27/4/2023

COMPENSATION AND REWARD MANAGEMENT

THEORY

OBJEKTIF PEMBELAJARAN
 Mengenalpasti teori-teori yang berkaitan dengan
pengurusan upah dan pampasan.

TEORI-TEORI PENGURUSAN UPAH

DAN PAMPASAN
 Traditional Theory of Wage Determination
 Theory of Negotiated Wages
 Subsistence Theory
 Wage Fund Theory
 Surplus Value Theory
 Residual Claimant Theory
 Marginal Productivity Theory
 Bargaining Theory of Wages
 Behavioural Theory of Wage

1
 27/4/2023

 Theory of Maslow’s Need Hierarchy

 Herzberg’s Two Factors
 Theory of Expectations
 Theory of Equity
 Theory of Dispute

 McDougall (1980) & Lawler (1971)

 Lawler (1971)
 Adam (1963) & Greenberg (1989)
 Nadler And Lawler III (1980)
 Vroom’s (1964)
 Porter & Lawler (1987), Herzberg’s (1966) & Yusoff
(1999)
 Locke (1968)
 Riggio (1996)

TRADITIONAL THEORY OF WAGE

DETERMINATION
 DEMAND and SUPPLY Determine wages

2
 27/4/2023

Theory of Negotiated Wages

 UNIONIZED EMPLOYEES can negotiate salaries
 COLLECTIVE BARGAINING PROCESS
 NON UNIONIZED EMPLOYEES can be negotiated
through INDIVIDUAL BARGAINING.

SUBSISTENCE THEORY
 David Ricardo (1772-1832)
 Worker should be paid to enable them to subsist and
perpetuate the race without increase or diminution

Wage Fund Theory

 Adam Smith (1723-1790)
 Wages are paid out of a predetermined fund of wealth,
surplus of savings of the wealthy.
 If the fund was large, wages would be high. If it was
small, wages would be reduced to subsistence
level.
 Demand for labour and the level of wages is
determined by the size of the fund.

3
 27/4/2023

Surplus Value Theory

 Karl Marx (1818-1883)
 Labour is an article of commerce
 The price of any product was determined by the labour
and the time needed for producing it

Residual Claimant Theory

 Francis Walker (1840-1897)
 There are 4 factors of production/business activity
1. Land
2. Labour
3. Capital
4. Entrepreneurship
 Wage represent the amount of value created in the
production and labour is the residual claimant.

Marginal Productivity Theory

 Wages depend upon the demand for and the supply of
labour.
 Workers are paid what they are economically worth.

4
 27/4/2023

Bargaining Theory of Wages

 Determined by the relative bargaining power of
workers, trade unions and employers

Behavioural Theory of Wage

 Marsh and Simon, Robert Dubin and Eliot Jacques
1. The employee’s acceptance of a wage level
2. The internal wage structure

Theory of Maslow’s Need

Hierarchy
 Abraham Maslow (1943)
 Maslow believed that people have an inborn desire to
be self-actualized, that is, to be all they can be.
 Define human needs in hirarchy – foods& water 
safety & security  social & belonging  ego & self-
esteem.
 Money is seen as a basic needs.

5
 27/4/2023

Herzberg’s Two Factors

 Frederick Herzberg’s (1959)
 Two key of dimensions of motivation and the hygiene
factor

6
 27/4/2023

Theory of Expectations
 Victor Vroom Yale School of Management (1964)
 Influenced by several factor such as:
 Skills of an employee
 The resource required to perform its duties
 The existing information
 And support the need to solve a problem in
employement issues

The relationship
effort and
performance

The relationship The relationship

compensation goal and
and performance performance

Source: Research by Samsudin Yaacob (2013)

Theory of Equity
 First delops by Adams in 1963 “Stock Ownership”
 Emplyer and employee have a stake in their
relationship
 As equity owner, it has a cost or capital contribution.
 In this relationship, both side will have benefits,
returns or rewards

7
 27/4/2023

Theory of Dispute
 Trade dispute often occur in any organization
 In the context of industrial relations between
employer, employees and their unions.

TEORI-TEORI UPAH DAN PAMPASAN

Teori Fokus
McDougall (1980) & Instinct Theory Depend on “Human
Lawler (1971) Instinct” whom a
workers determine it
needs such as working
(depends) to get
wages/salary (depends)

Lawler (1971) Drive Theory Similar to instinct – what

drives an employee to
works – encourage
workers by rewards –
gave impact to salary and
comitment in workplace

8
 27/4/2023

Teori
Porter & Lawler (1987), Poter & Lawler Model The relationship between
Herzberg’s (1966) & workers effort –
Yusoff (1999) performance – rewards
Locke (1968) Goal - Setting Theory Workers must know an
organization goals to
perform
Riggio (1996) Reinforcement Theory Extrinsic & Intrinsic
Rewards

Similar Level Of:

- Effort
- Skill Same:
- Knowledge - Pay
- Responsibility - Benefit

Fair Pay
&
Equal
Pay

Sumber: EOC, 2003