Resources Manager. We can express his objective in this area as being to
help the organisation make effective pay decisions.
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With the space at our disposal we can select only a few techniques for discussion. In
the Zimbabwe context these three seem to have current importance:
 PERFORMANCE APPRAISAL
 JOB EVALUATION
 PAY SURVEYS
Performance Appraisal
Objective – the objective of Performance Appraisal is to establish the relative

contribution with values of individuals in the organisation.
Indices – we can measure performance levels on following the two levels.
(i) Quality The standard of work performance
(ii) Effort The energy expended in work performance
It is valid to reward effort – to pay people according to how hard they work – but this
consideration should not enter into Performance Appraisal. Failure to differentiate
between quality and effort is a common fault of Performance Appraisal systems. In
Performance appraisals we should be interested only in how effectively people work.
Most top performers are also hard workers, but there are many hard workers who are
not effective performers. We might set out sights clearer if we spoke of contribution
“instead of performance”.
It is worth reminding ourselves that contribution can be made in two ways – through
revenue and through savings. The best kind of profit growth comes from increasing
income while holding down costs. Many Performance Appraisal systems are so
constructed that they favour the revenue earner and discriminate against the cost
saver.
We can also look at performance on a time-scale as follows.
 Present performance
 Past performance
 Future performance
Performance Appraisal, in the sense we are using here should be concerned only with
present performance. It is valid to reward past performance, to recognise loyalty and
practical experience. It is valid to reward predicted performance. We use this
criterion in setting new salaries and in paying those whose potential we deem
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significant. But factors like loyalty, experience and potential are not elements of
“performance” in our context.
Performance Appraisal systems diminish in value if they incorporate, instead of

separating, other kinds of reward. We lose motivation impact where people cannot
distinguish when they are paid for performance and when they are being paid for
other things.
Methods – In Zimbabwe the most common method of measuring performance is

Factor Rating. We establish a set of factors that we consider indicative of
performance, usually assign weighted point values to them and then rate our people
against them. We tend to measure by comparison, selecting certain individuals as
bench-mark men and we measure largely to the internal standards of our organisation.
Our problem with this method lies in the fact that human behaviour is subject to a host
of variables. Almost inevitably we choose too few or too many factors - ending up
with a Performance Appraisal system that is either oversimplified or over- elaborated.
Social Scientists make their best progress when they are able to identify a congeneric
factor, i.e. a single factor that reflects, in its operation, all or most of the variables
significant for a particular situation.
If we take the congeneric factor for performance to be Contribution Value – we have

an effective method of measuring it – the method implied in the technique of
Management by Objectives Measuring against a predetermined set of task
objectives have significant advantages over the factor Rating Method. For example:
(i) it is oriented towards the job so that it has direct relevance to “performance” in
the true sense.
(ii) Standards are established in advance, reducing the subjectivity.
(iii) Measurement takes place in terms that people can comprehend and accept as
meaningful.
We face tremendous problems in trying to measure finitely, but our admiration for the
precision of our colleagues in the natural sciences prompt us to pursue the quantitative
measure. One of the reasons why factor rating appeals is that it seems (though
falsely) to give a finite measure. We are concerned with “quality” in performance and
we would be prepared to accept a qualitative measure. Our task is to judge
accurately, not exactly, and we can achieve this with the M-by-O technique.
Employee Acceptance – Performance Appraisal Systems so often falter on the rock

of employee acceptance that we need to say something about this aspect. One of the
most important elements might be called “manifest justness”. A system will not
motivate unless it clearly discriminates between good and poor performance. The
negative side of discrimination is often forgotten. For every Performance Appraisal
system that fails because it is not seen to reward good performance there is at least
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one that fails because it is not seen to punish bad performance. The reward
differential is not apparent enough in many schemes.
Performance cannot be used as a motivator unless its level can be significantly

influenced by the individual concerned. We referred to this earlier as “opportunity to
perform”. Where variations in performance are dictated by external factors such as
the speed of a machine – performance appraisal may even prove a demotivator.
Participation is essential for acceptance in the fullest sense. Employees have no

desire to abrogate Management’s role – but they do not want to be consulted on the
question of how performance will be judged, because these judgements have a major
influence on their careers and incomes. Executives sometimes confuse this matter.
Employees dispute their precedents, not their verdicts. When the point is put to them
specifically, few Executives claim omniscience – they acknowledge that they can
judge job performance more fairly if they consult the man doing the task.
JOB EVALUATION
Objective - we can express the objective of Job Evaluation as being to establish the
relative contribution values of jobs in the organisation - identical that of
Performance Appraisal, except in the substitution of ”job” for “man”. We can
emphasise the close relationship in a phrase – pay the man what he is worth and see
that he does a job worth what you pay him.
Indices and Methods – these can be dealt with together and briefly because the
points are essentially the same as those already made under Performance Appraisal.
In Zimbabwe we commonly use the Factor Rating method for Job Evaluation. We
employ a multitude of indices to establish job worth, most of them relating to such
concepts as “skill”, “effort” and “responsibility”. Again, we end up with systems that
tend to be over-simple or over-complicated.
There have been a number of attempts to define a congeneric factor for Job
Evaluation – Elliot Jacques “Time Span of Discretion” is probably the best known.
Where companies have used congenerics they seem usually to have obtained better
results than are given by multiple Factor Rating. Yet we have not quite reached the
target.
Perhaps Contribution Value is worth considering as a congeneric. For a base model

we might visualize total contribution as a two-layered cake – one tier comprising
contributions through revenue, the other contributions through expenditure (savings)
we should be able to cut this cake into slices each representing the contribution value
of a job. This would not be a simple task, but it does not appear a feasible one – and
we would have a number of established Accounting principles to guide us.
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Job Design - although it is strictly not a part of Job Evaluation, we should mention
Job Design as a desirable preliminary. Jobs tend to grow like Topsy, in an unplanned,
haphazard fashion. If we make a conscious effort to enrich jobs so that they become
more stimulating and challenging, we will create an environment in which positive
motivation is more readily achieved.
Job Specification – another important preliminary is Job Specification – and this is

definitely part of the Job Evaluation process. Problems in this area are found at
opposite ends of a scale: under-specification or over-specification. Jobs are complex,
particularly in their relationships with other jobs in the organisation. If we rely on
memory and personal knowledge there is a good chance that we will evaluate
incorrectly.
Jobs are also dynamic. Specifications that try to cover every conceivable detail not
only become outdated quickly they also confine and confuse.
We will specify jobs well if we remember these things: consult the people who do the
job, record the essentials, expect change and review regularly for it.
Employee participation - we have just mentioned that Employees should be

consulted when their jobs are specified, because they can give us an insight not
available to the observer. They should also be consulted in the matter of design
because they will perform better in a job they have helped “create”. They will
certainly hope for some say in the method by which jobs are evaluated and rightly,
since evaluation determines their status and pay. However, participation should stop
short of evaluation itself – this is the judge’s task and not the litigant’s.
PAY SURVEYS
Objective – we use Pay Surveys to establish the relative values of jobs in the
Organisation. Job Evaluation will have given us an internal structuring of jobs and it
would be a fairly simple matter to apply pay differentials on this purely internal basis.
Pay, however, is a function of competition – of supply and demand – and we must
take account of the external market situation. Pay surveys help us to assign money
values to our jobs - they are pricing exercises.
Market Policies - organisations have three policy alternatives in the pay market they
can be leaders, equals of followers. Some try consistently to be one or the other, but
most are a mixture of all three. We usually want to be leader, equal or follower,
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according to our estimate of the particular job’s contribution value. We rely on Pay
Surveys to confirm our position in the market.
Market Selection – we said earlier that the Labour Marker comprises a number of
distinct sub markets. As a first step in Pay Surveying, we need to establish our target
precisely. For example, do we require a survey that is national or local in scope; do
we want to survey all jobs or only certain types and levels of jobs? Such
considerations are important – we can waste a good deal of time and money in
misdirected effort.
Problem of Comparison - in Pay Surveys we obtain information and make

interpretations comparatively. Our major problems lie in ensuring that the data we
compare are, in fact validly comparable. To illustrate this point we can mention three
of the main problem areas.
Earnings. Salary (or Wage), while it normally constitutes the greatest part of a man’s
earnings, is seldom the only part. Many managers for example, take a substantial
proportion of their earnings in an indirect form for tax reason – and a large number of
labourers receive free board and lodging as a portion of their earnings. Of course, we
want to compare direct earnings because “cash” aspect of pay is particularly important
– but Surveys that do not reflect total earnings do not permit meaningful comparisons.
Job Definition. We are often involved in comparing, for instance, the Sales Manager
in Company A with Sales Manager in Company B, or the Accountant in a factory
with the Accountant in a departmental store.
Location. We sometimes need to compare jobs in different geographical areas,

particularly where there is a significant movement of people between the areas
involved. The extent of competition for labour and the cost of living factor differs
from place to place. Unless we can identify this “location differential” we cannot
make legitimate comparisons between areas.
Survey Limitations. In reality, Pay Surveys can only give us one measure – that of
Central Tendency. This s a statistical concept – one of “average” – and we would do
well to remember the limitations of such concepts. They are guides not arbiters.
Market averages need to be viewed in the light of such variables as geographical
location, type of business and individual worth. At best Surveys are representative,
yet we often extrapolate date from them as though they were entirely comprehensive.
Data Processing – We have adequate statistical techniques for the analysis and
interpretation of pay data. Our problems arise more in processing – particularly with
regard to two factors – mass and speed. Effective surveying usually involves a
significant quantity of data and prompt feedback is essential if the results are to be of
value in decision-making.
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It seems that the answer lies in computerisation but the justification for this exists in
Pay Administration rather than Pay Surveys. An increasing number of organisations
are turning to computers for pay calculation – service bureaux and packaged
programmes have made this a viable proposition. These systems are eminently suited
to an integrated approach, we can combine survey data with administration data – and
be assured of quick feed-back.
From the widest point of view there is every reason for using computerised Pay
Administration as the focal point for collecting and processing data on the human
resource.
Conducting Surveys – Except in very limited and specific instances, the cost of
obtaining worthwhile pay data is inordinately high. Pay surveying requires more
contacts, more facilities and more time than most of us possess. We should seriously
consider using specialist agencies. We have a few good ones in Zimbabwe and they
provide a service at rates far more economical than we could manage individually.
CONCLUSION
From the Employer’s point of view pay costs have a real fiscal significance and in its
reward aspects pay is a primary factor for motivation. From the Employee’s point of
view pay as his main – and often only – source of income is a matter of vital concern.
A relevant criticism of our attitude as Human Resources Managers towards pay is this
– We regard it too much as a routine thing. Pay should be an instrument for
innovation and change.
NOTES ON THE CHAPTER:

