An Evaluation Of Wage And Salary Policy In The Public Service (A Case Study Of Wage And Salary Policy In Lagos State)

Project and Seminar Material for Human Resource Management (HRM)

An Evaluation Of Wage And Salary Policy In The Public Service (A Case Study Of Wage And Salary Policy In Lagos State)


Chapter One


Introduction

1.1 Background of the Study

Nwachukwu (2000), and Atchison, (2003) have aptly observed wages and salaries constitute a significant part of the overall cost of operations, observing that in some organizations wages and salaries constitute over50% of the operating costs. Companies or establishments that lack of ability to pay wages and salaries regularly are in danger of disintegration. Poor wages are a constant source of frustration and can result in declines in productivity.
Wages should not only be adequate but they must also show some element of equity, this is particularly true from the point of the employees. Anything short of a fair and equitable wage or reward can quickly attract the wrath of employees in an economy such as Nigeria. For many Nigerian employees, wages or salaries are highly critical issues. They are decisive because without them in sufficient quantities, life becomes extremely precarious for the worker and members of his/her family. As direct financial rewards, wages and salaries are the most emphasized by the employees, thus they sort of take a centre stage in the scheme of things as far as rewards for work is concerned. For many a Nigerian employee, wage or salary is the main thing. It is thus against this background that the need for a dynamic, intelligent and foresightful wage and salary administration cannot be overemphasized, particularly for an emerging economy like Nigeria in the era of globalization. Institutions or companies that seek to attract and retain highly productive and efficient employees cannot shy away from facing the challenges posed by the need to pay wages adequately in a competitive environment.

Nwachukwu (2000), and Ngu, (2005) have identified the key features or characteristics of good salary or wages as follows:

    1. The wage rates that prevail in the local market and in the industry. The main purpose here is that it will ensure that the company remains competitive.
  1. The internal alignment of wages to ensure equity.
  2. Recognizing for individual Performance. Although two individual workers may have identical
    qualification and/or experience, one may earn higher than the other due to his superior performance.
  3. Taking care of Individual Incentives. That is, incentives that:
    • Are easy to administer;
    • Whose results reflect the efforts of the individual;
    • Make the computation of reward easy;
    • Equate reward with the effort expected; and
    • Leave the factors necessary for the attainment of the objects in the control of the employees.

The essence of a wage incentive plan is to relate productivity to reward. Thus, employees who manifest outstanding performance receive extra pay. Usually, wage incentive in terms of extra pay is a cash payment made every week or month. It is paid to those employees who exceed their quota of the output. Typically, incentive plans used by organizations include piece-rate, profit-sharing, premium plans, stock option plans, to mention but a few.
According to Nwachukwu (2000) and Ogunbameru (2000) “wage and salary administration” refers to the development, implementation and on-going maintenance of a base pay system. The central objective or purpose of wage and salary administration is to provide pay that is both competitive and equitable (Atchison,2003).
In relation to Nigeria, wage and salary administration activities refer to all those processes, strategies, plans and schemes that give rise to pay policies. Such policies set the overall direction of pay within the organizations or establishment, public or private as the case may be. The actual development of a base pay system follows the determination of pay policies. For the purpose of clear direction, this paper embraces a number of critical and related issues as that impinge on the all-important question of wage and salary administration in Nigeria. Here, the focus is on relevant suggestions aimed at mitigating the difficulties encountered in handling the issues of wages and salaries in this country (Nigeria).

Douty (1980) and Ferris (1985) have identified the main wages and salaries structure determinants as those of (1) economic value or market value of an item which is the price it brings in due to the interactions of the forces of demand and supply (2) job worth, whose analysis tends to rely more heavily on perceptions of organization members of the relative value of the job (3) training: with requirements of jobs in terms of length, difficulty and who provides it. It relates to human-capital analysis and development (4) employee tastes and preferences. They are also economic factors. Worker expectations of future earnings strongly influence occupational choice and thus labour supplies. The problem however is that the labour market is not a perfect one. (5) Unions: Industrial unionism has also been shown by economic analysis to affect wage structures. Large organizations where employees are represented by industrial unions tend to have a highly differentiated wage structures (Ferris, 1985).
Apart from the above, other determinants of wage structure embrace (Ngu, 2005):

  1. Discrimination – the trends nowadays is to shift away from wage differentials based on sex or race.
  2. Industrial Relations Factors. Both industrial relations scholars and labour economists are involved. The industrial relations scholars base their views mostly on non-economic forces while the labour economists emphasize on such criteria as productivity, efficiency and general performance of the employee.
  3. Social Determinants: On such things as equity, status, and the preservation of customary relations.

