Study of Wage Differentials in Saudi Aramco Company

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Table of Contents

CHAPTER 2: LITERATURE REVIEW2

Types of Wages6

Additional Wages6

Piecework Wage System6

Wage Differentials14

Determinants of Wages16

Theory of Wages18

Theory of Karl Marx19

Effects of Wage Differentials19

Psychological Effect20

Economical Effect20

Saudi Aramco Company21

REFERENCES27

APPENDIX39

Chapter 2: Literature Review

In economics, wages are the price paid for the work. Wages are those payments which compensate individuals for the time and effort devoted to the production of goods and services. They include not only the income per hour, day or week worked by manual workers, but also weekly, monthly or yearly income of professionals and business managers. This regular income can be summed up to bonuses and extra payments, risk premiums, night rate hazard or overtime. It can also be included like the professional fees and the portion of the income earned by business owners like compensation for time spent on the business. Wages may be set depending on the weather, work done or by way of incentives. Sometimes discounts to employees that are usually paid according to the time worked or the time not worked due to a disease, but usually these employees receive a fixed salary regardless of the continuity (Haignere, 2002, 168).

In the past, there have been conducted many studies that provide significant evidence of the importance of Human Resource Management in determining the wage differentials among various international companies. The purpose of conducting this research is to provide evidence that the effective policies of the human resource management can be effective in determining optimal wage differentials. The documents regarding the research study on the human resource management and wage differential are typically provided by the Charleston County Library and Trident Technical College. There has been conducted a comprehensive study by the students of this institution on the topic. However, the literature review also undertakes many other studies of individual researchers.

According to Schermerhorn (2002), the human resource is a process of recruiting right people through the recruitment process. By selecting righteous people for the job, the work is done efficiently within the company. The main motivating factor for the workers to perform their job efficiently is the wages offered by the company. If the company is offering decent wages to their employees, it will affect their efficiency to a greater extent. Therefore, the role of human resource management is very important in determining competitive wage differentials. The study conducted by the Schermerhom proved that the policy of human resource management should be designed in such a way that the workers get equal employment opportunity. The wage differentials offered to the worker in the labour market should be a motivating factor for them. The studies show that the pay structure should be organized in a manner as to provide an incentive to the worker. The wages play a crucial role in the quality work performed by the labour.

According to the earlier studies, the “rule of thumb” is commonly adopted by the companies to determine decent wages in the market. According to the rule of thumb, a company should offer equal or more ...