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SELF TEST
1. In the correct order, what are the four steps that lead to a salary structure?
2. Select four of the major performance appraisal systems and briefly state the basis on
which each works.
3. Briefly mention the four main problems in performance appraisal.
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4. Discuss merit promotions as ways of adjusting an individual’s salary.
5. “The training of line management in salary administration provides the most

stimulating challenge in salary administration”. Comment.
6. The following salaries are paid within a particular grade $2000, $2300, $2500,
$2700, $2900. Calculate the “compa-ratio” from these salaries. Does this indicate an
under or overpayment?
7. What is the value of “compa-ratio” charges in salary budgeting?
8. When budgeting for payroll costs and for controlling it, certain factors must be taken
into consideration. Briefly explain 5 main factors.
9. Why is a written and oral policy communication on salary administration necessary?
10. A number of the aspects covered in this module are brought together as criteria for
effective salary planning. What are 6 of these criteria?
CHAPTER 5: SUPPLEMENTARY PAYMENTS
1. Describe the main factors upon which the decision to place work on an incentive basis
of payment depends.
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2. Outline the methods available for establishing work standards which form the basis of
work measurement
3. Discuss the essential requirements of a sound wage incentive programme
4. Identify the primary types of incentives that are commonly used
5. Describe the major requirements for a sound profit sharing plan
6. Discuss the basic forms of incentives for executives
7. Outline the reasons why companies must give special attention to the question of fair
and adequate compensation of professionals
5.1 INTRODUCTION
Based on the previous Chapters, we are now able to establish a rational, formalised
pay structure.
Employees are paid wages or salaries according either to the time worked or the
amount of work produced. Those whose pay is based upon time are paid a certain
sum of money per hour or per month – regardless of how productive they may be.
Work with pay on this basis is commonly called day work or time work. If on the
other hand, pay is computed according to how much work is produced (units, weight,
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assemblies etc) and if employees can earn extra money for producing more than a
certain quota, we call this a wage incentive payment method.
Only a relatively small proportion of employees receive their remuneration entirely in

the form of wage or salary. The various other forms of cash payments which make up
significant parts of remuneration concern us in this module. The principal
supplements are as follows.
 Bonus or incentives for individuals and groups

 Premiums – for additional hours worked etc.
 Remuneration of salesmen, managers etc.
Our module on supplementary payments is divided into three sections.
1. Wage incentives for individuals – our prime concern here is with individual
wage incentives where there is a direct relationship between the amount
produced by the individual worker and his pay.
2. Group incentives – these group or company-wide incentives are based upon

the concept of teamwork and cooperation among employees, management and
the union.
3. Remuneration for salesmen, managers and professionals – the compensation

issues and problems for each of these groups are unique and they are distinctly
different from hourly-paid problems for each of these groups are unique and
they are distinctly different from hourly-paid and office workers and therefore
warrant separate attention.
Although McBeath and Rands cover supplementary payments inadequately for

our purpose, it should prove useful as an introduction. Beach on the other
hand, covers this topic thoroughly and will form the basis of this module.
5.2 WAGE INCENTIVES FOR INDIVIDUALS
Each company has to decide which work is to be placed on an incentive basis for
payment. Beach is of the opinion that the following five factors have to exist before
incentive wage payment can be utilized effectively.
1. Individual or group performance must be measurable and suitable for

standardisation.
2. There must be a consistent relationship between the amount of skill and effort
exerted by the employee and his output.
3. The work can be readily counted and credited to the proper individuals.
4. Productivity should be attainable.
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5. The employees (and the union, if one exists) must accept, support and
cooperate in the method of wage payment
To this we can add –
6. Large pay rewards must be given to the best performers. It is interesting to

know that F. W. Taylor originally developed wage incentives as we know
them today.
Because wage incentives are based on work performance, work measurement

becomes an essential factor. The time required to perform a given amount of
work is used most commonly as a standard for measuring performance of
work that is on an incentive.
Fortunately, there are number of methods available for establishing these

standards and these include the following.
 Past performance
 Bargaining between employer and union
 Time study
 Standard data
 Predetermined elemental times
 Work sampling
Beach discussed the essential requirements of a sound wage incentive programme.
1. Management and employees should understand and support the incentive

programme.
2. The methods of each operation should be analysed before a work standard

established.
3. The standard should be determined by work measurement techniques, e.g. time

study.
4. Each job on incentive should have a guaranteed minimum rate.
5. The work standard should be guaranteed by management against change, unless

there is a change in the method.
6. It should be easy for employees to calculate earnings. (for example on certain

mines drillers was paid 1 cent per hole drilled. 70 holes per day would,
therefore mean a bonus of 70 cents)
7. An effective grievance procedure must be available to handle dissatisfaction

and complaints of the employees.
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Although each incentive plan should be tailor-made to fit the needs of the
organisation, there are a few primary types that are commonly used – measured day
work, piecework, standard hour and gains-sharing plans.
By using wage incentives in an industrial organisation intelligently, management
often achieves its goals of higher productivity and lower labour costs.
However, the introduction of incentives brings about many administrative and human
relations problems that did not exist before, or at least not any large degree. Meeting
the human problems imposed by incentives can be as crucial as developing the
incentive scheme. This is where your background knowledge or motivation and
productivity, gather into the Introduction to Personnel and Training Course, will have
to be put into practice and tested.
5.3 GROUP INCENTIVES
Group incentives are based upon the concept of co-operation among employees,
management and the union (if workers are represented by one). The objectives of
group incentives are somewhat broader in scope than the “higher output per unit time”
objective of the traditional direct wage schemes.
In order to understand its objectives and how group incentives operate, it is necessary
for you to study two such programmes – the Scanlon Plan and Profit Sharing.
The Scanlon Plan consists basically of two parts.
1. Labour cost allowable is used as a standard and is set by accounting methods

and not by time study.
2. A programme for implementing cooperation among the employees, union and

management to solve production and efficiency problems, which is achieved
through a unique suggestion plan. The plan, therefore places, emphasis upon
group cooperation and the initiation of ideas among the employees.
Profit-sharing is the result of an agreement between management and

employees whereby employees receive a share, fixed in advance of the profits
of the company. Objectives of profit-sharing, types of plans and requirements
for a sound plan are dealt with adequately by Beach.
5.4 REMUNERATION FOR SALESMEN, MANAGERS AND PROFESSIONALS
The incentive and payment plans that we have discussed so far do not always apply to
all categories of employees. Therefore, this section deals with pay practices for
salesmen, supervisors, executives and professionals.
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Salesmen
Here we are referring mainly to outside salesmen. When choosing a pay plan for
salesmen, management basically has to choose among three basic types.
 Salary
 Straight commission
 Salary plus commission
Supervisors
A supervisor who, is essentially a manager at the lower levels in the organisational

hierarchy, has often been called the “man in the middle” – i.e. between higher
management and the workers. Two important criteria are involved in setting the
salary level for supervisors.
1. The prevailing rates in the area or industry
2. A proper differential above the highest-paid worker in the group he supervises.
Supervisors are usually excluded from overtime payment and incentive schemes for
workers which underlines the importance of paying him 20-40% more than the
highest paid job under him. (Beach) If this does not happen, one can imagine the
impossible situation where the supervisor stands in the back of queue at a bank to
cash his salary cheque one of his workers, who has just cashed his own cheque, offers
to cash the supervisor’s cheque out of his own funds! Incentive schemes for
supervisors are base on different factors. The factors that are used to measure
performance should either be wholly or to a large extent within the control of the
supervisors.
Executives
In the category of executives are included members of middle and top management.
Incentives for the executives can take various forms.
1. Incentive bonuses that are directly tied to the profit of the company
2. Bonuses for improved individual performance above a set standard
The following are also tax savings plans.
3. Stock options
4. Deferred compensation
5. Executive fringe benefits
Professionals
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Generally speaking a professional employee is one who is in non-supervisory position
and is unusually and individual contributor. The work of a professional requires
knowledge of an advanced type in a field of science or learning, acquired by
prolonged course of specialised instruction and study. In the professional group are
included such jobs as engineer, chemist, attorney, economist, psychologist and
biologist.
Because the market demand for most professionals is very high, because it exceeds
supply in certain occupations and because professional as a group are among most
mobile of all groups, companies must give special attention to questions of fair and
adequate compensation.
5.5 INCENTIVES FOR BLUE COLLAR WORKERS BY GEORGE DE SWARDT
Incentives should, where possible, be designed to serve the objectives of a business.