According to Atchison (2003) numerous forces operate as wage determinants. Roughly, these might be classified as:

  1. Economic
  2. Institutional
  3. Equity considerations.

Several scholars (Nwachukwu, 2000; Ogunbameru, 2004; Agbonifoh et al, 2005) in their studies have emphasized the need to place premium on productivity in wage and salary determination.

A frequent trend in the administration of wages and salaries globally and in Nigeria in recent times is the need to recognize the cost living as a critical factor. The cost of living makes workers and unions to pressure employers (private and public) to increase pay.

David Belcher in Nwachukwu (2000) has advised that prior to embarking on policy regarding wages and salaries, the organization should bear in mind the following 17 assumptions: Pay is an incentive job performance. Pay in the form of money has more incentive value than pay in the form benefits. Employee satisfaction with pay is evidence of its incentive value. Consistent treatment of employees in the matter of pay is a prerequisite to obtaining incentive value from pay. Incentive value is lost when employees are ores paid.

Employees react negatively to pay inequalities. Pay inequalities are similarly defined by all types and levels of employees. Employees regard internal pay inequalities as more serious than external inequalities. Employees react only to gross external inequalities. Employees comparisons of pay are made first in terms of jobs, and second in terms of performance on jobs. Employees compare their pay with that of people in similar jobs. Employees comparisons of pay are uninfluenced by levels of aspiration and pay history. Managers make pay comparisons that are essentially similar to those of rank-and-file employees. Professional employees make external rather than internal comparisons. Employees accept the concept of hierarchy of jobs and pay. Employees’ determinants of the job hierarchy are similar to managements’ determinants. Employees agree with management on what they are paid for and weigh the factors. The research therefore intends to provide an evaluation of wage and salary policy in the public service


1.2 Statement of the Problem

Wages and salary has consistently been a controversial issue in the economy. Inspite of various policy measures adopted and implemented by government to meet the demand of the labour force, there is still more pressure on government for increment to meet the current reality of things in the economy. With rising inflation, the cost of living has escalated. Prices of commodities and essential items are getting out reach of the ordinary worker. What then can be an equitable measure to determine an appropriate pay for the worker in the public service to enhance his capability to meet the current reality of Things. The problem confronting this research therefore is to provide an evaluation of wage and salary policy in the public service with a case study appraisal of Wages and salary policy in lagos state.


1.3 Research Questions

  1. What is the nature of wages and salary?
  2. What is the nature of wage and salary policy in Nigeria?
  3. What are the determining factor for an equitable wage and salary policy in Nigeria?
  4. What is the nature of wage and salary policy in lagos state?

1.4 Objective Of The Research

  1. To determine the nature of wages and salary.
  2. To appraise the nature of wages and salary policy in public Nigeria.
  3. To determine the factor for an equitable wage and salary in the public service.
  4. To determine the wage and salary policy in lagos state.

1.5 Significance Of The Research

The research shall highlight the nature of wages and salary It shall provide a detail study on wage and salary policy in Nigeria The study shall determine the factor for an equitable wage and salary policy in the public service The study shall appraise the wage and salary policy applicable in lagos state It shall be a veritable source of information to managers,government and economic experts.


1.6 Statement of Hypothesis

  1. Ho Wages and salary in lagos public service is low
    Hi Wages and salary in lagos public service is high
  2. Ho The impact of wages and salary in lagos public service is low
    Hi The impact of wages and salary in lagos public service is high
  3. Ho There is no equitable wage and salary policy in lagos public service
    Hi There is an equitable wage and salary policy in lagos public service

1.7 Scope of the Study

The study provides an evaluation of wage and salary policy in the public service in Nigeria with a case study of the wage and salary policy in lagos state.


