Wage Setting Factors

Wage Setting Factors

Introduction

Bargaining between the employees and the employer is a prolong concept which is in existence since years. There could be different factors which could influence this negotiation between the employer and the employee. The market structure is a key determinant. There are certain markets where the employer is the king and others where the workers have a better negotiation power. Like the industries which are capital intensive, the employers are the king while in labor intensive industries, the workers have an important role.

This essay covers all the factors regarding individual and collective bargaining, income differential between high wage and low wage workers and income differential between rich and poor.

Discussion

Individual vs. Collective Bargaining

Individual bargaining is a process of negotiation between the individual and his employer. Therefore, Individual employment agreement binds only two parties which are the individual himself and his employer. While Collective bargaining is a process, which is borrowed from private-sector labor relations between the employer and employee, that govern the employment conditions of a majority of U.K. organizations. Here, the negotiations are between the union and the employer. It is permitted that for collective bargaining for public employees; the employees usually must agree to utilize the collective bargaining process through an election to choose their representative. Once the representative has been chosen, they proceed to negotiate the conditions of their employment with the employer (Jensen, 2001).

Collective bargaining could have many combinations; it could take place between an employer, one or more employers' organizations, a group of employers, and one or more organized workers. Collective bargaining serves two purposes. On the one hand, it serves to determine the wages and working conditions of the workers through negotiations between two parties who have acted freely, voluntarily and independently (George, 2010).

Negotiation may cover all aspects of employment like wages, hours, breaks, vacation, leave, working conditions, vocational training, system redundancies, definition of occupational categories, promotions, etc. It also determines rules for the relationship between unions and employers (representatives in the workplace, information and consultation, union card, licenses and permits for union leaders, conflict resolution, etc.). Among other systems that comply with the collective bargaining in street trading since it only meets some of the above functions (Burdett, 1998).

Internal Equity vs. External Comparability

Internal Equity is basically a process use to evaluate what actually an employer is gaining from individuals in order to compensate them fairly. Internal Equity ensures the employees that all his colleagues in his organization are paid the same. Therefore, this perception that the employees are fairly paid, motivates them to deliver their best. On the other hand external comparability means that the employer compares the wages and salaries that prevail in the market against the same job description and offers you the same. Here the increment in the salaries also depends on the comparison with the market.

The objectives of internal equity are to influence employees for further commitment in the organization by enhancing their dedication and motivation to share their skills with the ...