Six Dangerous Myths About salary
￼Six Dangerous Myths about Pay
Many theories or wrong views regarding salary. Jeffry Pfeffer in his journal entitled “Six Dangerous Myths about Pay” explained that there were six misconceptions about salary giving.
First: “Labor rates and labor costs are the same thing”
Many people assume that labor rates are equal to labor costs. Though both are different payroll methods. Labor costs are payroll based on employee productivity, while labor rates are payroll based on working hours.
Example of two steel companies. Company 1 applies a salary of $ 18.07 / hour, while company 2 applies a salary of $ 21.52 / hour. But apparently only 34% of time for work, 63% scrap, while the salary presentation was 19%.
Second: “You can lower your labor costs by cutting labor rates”
Many managers assume that to reduce labor costs by cutting labor rates. Even though the reduction in labor rates should not reduce productivity. Employees may go down in terms of time, but in terms of productivity they cannot go down.
For example, old workers get a wage of $ 2000 / week, the company wants to cut labor rates by hiring new workers by $ 500 / week, but because it is not yet skilled so it lowers productivity.
Third: “Labor cost constitute a significant proportion of total cost”
Managers assume that labor cost is the largest portion of total costs. Even though labor costs are variable costs that are flexible so they can adjust. An example is the US Apparel Manufacturing company where labor costs are only 15% of the total cost.
Fourth: “Low labor costs are a patent and sustainable competitive weapon”
Many perceptions have emerged stating that low labor costs are important in winning cost competition. Whereas labor costs are only one way, not the only way in competition. There are other important elements in competition, such as quality of service to customers, quality of delivery, and product innovation.
Example The salary of Men’s Warehouse’s company is bigger than store employees in general, but Men’s Warehouse is more competitive than its competitors, because it is because its employees have good skills.
Fifth: “Individual incentive pay improve performance”
Many managers assume that individual incentives can improve employee performance. Though individual incentives can cause
– Low teamwork
– Employees focus on the short term
– Employees believe that salary does not depend on performance but on good relations with superiors
Example: Lantech companies apply individual incentives to their employees that cause intense competition between employees, resulting in conflict
The sixth “People work for money”
This myth states that employees work only for money. Even though many employees who work are not solely because of money, there are those who work with the aim of actualizing life, looking for happiness, or even having a perception that their work is for worship. Motives at work will reflect his commitment to work.
Example: SAS Institute companies that have employees with low turnover rates because they apply variations in the projects they are working on, a pleasant work environment, and the attention and appreciation given to employees.