1.8 Definition of Terms

Compensation:

The term “compensation” simply refers to the wages paid directly for time worked as well as more indirect benefits that employees receive as part of their job or employment relationship with an organization (Otobo, 1987). Wages or salaries paid are typically payments made in cashable (naira) form that reflect work done and related remunerations such as base pay or bonuses such as paid workers during the end of the year (e.g. New Year packages and the like). Benefits are forms of compensation beyond wages, for time worked including various: protection plans e.g. health insurance or life insurance; services; pay for time not worked e.g. vacations or sick leave; income supplements such as stock ownership plans.

Job Evaluation:

An Integral Element in Wage and Salary Administration According to Mullins (1999) job evaluation is the process of systematically determining the relative worth of jobs to create a job structure for the organization. The evaluation is based on a combination of job content, skill required, value to the organization, organizational culture and the external market.

Wage And Salary Administration Defined

According to Nwachukwu (2000) and Ogunbameru (2000) “wage and salary administration” refers to the development, implementation and on-going maintenance of a base pay system. The central objective or purpose of wage and salary administration is to provide pay that is both competitive and equitable (Atchison, 2003). In relation to Nigeria, wage and salary administration activities refer to all those processes, strategies, plans and schemes that give rise to pay policies. Such policies set the overall direction of pay within the organizations or establishment, public or private as the case may be. The actual development of a base pay system follows the determination of pay policies.

Wage Structure Determinants Douty (1980) and Ferris (1985) have identified the main wages and salaries structure determinants as those of (1) economic value or market value of an item which is the price it brings in due to the interactions of the forces of demand and supply (2) job worth, whose analysis tends to rely more heavily on perceptions of organization members of the relative value of the job (3) training: with requirements of jobs in terms of length, difficulty and who provides it. It relates to human-capital analysis and development (4) employee tastes and preferences. They are also economic factors. Worker expectations of future earnings strongly influence occupational choice and thus labour supplies. The problem however is that the labour market is not a perfect one.

Unions:

Industrial unionism has also been shown by economic analysis to affect wage structures. Large organizations where employees are represented by industrial unions tend to have a highly differentiated wage structures (Ferris, 1985).
Simplicity. To reduce dissatisfaction arising from feelings of unfairness in the grading and salary scales attached to the job, it is important that whatever system employed must be simple enough for employees to understand.
Essential features of job evaluation According to Ogunbameru,(2004) are:

  1. Impersonality. It must be impersonal; it is the job, not the person that is the subject of analysis.
  2. Simplicity. To reduce dissatisfaction arising from feelings of unfairness in the grading and salary scales attached to the job, it is important that whatever system employed must be simple enough for employees to understand.
  3. Flexibility. It should be flexible enough so that jobs can go up and down depending on the changes in the content of the job.
  4. Verifiability. The results obtained for the exercise should be verifiable and capable of being validated and upheld by another expert.

Chapter Five


5.0 Summary Conclusion and Recommendation

The main objective of the research work is to finding out the following:

  1. To determine the nature of wages and salary
  2. To appraise the nature of wages and salary policy in public Nigeria
  3. To determine the factor for an equitable wage and salary in the public service
  4. To determine the wage and salary policy in lagos state.

Findings

The study was able to make the following findings based on the responses of the respondents from the questionnaires distributed:

  1. Wages and salary in Lagos public service is high.
  2. The impact of wages and salary in Lagos public service is high.
  3. There is an equitable wage and salary policy in Lagos public service.
  4. Increase in wages and salary has significant effect on the retainability of an employee.
  5. Worker expectations of future earnings strongly influence occupational choice.

Conclusion

Based on the result of the data analysis the study therefore concluded that the impact of wages and salary in Lagos public service is high since there is equitable wage and salary policy in Lagos public service.


Recommendation

The study made the following recommendations in order to help the Lagos state government in decision making, it also help other researcher with background information on an evaluation of wage and salary policy in the public service:

  1. The federal government of Nigeria should review the wages and salary due to employees’ in the public service
  2. Wages should not only be adequate but they must also show some element of equity, this is particularly true from the point of the employees.
  3. There should not be delay in wages or salary of employees’ as this will be disunity in the public service.

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