We will restrict this discussion to the commonly discussed objectives of higher
volume and quality of output at lower cost.
In the literature on this subject matter is often treated in an analytic way, which seems
to take the subject out of its natural context. On the design of incentive schemes and
in diagnosis of unsuccessful ones the author has never found an analytic approach to
be anything barren. The practical approach is an exercise in communication and
empathy that leads to the construction of a complete system of incentives and
controls. When one encounters a successful incentive scheme that, according to many
of the analytic criteria should be unsuccessful, one is forced to look very closely at the
indescribable thing called morale. The same applies to schemes that exhibit all the
structured attributes of the successful schemes and yet fail.
It is no doubt constructive to analyse some of the methods of organisation that aim to

acknowledge one or other of the specific motives some people have in a work
situation, but favourable responses from workmen are not obtained by thinking in
terms of “motivation” because we cannot supply anyone with motives. Too many
people seize on one particular form of work organisation such as job enrichment,
short interval scheduling, measured day work and bonus incentives, in the belief that
one or other of these ways supplies better “motivation” than the others. Successful
incentives schemes will usually include examples of all these forms in different
sections at different levels in the organisation, because a system of incentives must
appeal to the motives that people have. It has to be system because there is no single
king of incentive that will induce people to endure the complicated system of
restraints and respond to the many demands of a modern industrial work situation.
In the discussion which follows we will deal mainly with the structured aspects of an
incentive system and we will assume that a bonus scheme will be part of it. Fairly
precise work measurement must be practiced in any organisation that aims to be
objective about its claims for success in the practice of any form of organisation
compared with any other. It is not possible, without work measurement, to separate
the contributions to productivity made by the equipment, labour and other resources
of production. The observations and conclusion on which this decision is based have
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all been drawn from cases where work is measured. During a recent visit to the
United States the author also examined some systems with heavy accent on job
enrichment and measured day work.
As a framework for the discussions it is convenient to describe some of the workings

if a typical successful incentive scheme. It has the following principle features.
1. The morale of work groups is high and management aims to pay their workers
well.
2. It is based on work measurement that is reasonably consistent and precise
3. It is based on the principle of daily calculation and communication of bonus
earnings.
4. The bonus rates are such that an average worker can earn can earn between
25% and 35% of his basic wage and bonus
5. The bonus earnings of every worker are protected against being lost by lack of
work, machine break-downs or any other factor which not controlled by the
worker.
6. The values for tasks are expressed in time for a carefully specified method.
7. Equipment maintenance, material supply and work loading must effectively
enable the worker to maintain uninterrupted performance.
8. Supervision must be mature, fair and technically competent.
9. The job content must b matched to the skills of the worker to the extent that he
can take pride in high performance.
High Morale
It is necessary to point out that bonus incentive schemes do not, by themselves,

improve morale. In fact a bonus scheme, introduced into a situation of distrust and
antagonism between management and labour can be relied on to make the situation
worse.
In circumstances where words like “motivation are frequently used in management

communication, it is unlikely that an incentive scheme will succeed. Workmen do not
like to be “motivated” but they respond to plain bargaining when they trust and
respect their supervisors. In bargaining, you do not attempt to infuse people with
motives, you simply respond to those they have.
An attitude typical of managements who operate successful incentive schemes is the

expressed desire to increase the earnings of their labour force in some manner that
ensures that they are rewarding the right people. The incentive scheme then becomes
a mechanism for protecting both management and workers from being imposed upon.
Implicit in this attitude is the belief that the workmen, as well as management, accept
the need for economic effectiveness of their efforts. Where the labour force is too
unsophisticated to reach such an acknowledgement of mutual advantage, agreement
on objectives can be reached in other ways, but the basis of successful co-operation
has to be a belief shared by workmen and supervisors, that the group objectives are
worthy of their efforts. This, in this author’s view, is the essential element of good
industrial morale. It permits constructive social pressures to develop within each
working group in the plant.
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Work Measurement
Few games are every played without some rules for scoring advantage. In group
efforts where the nature of individual tasks is diverse, we also need some way of
keeping the score. It is only in groups having exceptionally good morale that a bonus
scheme will succeed despite inconsistency of work measurement.
Work study men stop using stop watch techniques are taught to estimate (rate) the
effectiveness of the work performance they observe. There are several rating scales,
but of them are linear scales drawn between two points and projected in both
directions. The two fixed points being:
(a) the pace and effectiveness that is normal for an average person who is paid for
the time he spends at work, rather than according to his output; and
(b) the pace and effectiveness that is normal for an average person who is paid
according to the output he delivers.
It is an observable fact that the output under the second set of conditions is one-third
greater than the output under the first set of conditions.
Since the tempo estimates or rating judgement required from a work study man in a
subjective process, it is difficult, but not impossible, to achieve consistency of
estimates made for different tasks, by different work study men, concerning different
operators, all in the same plant. It is more difficult to achieve consistency between
different establishments. Predetermined motion time systems such as MTM,
eliminate most of these difficulties, but some at cost. The standards constructed from
MTM data, however, are consistent not only from firm to firm but throughout the 26
countries of the world where MTM is well established. The leading countries are
USA, Britain, Sweden, West Germany and Japan. There as so few firms, in this
country, than can provide the right experience for a work study man that it is difficult
to account for relatively large number of practitioners. However, it does not partly
explain the large number of bonus schemes that are started and then dropped.
It seems hardly necessary to point out that performance standards, whether used for
incentives or in any other way, are standards against which people are expected to
perform in a manner that bears favourable comparison. A man’s standing in his work
group can be seriously affected by these standards. Surely their determination
deserves to be done by qualified people with proven experience in environments
where their techniques have been successful?
Daily Calculation
Short Interval Scheduling is a technique which enjoys recurrent vogue. Its underlying
principle should be applied in the design of any incentive scheme. People differ
markedly in the degree to which they respond to distant rewards. It does not matter
whether the reward is social approval or cash. All people respond to distant rewards.
It does not matter whether the reward is social approval or cash. All people discount
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the future, but every person applies his own discount rate. Some people can strive
after benefits that will be achieved only in several years time; for some a day is too
long to wait for a reward. As a general rule a bonus scheme which provides for
weekly calculation of the bonus will be unsuitable for unskilled workers. In many
cases the bonus needs not only to be calculated daily but paid daily in cash. To
calculate and communicate daily and pay weekly is a reasonably effective
compromise. In most cases, it is necessary either to calculate and advise bonus
earnings daily, or to ensure that the system of scoring is simple enough for every
worker to calculate his bonus for himself. The former is preferable.
In any good incentive scheme the system designer will have established the typical
reward-response period for each working group and designed the supervision and
control routines accordingly.
Bonus Ratio
Trade unions in Europe rarely agree to incentive schemes or any other basis than strict
proportionality between the volume of work output and the total pay (base rate plus
bonus). Also they never accept any system which does not guarantee the base rate
irrespective of the work output. If they pay is to be strictly proportional to output,
where is the advantage to management? The advantage arises mainly from the fact
that the normal tempo of work, under conditions of payment for time spent, is never
maintained throughout day. Stoppages, delays and interruptions normally rob the
workman of his opportunity to produce consistently. The inalienable personal time a
workman requires is seldom more than ten or twelve percent, but delays account for
anything from five to eighty percent of the time he spends at his work station. The
advantage of bonus scheme is that it gives the workman a financial interest in having
these delays eliminated. The workman puts pressure on the supervisor to ensure a
continuous work load and uninterrupted supply of materials, tools and services.
When we hear of increase in output in the order of one or two hundred percent, the
improvement comes from no startling change of tempo, but simply from improved
organisation of the workflow - a large part of the frustration content of the work’s job
is removed. The customary rates of bonus in Europe could have been determined by
bargaining processes rather than any perception of some natural relation between rates
of pay made the effort elicited but here in Zimbabwe, trade unions, where they
concern themselves at all, seldom demand more than 15 % as the minimum average
increase in earnings to arise from bonus.
Nevertheless, average bonus earnings of less than 20% over base rates are nowhere
known to be effective in eliciting a proper response. They do no more than
discourage the workman from looking for other employment. Those few cases known
to the author where adequate responses are achieved for 25% base rate are situations
where the base rates are so low as to create a dire necessity for more income for the
workers.
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The author has encountered some schemes which present the outward appearance of
being exceptions to this rule but on inspection they have all turned out to appear only
so because the required work measurement is either faulty or non-existent. Arbitrary
or subjective bases for awarding bonuses are non incentive schemes. Some schemes
do not operate successfully, for a short time, at rates below these levels, but
approximately one year seems to be the limit. The observed fact that the effectiveness
of bonus schemes is related to the amount of bonus paid suggests that the financial
element in any incentive schemes is important enough to merit serious consideration.
Protection of Bonus Earnings
One of the most important aspects of and enduringly successful bonus scheme is its
provision for protection against earnings loss from causes beyond the control of
workmen. It is also the aspect most likely to be neglected technically oriented
management, although it provides for management a control of exception conditions
that can be improved upon only at great expense.
A bonus scheme makes it rational and desirable, in the eyes of a workman, to ensure
that every delay or other involuntary idleness is reported in writing to management.
The employee usually demands that he be given credit in bonus minutes, for the time
he is involuntarily idle or when the condition of the work coming to him requires
effort on his part that is not provided for in the standard for the job. The facts of the
matter have to be recorded in writing so that the bonus calculations can be properly
made to compensate him for his idleness. He get no contribution to bonus from such
events but since he gets credit for the time lost, he does not lose any bonus earned on
previous or subsequent work. Naturally such awards of standard minutes for idleness
will be tabulated by wage clerks to provide management with a precise measure of its
effectiveness in organizing the work flow. The system puts the onus where it
belongs: on the workman for reporting an on management for action.
The procedures for considering and recording such exceptional awards are a matter of
considerable sensitivity and are seldom satisfactorily achieved on a first attempt
unless the designer has some experience on such matters. From the workman’s point
of view it is a simple matter of fair play but from management view it bristles with
problems that, on analysis, turn out to be the basics of good administration.
Express Work Values as Time Standards
Apart from the need to record exceptional conditions in terms of time lost or time
required for extra effort, a time standard is a simple objective which all workmen can
understand. To add up the time standards for the work he has done is no great
problem even for an unsophisticated workman. If any firm finds neither itself
employing people who can neither add nor read, simple humanitarianism suggests that
they provide or make available the necessary training.
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These time standards must be inviolate which means that nothing but the highest
quality of work study is good enough. It is also necessary that the method of work for
which the standard is set must be specified very precisely. Europe has many bonus
schemes which are frozen into sterility because failure to specify the method has
given the trade union the opportunity to refuse to accept a change in the standard
necessitated by improvement in equipment. It is downright foolish, in the light of
present knowledge and experience, to set time standards or any other form of bonus
rate, without carefully specifying the method to which it applies.
Some highly successful incentive schemes also provide a formula for calculating the
cash value of any improvement in method introduction by a workman. He is then
compensated in cash and the time standard for the job is revised according to its new
work content. The technique has some advantages over the conventional suggestion
scheme.
When MTM is used for work measurement this specification of method emerges
almost as a byproduct of the method of setting the standard.
Equipment Maintenance and Material Supply Conditions
It should be thoroughly understood by every management contemplating an incentive

scheme that he increase in productivity will come from improvements in organisation
and only to a minor extent from harder work. In fact the thorough study of methods
that normally forms part of the process of setting standards will often produce
changes that have the effect of decreasing the arduousness of the work. Most
workmen have a low tolerance for frustration and few workmen are unaware of the
quality of organisation that prevails in the working environment. Their analytic
powers may not enable them to be specific about aspects of organisation but they have
a keen awareness of its effects and their opinions will be reflected in the spirit they
show in their work. The people who design effective incentive schemes respect
Napoleon’s dictum that there are no bad soldiers but some bad generals.
Management must ensure that effective production planning and machine work or
group loading is practiced. A bonus scheme will do more than create willingness to
collaborate, both in production and recording of production. Management must
ensure that the work, the tools and the material are available to the workman. It is not
unusual in badly organised situations to find an aggressive workman who will rob
high priority jobs of material to keep himself busy in some low priority job. Given
the wrong conditions, a bonus scheme can turn disorder into bedlam and do
permanent damage to morale.
Quality of Supervision
A bonus scheme will enable a good supervisor to manage comfortably a far larger
workforce than he could control without it. It will not usually help an inferior
supervisor to improve his performance. The system of measured work standards will
relieve the supervisor of much of the necessity to observe physically and to exhort his
workmen. He can organise the work rather than the people. In turn, the people he
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supervises are relieved of the feeling that he is breathing won their necks. For
example, a supervisor need not interfere if a workman who consistently earn high
bonus is erratic in attendance at his work station, because the objectives of the
company are clearly being satisfied by the high performance if the workman is not at
the same time disturbing another workman. Since the supervisor has, in the measured
work system, the means to know the workman’s output he need not be suspicious of
the workman’s occasional desire to vary the work routine.
The other side of the picture, however, is somewhat different. Because it accord with
their motives to avoid idleness and bad work which might not pass inspection, the
workers will seek out the supervisor to get him to do something about the problem
which interferes with their ability to improve or maintain their earnings. The quality
of the decisions and actions he take to resolve the workmen’s problems will be the
critical part of his image in their eyes. He will have to arbitrate in cases where the
work is claimed to be more difficult than the standard allows for; he will have to
explain and demonstrate why, in some cases, the methods employed by the workmen
are not effective; he will have to go back to departments earlier in the work flow to
insist that their part of the work be done properly and on time; he will have to
organise material supplies and he will have to do these things as the representative of
the workmen – no longer purely as a representative of the management, since his
subordinates have an interest in seeing that these things are done properly. To put the
blame on management or on some other department will no longer be enough because
his subordinates will be dissatisfied if he fails in these things. Every one of his
workmen will settle down to his own natural work pace and regard himself as having
a right to the earnings appropriate to his efforts. If his earnings fluctuate because the
supervisor fails to organise a proper workflow, or fails to ensure that supplier
departments deliver their work in satisfactory condition, it will be his own workmen,
not the management, that will express dissatisfaction soonest. The supervisor, in a
bonus scheme, works under quite a different set of social pressures from those which
he may have been used to in the past.
Matching Tasks and People
It is not surprising that many supervisors do not like bonus schemes. Neither is it
surprising that some of the schemes they have been subjected to.
Those workmen who are unable to meet the average performance level of the group
are likely to seek other employment. However, any tendency on the part of the
supervisor to exhort or draw attention to their poor performance is usually a grave
mistake. Conversely, people elsewhere in the district, who feel confident that they
could take advantage of the opportunity for higher earnings, will be drawn to will be
drawn to feel confident that they could take advantage of the opportunity for higher
earnings, will be drawn to the firm that offers them. To divide department into tow
sections, only one section operating on bonus has often been discussed but does not
appear to be practical because, in the experience of the author, one system always
destroys the other. If the bonus scheme is successful, even the floor cleaners will
demand to be included. Inevitably a natural selection process comes into action at the
first introduction of a bonus system, the effects of which must be anticipated.
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Any attempts at job enrichment should, therefore take this into account. One can
form groups with richer and more varied job content, but such groups usually show
rejection symptoms towards individuals who fail to meet group standards. This
tendency is strong when the group operates on a group bonus and the group cohesion
which is characteristic of a well-matched group, persists in social activities outside
working hours.
Group Technology is an industrial engineering technique which involves classifying

products into groups which have similar processing requirements and, where possible,
setting up groups of machines to carry out these processes without passing the work
through the control areas or successive supervisors, or moving the articles among
widely located machines in a shop. Many such groups operate without formal
supervision and are typical examples of what the job enrichment enthusiasts would
like to do everywhere. However, excellent as the results are from such forms of
organisation in high technology industries with sophisticated operators, to attempt
such organisation with operators high technology industries with sophisticated
operators, to attempt such an organisation with operators who have experienced
considerable difficulty and heartache in learning their present limited skills, would be
an act of downright cruelty. Incentive schemes always give better results when jobs
are structured to match the skills and interest of the people. Sometimes enrichment is
called for, but often it is necessary to de-skill a job and to resort to short interval
scheduling everywhere a bonus scheme is operating.
Conclusion
Incentive bonus schemes are not substitutes for other techniques for improving
productivity, they are simply a refined variation on the basic remuneration method
which gives the workmen an internet in keeping the source accurately and which
ensures that payment is made in proportion to individual contributions to output. Any
good incentive scheme, whether or not a bonus is paid, requires comprehensive work
measurement to be applied to be sure that its effects can be properly monitored.
Various ways of organizing and scheduling work need to be applied according to the
predominant motives and skills of the people to satisfy many of their motives which
also achieving company objectives. An incentive scheme is good or bad according to
its success in achieving both productivity objectives and its ability to enable people to
achieve their personal objectives and enjoy the legitimate satisfaction of creative
work.
It should be clear that a bonus scheme is no cure for low morale and that any such
scheme introduced into an environment of distrust and bad organisation has no hope
of succeeding. This does not mean that one cannot use a bonus scheme in combating
such conditions but it has to be part of a complete new deal.
NOTES ON THE CHAPTER
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SELF TEST QUESTIONS
1. List five of the essential requirements of a sound wage incentive programme as

expounded by Beach.
2. What are the four primary types of incentive plans that are commonly used?
3. The Scanlon Plan is an example of group incentives. Describe the two basic parts and
indicate how it differs from individual wage incentive plans.
4. Which, in your experience, are the three main requirements of a sound profit sharing
plan?
5. Do you feel that a deferred profit sharing plan will appreciably alter employee
productivity or attitudes?
6. Which three basic pay plans are available for salesmen? Which one would you
recommend and why?
7. List four of the basic types of incentives for executives, of which two are also tax
saving.
CHAPTER 6: FRINGE BENEFITS
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1. Discuss the reasons why companies adopt fringe benfit programmes
2. Describe the types of fringe benefits
3. Calculate the total cost of fringe benefits, on average, expressed as an approximate

percentage of basic salaries
4. Outline the benefits of fringe benefits to employers
5. Discuss the benefits of fringe benefits to employers
6.1 INTRODUCTION
When a company engages an employee it adds substantially more to its costs than the
agreed starting salary. In addition to basic overheads associated with providing a
place to work and equipment to enable the employee to carry out his function, it
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provides him with a series of benefits. This fringe component completes the
remuneration package, the real total cost to the company of employing the employee.
This module consists of the following five relatively short sections.
1. Why companies adopt fringe benefit programmes. This covers the reasons
why fringe benefits are given and what the company can expect in return,
2. Secondly, the type of benefits, classified under logical headings, is discussed.
3. Thirdly, the cost of fringe is briefly mentioned.
4. Fourthly, the advantages to both employers and employees are summarized.
5. In conclusion, reference will be made to future trends.
Beach covers fringe benefits comprehensively, based on the American scene, while
the British scene is covered by McBeath and Rands who really only discuss the types
of benefits. Data on fringe benefits in Zimbabwe can be obtained by either contacting
personnel departments in other companies directly of from salary and benefit surveys.
(See Module 3) The surveys usually have a separate section dealing with fringe
benefits of various levels of employees.
6.2 WHY ADOPT FRINGE BENEFIT PROGRAMMES?
Prior to World War II, fringe benefits as we know them today were relatively
unknown. During the war, governments prevented wage and salary increases in many
instances because of inflation but permitted the creation of benefit programmes.
The major forces causing companies to establish and expand fringe benefit
programmes, in general, are as follows.
1. Most companies find that it is most beneficial to keep reasonably consistent

with prevailing practice among all the companies in the labour market area.
This helps them to complete successfully for new employees and to retain
those already employed.
2. Much management is sensitive to the needs and problems of their employees.

They realize that at times employees face crises that are beyond their resources
to handle. To provide protection against the various risks of living, the
employer pays part of the cost, while the government and individual worker
also pay a share. There are two basic reasons why employers contribute to
such programmes that ensure employee security one is humanitarian
“enlightened self-interest”, i.e. to the company’s advantage to help its own
people.
3. Frequently, management will establish certain fringe benefits it believes that
these will enhance employee morale and create more positive attitudes
towards the company.
4. Some paternalistic employers have elaborate fringe benefit programmes that

are designed to make the organisation the dominant institution in the lives if
all its employees. They seek to provide for their economic, social and
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psychological needs on a comprehensive basis. Some companies, for example
in mining, are forced to do this.
5. Sometimes companies establish attractive fringe benefit programmes in order

to enhance their public relations image.
6. The demands of trade unions are often the main reasons why a company
adopts a particular fringe benefit programme.
7. Legal requirements force employers to contribute to certain benefits. Some

examples are workers’ compensation funds which have a minimum number of
days of paid holiday, a minimum number of days paid sick leave etc.
8. Because it is the ‘normal thing’ to do. Some companies simply have fringe
benefits because others have them.
What then are the factors that management must consider in establishing a particular
kind of fringe benefit?
1. Power of the trade union and workers’ committees

2. Cost and ability to pay
3. Tax consideration
4. Needs of the company
5. Long-term consequences
With this background information we can proceed to the different types of fringe
benefits.
6.3 TYPES OF FRINGE BENEFITS
There exists considerable disagreement among writers among management as to just

what things to include within the meaning of fringe benefits. What to include under
the meaning of the term “fringe benefits” (also called benefits and services, indirect
compensation etc) depends primarily upon one’ s purpose. If one wants to determine
the full cost to a company, over and above the average wages and salaries, of labour
to operate the business then he will adopt an all-inclusive definition.
If one includes only those things that a company offers to recruit and retain qualified
personnel, then a more restricted definition is used. Beach gives a representative
rather than an exhaustive list, but more important - he classifies fringe benefits under
the following four logical headings.
1. Employee security (financial protection against certain risks)
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2. Pay for time not worked
3. Bonuses and awards (not directly related to employee output)
4. Service programmes (social and recreational programmes and special aids and
services)
It is suggested that the best approach to study this section is to use this classification
and, after reading Beach and McBeath and Rands, to draw up your own list of fringe
benefits. This list should be based on your own company and by talking to your
friends in other companies will enable you to comment briefly on each fringe benefit
listed.
6.4 THE COST OF FRINGE BENEFITS
The full implications of fringe benefits are only realised when the total costs all fringe
benefits are considered together.
The total costs of fringe benefits lead to substantial costs over and above basic
salaries; in fact, these costs usually exceed 20 or even 30 percent of the basic salary.
Personnel officers can show their cost consciousness by not only suggesting
additional and improved fringe benefits to management but alerting them to the cost
of existing and new benefits.
McBeath and Rands takes the cost aspect a step further by viewing it as only a part of
the total manpower costs. This is built up in a table which consists of the following.
 Basic average wages and salaries
 Bonus and allowances payments
 Fringes benefits
Manpower cost figures are essential for sound budgeting and manpower planning and
also enable employers to make decisions as to where, geographically and
economically, is the best place to locate their operations.
6.5 ADVANTAGES OF FRINGE BENEFITS
This section provides a brief summary of the main advantages of fringe benefit
programmes to both employers and employees
Employers
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Although fringe benefits are not directly related to the productive effort of the
employees, management gains advantages by implementing a well-planned
programme of fringe benefits.
1. aids the recruitment programme

2. reduces labour turnover and absenteeism
3. raises morale
4. creates greater company loyalty
5. enhances public relations image
Employees
1. financial protection against certain risks

2. benefits are cheaper than if they had to obtain them individually
3. tax saving; had they received the cash instead they would be taxed
4. Some benefits are viewed as status symbols, e.g. cars
5. Some of their economic, social and psychological needs are satisfied by fringe
benefits.
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SELF-TEST
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1. State three of the main reasons why companies adopt fringe benefit programmes
2. In establishing a particular kind of fringe benefit management must consider certain

factors. What are the five main factors?
3. Using Beach’s classification of the types of fringe benefits, list four benefits under
each heading.
4. Manpower costs consist of three categories of labour cost. What are these categories?
5. State four main advantages of fringe benefits to employers
CHAPTER 7: THE ROLE OF THE HUMAN RESOURCES OFFICER

IN MANAGING SALARY ADMINISTRATION
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1. Trace the evolvement of the reward management role over the years
2. Outline the factors which provide a guide as to the number of staff required in reward
management
3. Identify the basic pay systems
4. Distinguish between extrinsic and intrinsic rewards
5. Explain why it is important to consider the union’s attitude in salary and rewards
6. Discuss the five areas of reward management which should be included in designing a
totally individualised compensation package
7. Describe the three main individual reward management plans
7.1 INTRODUCTION
We started our course by looking at the general meaning and implications of

compensation. The next step was to determine the internal equity of payment by
examining job content and its measurement. External equity was obtained by
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considering the influence of the market and legislation. This enabled us to establish a
salary structure for a company. By appraising performance one was able to establish
an individual’s position within a pay grade. Salary planning was viewed as a way to
change individuals’ salaries.
What we had covered so far was combined in a salary policy and implemented
through procedures. Few, if any, employees received only a basic wage or salary;
therefore we covered the various forms of supplementary payments and fringe
benefits in the previous two modules.
In this Chapter we will examine the role of the personnel officer in managing salary
administration. It is divided into seven sections.
1. Who is responsible for compensation?

2. How many staff is required in salary administration?
3. We will then examine Scott Myers’ system and strategy approach to rewards
4. Recording, controlling and updating the compensation programme
5. Some background on managing unionised groups is given
6. Some of the practical pay problems you will have to deal with are discussed
7. Finally, we will take a look at the future and salary and rewards
7.2 WHO IS RESPONSIBLE FOR REMUNERATION?
In the smaller company, the service, sophistication and formal system required are
typically less. The same principles of internal equity between jobs, external
competitiveness for jobs, individualised pay for performance and do forth, continue to
be applicable. However, because of its small size it is likely that the company’s
individual jobs are known understood by the line management in greater detail than is
possible in very large organisations. Less effort is required in job description and
similarly job measurement (or job evaluation) to achieve internal equity can be
approached more directly since the number and type of internal relationships are
fewer and more readily identifiable. In other words, under these conditions line
management is itself in a position to perform more of the remuneration
responsibilities with less reliance on systems and services from a specialist
department.
The reward management role in the smaller company provides a good perspective
from which to view the reward management manager’s (or Human Resources
officers) function in general; the point being that reward management is basically and
principally a line management responsibility. The aim of the Human Resources
department in the larger organisations should be to develop sufficient systems,
policies and procedures to facilitate sound line management decisions. Reward
Management is relevant only to the individual and he judges the system according to
the reward management decisions which affect him. Therefore, the Reward manager’s
(or Human Resources officer’s) chief responsibility is to prepare each line manager to
perform his reward management responsibilities most effectively.
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Beach, in discussing the organisation for reward management also describes the
important role of the line manager in reward management by listing seven of their
functions. No compensation programme can therefore be effective without the
co-operation of line managers who are responsible for their subordinates’
performance and pay in the first place.
EVOLUTION OF THE REWARD MANAGEMENT ROLE
The compensation role might be described as having evolved through three major
stages. Any given organisation might be and might, by design remain at any of the
three stages. Keeping in mind that the remuneration management role practiced in
different companies will vary significantly in content and impact, let’s look at the
three stages.
The first stage might be described as the records or information orientation. In this
stage one find a centralisation of pay data – data concerning basic salaried, increases,
awards etc.
The second stage might be described as the survey orientation. By utilising the data
available within the organisation as a base of comparison, attention begins to be
directed to the outside labour market.
The third stage, one which relatively few in Zimbabwean organisations have evolved,
might be described as the integrated professional reward management role. This is the
stage where the function becomes one of explicit policy development which includes
elements of planning and control.
Especially in the last two stages the reward manager must provide the company with
the tools necessary to maintain that precarious balance between a reward management
level high enough to compete for needed human resources and low enough to allow
the company to be profitable.
7.3 HOW MANY STAFF ARE REQUIRED?
Reward Management, as a continuing process in every organisation, requires staff to

carry it out. In many Zimbabwean companies the actual management of wages and
salaries forms part of the Secretarial function, while the development of pay systems
and policy making on reward management matters fall under the responsibilities of
the Human Resources department. It is described however, as in the case of some
larger companies, that the total salary and reward function should form part of the
Personnel department. The salary administrators should be part of this department and
in smaller companies their duties will be the responsibility of the Human Resources
Officer.
The variation in systems of reward management, in size of organisation, in types of

employees and many other factors mean substantially different reward management
staffing requirements. McBeath and Rands reviews some typical salary administration
posts in various sized organisations.
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In deciding how many Reward Management Administrators are required, the
following factors can give a guide for “average conditions”.
 Management attitude – a heavy interest by top management may boost the

establishment.
 The staffing during start-up an overhaul stages is inevitably heavier than is
required to run an established system.
 The type of job evaluation method selected.
 Analysis of the procedural requirements of individual salaries in a company –
i.e. frequency and control of reviews and adjustments, the degrees of central
control or delegation of responsibility etc.
 The type and mix of staff being administered.
 They also fee that it is probably unwise to divorce the salary administration
establishment from that of the Human Resources department as a whole
because Reward Management should be integrated with the total Human
Resources function.
Reward administrators or Human Resources Officers should have the ability to

integrate and evaluate huge quantities of varied data and organise and present results
in a clear, understandable fashion, apart from the technical knowledge and equally
important, a sufficient understanding of human factors in the organisation to guide
them in the implementation and operation of the compensation programmes. This is
another reason why Reward Management should be managed by the Human
Resources department and not by the secretarial or any other department.
7.4 A SYSTEMS AND STRATEGY APPROACH
Scott Myers in his book Every Employee a Manager, has a very interesting approach
to why pay systems fail, and the strategies to make pay systems succeed.
Why Pay Systems Fail
Dissatisfactions arising from pay stem largely from ineffective application of systems
that influence pay. No matter how intrinsically well-designed the system, if it does
not satisfy the conditions of effective systems, it will not win acceptance and
satisfaction.
It is probably worthwhile to restate when a management system is considered

effective – when the people whose job is influenced by the system –
 understand its purpose;

 agree with its purposes;
 know how to use it;
 are in control of it;
 can influence its revision;
 Receive timely feedback from it.
Myers lists seven basic pay systems -
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1. Financial reviews;
2. Job evaluation;
3. Performance Appraisal
4. Wage and salary surveys;
5. Cost-of-living index;
6. Income tax;
7. Social security (legal requirements).
By receiving the seven basic pay systems it is apparent that not all conditions for
effectiveness can be satisfied directly for each system. However, three conditions are
satisfied for all seven systems if people understand and agree with the systems and
receive timely feedback from them. The other conditions usually cannot be satisfied
directly, but this is now always necessary as long as individuals know ho the system is
used, how and who controls it and when and why it is adapted to new situations. The
importance of openness and sound communication with employees is thus worth
underlining.
Strategies to Make All Systems Succeed
One strategy is to utilize the relationships that exist naturally in all organisations, to
involve horizontally and vertically related groups in the problem-solving, goal-setting
functions of the organisation – i.e. the problem-solving and goal-setting strategy.
The financial review and performance appraisal systems are best administered
through the natural relationship strategy, whereas, job evaluations and salary
surveys may be achieved through emphasis on the task-force strategy.
The remaining systems – cost-of-living index, income tax and social security can
now lose much of their mystery and hence much of their oppressiveness.
7.5 RECORDING, CONTROLLING AND UP-DATING THE REMUNERATION

MANAGEMENT PROGRAMMES
The principal importance of record-keeping and data-processing in reward

management lies in the information they provide for decision-making. Such useful
information includes statistical descriptions of pay structures and salaries within and
outside the organisation and the stable historical and trend data as well as statistical
answers to questions of all sorts. This should enable you to answer such questions as
follows
 How does labour turnover in any particular grade relate to the average salary
paid at that grade?
 How do salaries in the production department compare with salaries of other
staff departments?
 What percentage increase was given per department, per grade?
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An essential part of the arrangements for keeping records of individuals is a central or
master file, containing a large collection of information about each employee, whether
a manual or computer system is used.
The primary purpose of wage and salary administration is control seeing that reward
management in practice achieves desired results. The task of control is continually to:
1 Develop new standards and improve present ones.

2 Measure results against standards to evaluate consistency between results and
standards and between the various programmes.
3 Take the action necessary to improve results by improving programmes or
changing standards.
Remuneration control is concerned with standards in regard to intrinsic and extrinsic

rewards, standards in regard to perceived equitable rewards, standards in regard to job
satisfaction and standards in regard to job productivity.
Standards for the control of total payroll are of two types – budgets and ratios. In
most organisations the basic control standards is the budget. Budgeting was discussed
in Chapter 4. Some organisations have developed ratios relating to certain variables
to payroll that provides standards, for example, salaries as a percentage of sales could
be, say 10%.
Those responsible for keeping a Remuneration programme up to date need continuing

endorsement of the programme and honest feedback from managers who use it.
Fairness and impartiality in the administration of a plan are musts even though they
will produce unpopular decisions from time to time. Undue secrecy and inadequate
communication makes it difficult to convince employees they are properly paid.
In order to up-date the reward management programme there should be a response to

changing-conditions:
1. It must anticipate and adjust easily to economic changes such as rises in cost
of living ad inflation.
2. It must be sensitive to the changes in people and jobs
3. It must respond to organisational change
4. It must not persist in tolerating and reinforcing the problems that the first
mechanical reward management programme was supposed to relieve.
5. It must resist the attitude that is necessary is to adopt and adjust yesterday’s
reward management programme to keep pace with changes in the
organisational environment.
6. It must anticipate changes and successfully plan the implementation of such
changes.
7.6 MANAGING UNIONISED GROUPS
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It is essential that each Human Resources Officer should know how to manage
unionised groups and in particular the role of collective bargaining in reward
management.
McBeath and Rands do not emphasise the role of unions sufficiently. They refer to
unions and salary fixing and to unions and fringe benefits.
Beach covers the role of unions in America in much more depth. To gain the
necessary understanding of unions in this context read Beach’s section on unions
representing interpretation of collective agreements covering wages, hours of work
and other conditions of employment and dispute settlement procedures.
Next look at Beach’s coverage of union attitudes towards specific remuneration

management techniques, such as:
 job evaluation
 wage incentives
 group incentives
 profit sharing
Industrial relations and wage negotiations are an important part of the Human
Resources manager in most western countries and are increasing in importance in
Zimbabwe.
7.7 PRACTICAL PAY PROBLEMS
We have established that salary and rewards are important to individual employees for
various reasons. We have examined various methods which would enable us to obtain
internal and external equity if a sound reward management programme is introduced.
In this module we have pointed out that the individual will judge the pay policy of the
company mainly on how he is treated as an individual.
With this background let’s take a close look at some of the practical pay problems that
you as a Human Resources Officer in charge of salary and rewards will have to
handle.
Pay day queries – what happens on pay day if an individual wants clarification of
how his pay was calculated? This problem could be avoided in line managers had
been thoroughly trained by you to explain their subordinates’ pay. An employee’s
first approach should therefore be to his line boss, secondly to the pay clerk, if it is a
minor arithmetic problem and finally to the Human Resources Officer as a last resort.
Pay grievances - the Human Resources Officer should be an objective source which
the employee can approach to discuss his pay grievances if he does not obtain
satisfaction from his boss. This should prevent him from running to his union.
New employees – with a sound induction programme, the Human Resources Officer
is in position where he must explain pay and all deductions in detail to all new
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employees. It is important to remember that it is the “take-home” pay which employee
is really interested in, especially at the lower levels.
Secrecy – in the absence of openness and good communication about the pay system
in an organisation, employees will make assumptions based on rumors and hearsay,
which are more than likely, incorrect and lead to dissatisfaction. For instance, an
employee might grossly over- estimated the pay of his supervisor while under-
estimating the differential between his own pay and the pay of those in a grade just
below him, both assumptions leading to a belief that the pay system is unfair. Secrecy
will likely lead the workforce to believe, sometimes with justification, that reward
management system will prevent such dissatisfaction and suspicion.
The good performer – although we have held the view that companies should pay
for good performance, what happens to such a person especially one who is near the
top end of his scale? A one-time bonus appears to be answer. It rewards the individual
for his performance but does not commit the company indefinitely as does an
increase.
Xmas bonus? - Many companies simply give an extra month’s pay in December, the
so-called 13th month cheque. In view of our description of motivation, it is doubtful
whether any mileage is obtained from this bonus if it is given to everybody regardless.
In fact, labour turnover in the following January shows how little value it really has.
However, if the employee feels he has earned the bonus, either by his performance or
length of service or both, it could be of much more value.
Labour turnover – once salary grades have been established they can be examined in
the analysis of labour turnover. High labour turnover in a particular in a particular
grade can be an indicator of underpayment
Many other problems will arise which we feel you are now much better equipped to
handle satisfactorily.
7.8 A LOOK TO THE FUTURE
The techniques have been applied to the present with all its application problems; let
us now look to the future. Dunn and Rachel in Wage and Salary Administration
criticised current systems and suggest alternatives. They feel that traditional reward
management programmes, with their emphasis on wage and salary, fringe benefits
and profit – sharing type of packages, have failed to attain their goal of attracting,
holding and motivating employees. Present reward management practices have
become a source of employee dissatisfaction and employer-employee conflict and
have resulted in high rates of absenteeism and turnover. Today’s organisation, then,
has been forced by competition to maintain tremendously expensive yet unproductive
reward management systems which have become a source of dissatisfaction rather
than satisfaction.
They feel the solution is an individual approach. Traditional reward management
theory has tended to categories employees into work groups or labour grades and then
to compensate them on the basis of group membership rather than individual needs
and desires. Emphasis has been placed only on the extrinsic rewards such as pay and
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fringe benefits without considering the intrinsic rewards such as personal satisfaction
derived from the job itself or from relations with the work group. Traditional theory
has failed to realize that what may reward and hold one employee may have no real
influence on another. Consequently, many employees are dissatisfied and, in an
attempt to end frustration, quite often are late to work, are absent from work, do not
give their best efforts or change jobs.
The emphasis then must be placed on the individual and he must have some influence
on the way he is compensated. If managers hope ever to understand what kinds of
rewards their employees prefer and as a result to be better able to attract, hold and
motivate, we must begin to survey individuals to determine their needs and desires
and to build reward management packages centered on the individual employee. What
is the framework for such an approach? In designing a compensation package for the
individual, one must consider not only the traditional extrinsic rewards but also the
intrinsic rewards that make the package would include the following five areas of
reward management:
1. The immediate job itself, which includes the skill level of the job, the prestige
connected with it, the relation the job to the aspirations of the worker, the
sense of progress felt by the worker, the energy demands made, the degree of
self-determination required and the job conditions.
2. The worker’s relations with the work group which include his feeling of
acceptance by the group, his pride in the group and the cohesiveness of the
group.
3. The worker’s relation with the supervisor which include delegation of
authority, communication, closeness of supervision, participation in decision-
making, technical assistance rendered and the supervisor’s interest in the
workers.
4. The reward system which includes the wage and salary level, opportunity for
promotion, the basis upon which promotions are made and the security of the
worker.
5. The organisation as a whole which includes its major policies, how the worker
sees it, worker identification with the organisation’s goal and the prestige of
the organisation.
The framework is essential to any individualised plan that might be designed. With
the framework in mind, let us look as some individual reward management plans.
 Cafeteria-style Pay Plan
It has been suggested that organisations can greatly profit from introducing
cafeteria-style pay plans. These plans allow employees to select the
combination of cash fringe benefits that they want. Every employee is
assigned x amount of reward which he can divide up among a number of
fringe benefits and cash. In most organisations many workers are given fringe
benefits they do not value in proportion to what they cost the company.
Cafeteria plans can solve this problem since they ensure that people get only
those fringe benefits which they value. In addition, such plans impress on
employees just how much the company is spending to reward them.
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 Longevity Plan
The longevity plan is based on the age of the employees. Certainly the
cafeteria plan would be tremendously expensive; the longevity plan, however,
groups employee by age and consequently reduces the total number of
different plans and the total cost.
 Job Enrichment
Rather than emphasising the extrinsic rewards of the job itself. Job enrichment
was covered in Introduction to Personnel and Training. Refer back to this to
refresh your memory.
 Human Resources Accounting
Although not an individual plan in the same sense as the previous three, it is a new
concept that attempts to determine the monetary value of individual employees.
Many a Chairman’s Address accompanying annual reports state that: “Our employees
are our most important and valuable asset”. However, when turning to the balance
sheet we find no information on the human assets. Although the system has no
actuarial significance at present, a few companies are now including the monetary
value of employees as a matter of interest in their annual reports. Human resources
accounting is a management information system that puts a monetary value on the
training, development and assumed replacement costs of supervisory employees.
One of the two approaches to human resources accounting, being pursued by Dr Plye
of the University of Michigan, is the “cost approach”. It relies upon extending to
human resources accounting concepts and procedures that are currently used in the
management of physical and financial resources. In a most general sense the real
worth of human resources may be defined as the present discounted value of their
contributions less the cost of acquiring, developing and maintaining and utilising
those resources in the organisation.

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SELF-TEST
1. Who is responsible for reward management?
2. What are the three major stages through which the reward management role has
evolved?
3. List five factors which should be considered in determining the number of

administrative staff required.
4. What are the three strategies that Myers feels can make four of the pay systems
succeed?
5. In response to changing conditions, which six guidelines should be followed in order

to up-date the reward management programme?
6. Explain the difference between extrinsic and intrinsic rewards and give examples of
each.
7. Which five areas of reward management do Dunn and Rachel include in designing a
totally individualised reward package?
8. Which three individual reward management plans do you know? Explain them
briefly.
CHAPTER 8: PRACTICAL REWARD PROCESSING AND PAYMENT
74
1. Outline the steps which should be followed when processing salaries and wages of
employees
2. Provide justification as to why an organization should computerize its reward

payment systems.
3. Identify the major pitfalls which may affect the efficient processing of salaries.
4. Describe the various statutory payments which have to be remitted to other

organizations and specify the cutoff dates for the payments.
8.1 INTRODUCTION
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The effective payment of salaries and any benefits to staff is highly influenced by the
amount of time and preparation invested into the process and the payroll system
which is used by the company. The role should be taken seriously as it is the final
stage through which employees are given what they have contracted with the
company.
While most companies still have manual systems for processing remuneration, a
number of them have since computerised their systems to improve the efficiency with
which the processing is done. There are various remuneration processing packages
which can be purchased on the market but it is necessary to have it customized to the
organization’s specific requirements.
A proper payroll system should be certified by the Computer Society of Zimbabwe.

An accurate record of all statistics that affect salaries should be available for input
into the system e.g. leave days taken; overtime sheets; promotions; advance salary
deductions; medical aid deductions; terminations and new employees.
8.2. THE STEPS IN THE PROCESS
It is important to confirm that all the employees are on the system. Important
information to include on each employee includes; First name and surname; address;
national registration number; date of birth ; banking details ; gender ; marital status;
and date joined and designation. This information will need to be produced on the pay
slips.
Where the organization has a grade structure, the specific grade needs to be captured
so that it also appears on the system
8.3. MAJOR PITFALLS TO AVOID WHEN PROCESSING SALARIES
Make sure that you have terminated all the employees who have resigned and who
have been dismissed before you start anything in case you forget to terminate them
On any payroll system there should be an end date field which has to be filled in when
a person is no longer employed by the company.
1. Avoid double payments as not everyone is honest and it may prove very
difficulty to recover the money from an overpaid member of staff. The law
may also protect such a person if he received the money thinking that it
is due to him and use it before recovery.
2. Always make sure that PAYE is being calculated correctly.
3. Always make sure that all earnings are taxable.
4. Take note of elderly people on your payroll so that they enjoy an elderly
person’s credit which they are entitled to. There are also other credits to
certain groups of tax payers like the blind person’s credit and disabled
person’s credit.
74
When all the information has been inputted and all calculations are done and
checked by an independent third party, a bank disk is prepared and sent
to the bank either by paynet or taking the actual disk to the bank. This all
depends on the company’s available facilities.
8.4. THE OUTPUTS OF THE PROCESS.
The processing of the salaries will result in certain outcomes which ensure the
payment of staff salaries either in cash or through their bankers. These
outcomes include the following documents:
Pay slips which should be handed to employees at least a day before the pay
day to allow them to plan their expenditure.
Bank Schedules which will be submitted to the bank for them to make the
appropriate transfers into the employees accounts.
Payroll Summary showing all the employees paid and what has been paid and
deducted.
Coinage analysis report which shows all employees paid by cash and their
break down of payments and this will assist to avoid challenges of change..
Earnings Schedules
Deductions Schedules showing all the deductions made on the various

salaries paid.
Pension report showing the total pension deductions made on the salaries and
the amount contributed by the employer.
Medical Aid report showing the deductions made for those employees who
are on medical aid.
NEC report which shows the various deductions made on the salaries for
payment to the National Employment Council and the employer‘s contribution
towards that cost.
Trade Union reports
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NSSA Report showing pension contributions to the National Social Security
Authority.
P6 Forms for income tax returns
ITF 16 Reports for Tax purposes
8.5 STATUTORY DEDUCTIONS AND PROCEDURES FOR REMITTING

THEM AND THE CUT OFF DATES
Pay as you earn deductions.
All salaries above a certain threshold are subject to tax which should be calculated
and deducted from the employee’s salary. The current tax threshold is US$225-00
which is effective from 1 January 2011.During the month of November, tax payers
are granted a tax free bonus portion and this need to be considered in tax calculation.
Every employer has a legal obligation to deduct Pay As You Earn from employees
every month and to remit to Zimra on or before the 10th of every month. P2 forms are
to be completed and proof of payment attached and sent to your nearest Zimra offices.
The deducted amount should be deposited into ZIMRA bank account which is
maintained at most of the Commercial Banks. A duplicate deposit slip is attached as
proof of payment.
National Social Security Authority (NSSA)
NSSA is a compulsory pension scheme and all employees are required by law to
contribute to the scheme.
Employers should deduct 3% of basic salary from every employee every month plus
3% contributions is paid by the employer for every employee. Payment has to be done
by the 10th of every month. Form P 4A is to be completed and proof of payment
attached and sent to NSSA.
Employers are mandated to deduct National Employment Council levy from

employees depending on the various employment industries. Depending on various
employment Industries remittance forms are completed and proof of payment has to
be attached and sent to the responsible authorities. Failure to remit the contributions
by the 10th of every month will result in surcharge and interest being demanded on the
company’s account. Workmen‘s Compensation Insurance Fund (WCIF) premiums
must also be paid together with the NSSA contributions. If you go to the back of the
form P2 4A there is a table showing a description of every industry and the WCIF %
that is due to NSSA every month.
Example:
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Total wage Bill is
$2000.00
WCIF % for the Industry 2.34%
Amount to be remitted to NSSA will be
2000.00 * 2.34 = $46.80
100
This figure will then be added to the deductions made for the pension scheme and the
employer’s contribution and remitted to NASSA. The WICF is only paid by the
employer and the employee does not contribute anything.
Zimbabwe Manpower Development Fund (Zimdef):
This is a levy charged in terms of the Manpower Planning and Development Act and
should be paid by the 10th of every month. It is calculated at 1% of total wage bill.
The amounts to be declared as wage bill must include; salaries and wages; cash in lieu
of leave; motor vehicle allowance; bonus; transport allowance; housing allowance;
commissions; employer contributions e.g. of pension; medical aid; NEC; the value of
food given to employees; free accommodation; water bill. Remittance forms with
proof of payment attached are to be forwarded to their offices in different towns and
cities. Failure to pay levy on or before the due date may be surcharged an amount
equivalent to ten percent of the levy for each month or part thereof
8.6 ADDITIONAL SALARY PAYMENT MATTERS
Salaries are a very sensitive matter in the employment relationship hence they have to
be managed with caution.
Always communicate with employees with regard to pay dates and any changes that
might come up. If possible have a calendar of your pay dates.
Always communicate with ZIMRA with regard to tax tables.
It is important to religiously comply with all statutory payments as there are financial
implications and consequences for non compliance.
Employee leave records should be regularly updated as failure to do so will result in

employees being paid for leave days which are not due at the time they leave the
organization.
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SELF PRACTICE QUESTIONS
1. List and discuss the various statutory deductions which have to be made on
employees” salaries. What is the Human Resources Officer‘s authority source in
effecting such deductions.
2. State the information which is shown on a standard pay slip and explain at what stage
the pay slip should be given to the employee?

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CHAPTER 9: OCCUPATIONAL COMPENSATION AND EMPLOYEE
PENSIONS
1. Discuss the circumstances under which an employee may receive compensation from
NSSA.
2. Narrate the procedure for claiming any compensation from NSSA and what forms
have to be completed.
3. Identify the different types of benefits paid by NSSA and the qualifying criteria for
each benefit.
4. Outline the various items that should be addressed in the Constitution of a Pension
Fund before registration.
5. Describe the various situations where a contributor to NSSA may receive refunds for
his contributions and the percentage of the employer’s contribution one is then
entitled to.
74
9.1 INTRODUCTION
Employees may suffer various misfortunes like death or injury while at work thereby
entitling them to some form of compensation. Under common Law, an employer is
liable for injury if he breaches his duty of standard care. The damages payable include
lost earnings, actual and potential and compensation for pain and suffering endured by
the employee.
9.2 HISTORY OF EMPLOYEE COMPENSATION
The Native Labour (mines) Compensation Ordinance, no. 306 of 1912 provided
rudimentary compensation to black miners for injury or death at work. The Workmen
Ordinance no. 20 of 1922 introduced a compulsory occupational compensation
system to pay compensation to workers or their surviving dependents when killed or
injured at work due to accidents not arising from their own serious and willful
misconduct. This Act applied to white workers only while excluding blacks, public
servants, domestic and agricultural workers and casual workers.
The Workmen Compensation Act of 1960 brought black workers into the definition of
workman and was replaced in 1990 by NSSA (Accident Prevention and Workmen‘s
Compensation Scheme) S.I. 68.
The scheme provides financial relief to employees or their dependents that are killed
or injured while at work. The principal employer remains liable even where the
services of the worker are temporarily let out.
9.3 CIRCUMSTANCES WHERE COMPENSATION IS DUE
1. The claimant should be a worker in a contract of employment.

2. The death or disablement should arise during the course of employment.
3. A genuine accident should cause the death or injury.
4. The claim should be submitted within the time period.
9.4 PROCEDURE FOR CLAIMING COMPENSATION
1. An employer should give written notice of the accident to the General

Manager within 14 days.
2. The worker or dependent should submit claim supported by a medical

certificate.
3. In terms of section 52 the General Manager should determine the claim and
advise the employer and claimant in writing.
74
4. The employer and worker may request a reconsideration of the determination
within 14 days.
5. The claimant may lodge an appeal within21 days to the NASSA Board which
should sit within 30 days.
6. One can appeal against the Board Decision within 21 days to the
Administrative Court.
9.5 BENEFITS PAYABLE TO THE EMPLOYEE OR THE DEPENDANTS
1. Medical expenses covering hospital treatment, medicines spectacles, hearing

aids, travel and any other associated costs.
2. Employer should provisionally pay 100 % of the employee‘s salary for the
first 30 days which will be refunded in terms of Section 33 (9).
3. Periodical payments may be paid pending determination of degree of

disablement.
4. Compensation pension is paid if 30% disability is proved and depends on

claimant‘s salary at the time of disability.
5. Lump sum payment is awarded to employees whose disability is not

permanent.
6. Funeral grant is paid to the family or whoever met the funeral expenses of the
employee.
7. A survivor’s pension or allowance is paid to the spouse and children below 18

years will receive allowances.
9.6 COMPENSATION SCHEME FOR CIVIL SERVANTS
Employees of the state are covered under the State Service (Disability Benefits) Act
Chapter 16.04. The Act applies to all employees of the state including members of the
uniformed forces who can claim various benefits like compensatory sick leave,
medical expenses, funeral expenses, travel and subsistence allowance, vocational
training, disablement pensions and widow or child allowances.
The compensation paid to public servants is financed from the Consolidated Revenue
Fund.
9.7 PENSIONS AS A FORM OF REMUNERATION
Pension legislation provide a legal framework within which payments are made to
former employees on retirement due to age , death or medical reasons .The payments
are financed from employer and employee contributions. Common law has no
provision for pension but a gratuity paid as a lump sum payment on retirement.
74
9.8 PRIVATE SECTOR PENSION ARRANGEMENTS
Any association of people can establish a pension scheme to pay benefits on

retirement. Section 2 of the Pension and Provident Fund Act defines a fund “as any
scheme or arrangement the principal object ….being to provide benefits to persons
who ….. are members ….upon their retirement on account of age or ill
health…………..”
A retirement annuity fund is a fund established by an association of persons or insurer
which – (a) provides for payment of a pension to a person who is or has been a
member of the fund on his retirement, and (b) is operated either as an insurance
company scheme or without payment of commission to any person for the
introduction of the business…”
9.9 FORMALITIES, REGISTRATION AND ADMINISTRATION OF THE FUND
Every Pension Fund should be registered in terms of the Pensions and Provident Fund
Act after submission of a Trust Deed which is the constitution. The fund should fulfill
the following:
1. Comprehensive rules with a registered office in Zimbabwe.

2. Appoint a Principal Officer who is resident in Zimbabwe.
3. Appoint an auditor who is not a member of the scheme.
4. Rules which are approved by the Registrar covering benefits payable,
contributions and core business of the fund, appointment and powers of the
trustees.
5. Financial administration covering books of accounts, auditing of accounts,
investment strategy.
6. Rules governing membership and benefits and contributions.
Provisions covering transfer in and out of the scheme and withdrawal benefits.
8. A pension once payable will be paid for the duration of one’s life and on his
death, the benefits are paid to the spouse or children until they attain 18 years.
9. A surviving spouse receives the pension until death or remarriage
9.10 REFUNDS OF EMPLOYEE CONTRIBUTIONS
1. A member who ceases to be a member is entitled to a refund of his

contributions with simple interest.
2. Where one completed five years but less than six years he will be entitled to
the 25% of the employer’s contribution, 50% if an employee has served for
more than 10 years.
3. Retrenchment
Where one is retrenched or the company ceases operation, the pension contributions
have to be refunded if alternative employment is not secured within two years or one
is 55 years or above, then he deserves early retirement pension.
.
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9.11 NSSA – PENSIONS AND OTHER BENEFITS SCHEME.
This scheme applies to all employees and is compulsory and this was confirmed in the
Supreme Court judgement in Nyambirai Vs NSSA and Anor 1995 (2) ZLR 1 (S)
where the scheme was deemed constitutional.
9.12 BENEFITS PAYABLE UNDER THE SCHEME
The scheme pays benefits to members depending on their circumstances at the time
the benefits become due. The types of benefits payable are as follows;
1. Retirement pension for those who have reached the age of 60 years and
contributed for ten years. Those in arduous occupation may retire at 55 years
and late retirement can extend to 65 years.
2. Retirement grant is payable to those who reach retirement after contributing

for less than ten years. This is calculated multiplying one twelfth of one’s
insurable earnings before retirement by the number of years one contributed.
3. Invalidity Pension is payable to employees who contributed for more than one
year and produces a medical certificate by a NSSA accredited doctor
confirming permanent incapacity to work due to disease or bodily harm
arising from a non work cause and one should not have reached 65 years.
4. Invalidity Grant is payable to those who become invalid after contributions of

less than 12 months and not having attained 65 years.
5. Survivors Pension is paid to the surviving spouse and children of the deceased
if the deceased was entitled to a pension at the time of the death. The spouse
receives 40% of what the member would have been entitled to while children
share 40% with disabled children entitled to payment until death. The parents
will receive 12 percent with other dependents receiving 8 % of what the
member was entitled to.
6. Survivors Grant is payable to the spouse or children where the contributor

was entitled to an invalidity or retirement grant at the time of his death and
cannot exceed what the deceased was entitled to. It is calculated at one twelfth
of the yearly insurable earnings multiplied by the number of years of
contributions.
7. Funeral Grant is payable to cover funeral expenses of a deceased employee

provided the deceased had contributed for up to 12 months. This is payable to
the relatives on production of a burial order or death certificate.
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9.13 PROCEDURE FOR CLAIMING BENEFITS
1. Form P. 9 should be completed and submitted to NSSA with the

employer having signed the certificate in Form P. 10
2. The forms should be accompanied with by appropriate documents

which include a medical certificate, birth certificate, marriage
certificate, death certificate and any other additional documentation
which NSSA may demand.
3. The claims have to be lodged within one year in the case of invalidity
pension, six months before date of retirement and not more than one
year in the case of retirement pension, and for the survivors pension
this should be within a year from the date of death of the deceased.
Any claims submitted after the stipulated periods may be considered at the General
Manager’s discretion provided there are compelling reasons to do so.
SELF ASSESSMENT QUESTIONS
1. Discuss the circumstances under which an employee or his dependents may qualify
for compensation for injury or death while at work.
2. You have been invited as a presenter at the IPMZ convention and you have been
asked to present a paper on how one can claim benefits from the NSSA – Pension and
Other benefits scheme. State the issue you will cover and explain some of the
challenges which normally cause delays in the processing of such benefits.
3. Some commentators have claimed that the benefit being offered by NSSA are few and
does not cover the diversity of situations employees find themselves in. Identify the
benefits and the qualifying requirements. Do you think there is another benefit
requiring introduction?

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REFERENCES
Armstrong (2003) “A Handbook of Human Resources Management Practice “Kogan Page,

London.
Armstrong (2010)“Employee reward” “Kogan Page, London
Bates & Dean (2006) “Personnel Management in Zimbabwe” Harare, Zimbabwe
Beach D.S (1985) “The Management of People at Work” McMillan New York
Blunt and Popoola 1985, “Personnel Management in Africa” London, New York
Cascio W.F. (2003), Managing Human Resources, Tata McGraw – Hill, New Delhi
Gwisai (2006)“Labour and Employment Law In Zimbabwe: Relations of Work under Neo –
Colonial Capitalism” Zimbabwe Labour Centre, Harare
Mintzberg (2009) Managing, San Francisco, Berret-Koehler
74

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IPMZ

COURSE DESIGN LENGTH: 200 HOURS

CHAPTER 2: JOB CONTENT AND MEASUREMENT

CHAPTER 4: SALARY PLANNING AND POLICY………………………………. 66

CHAPTER 6 : FRINGE BENEFITS…………………………………………………. 111

CHAPTER 7 : THE ROLE OF THE HUMAN RESOURCES OFFICER IN

7.6 Managing unionised groups………………………………………………………. 123

CHAPTER 8 : PRACTICAL REWARD PROCESSING AND PAYMENT………. 128

CHAPTER 9 : OCCUPATIONAL COMPENSATION AND

By the end of the course, you should be able to:

1. Outline the importance and implications of reward management

2. Outline the relevance of job content and measurement

3. Describe the influence of market value and legislation on salary levels

5. Identify the role of supplementary payments in an organisation

6. Discuss the importance of fringe benefits in reward management

8. Administer wage and salary administration within an organisation

9. Design a compensation policy for an organisation

Reward management is a discipline concerned with the formulation and implementation of

McBeath and Rands Salary Administration, Business Books limited, London.

Armstrong, M. (2003) A Handbook of Human Resources Management Practice, Kogan Page,

As reward Management is in a constant state of change you should attempt to remain up to

Please attempt all the questions to test your understanding.

Chapter Learning Objectives

Upon completion of this chapter, you should be able to:

1. Identify the main reward considerations in modern society

2. Describe the major employer’s objectives in wage and salary administration

3. Outline the benefits of a sound reward management program to employees

5. Outline the principles of wage and salary administration

6. Examine the model of the determinants of pay satisfaction

7. Identify the three manifestations of pay dissatisfaction among employees

Reward management is a discipline concerned with the formulation and

Reward Management should be strategic and underpin the business strategy,

Remuneration Management should support the achievement of organizational goals

Remuneration is broader than wages as it includes wages and any allowances,

The organization‘s philosophy will determine whether it is a high payer, average

1.2. AMOUNT OF REWARDS PAYABLE

1.3. FORM AND MANNER OF REMUNERATION PAYMENT

1. The particulars of the remuneration, basis of its calculation and intervals at

2. Particulars of any bonuses or incentive production scheme.

3. Particulars of vacation leave and pay.

4. Particulars of any other benefits under the contract of employment.

1. The names of the employer and employee.

3. The component of remuneration representing bonus or allowance.

5. The net amount received and how it was paid.

1.4. CIRCUMSTANCES UNDER WHICH REMUNERATION CAN BE

4. Remuneration cannot be in the form of liquor or drugs.

5. Remuneration in kind cannot substitute entirely for remuneration in money as

1.5. REWARD MANAGEMENT CONSIDERATIONS IN MODERN SOCIETY

Reward Management, in an industrial society, often serves as a substitute for personal

Determination of rewards may also involve questions of power and influence –

Economic elements in rewards.

Sociological aspects of reward management

To the recipient, pay serves as a symbol of status as well as a means to purchasable

Psychological aspects of salaries

Schein, in Organizational Psychology provides us with a link between rewards and

Ethical considerations in rewards management

With economic, psychological and political considerations to be balanced, it should

Political considerations of remuneration

Within communities and economies, standards of living (largely determined by

The Legal provisions relating to remuneration payment

1.6. EMPLOYER’S OBJECTIVES IN WAGE AND SALARY ADMINISTRATION

When the employer introduces remuneration packages, he is doing it with certain

The objectives of the employer can be summarized as follows.