EFFECT OF SALARIES AND WAGES ADMINISTRATION ON EMPLOYEE’S ATTITUDE TO WORK IN AN ORGANIZATION

CHAPTER TWO

LITERATURE REVIEW

2.1 Review of related literature

Past works relating to the subject matter of this study were reviewed in this section of the study. The review was carried out under the following sub heading: conceptual reviews, relationship between effective wages administration and the employees performance in the organizations, perceived constraints to full implementation of adequate wage by some state bank management in Nigeria, theoretical framework and empirical review.

2.2 Conceptual Review

Wages administration like many other concepts in the social and behavioural or managerial sciences has been given a variety of definition. This is because most literature on the concept sees authors defining it from their various world views. However, within the context of this study, wage administration simply put, means the management of human resources with respect to salary payment to workers when services are rendered. In keeping with their own side of the contract, employers endeavour to pay their workers. The implication is that there exist a contractual agreement between workers and the employer. The way and manner the wages or salaries are paid determines to a large extent the performance of the employees.

In the opinion of Manadhar (2005), there are levels to bank wages, namely, reservation wage, efficiency wage and capitation wage. Reservation is given on opportunistic event, efficiency is fixed far and above the opportunistic wages while capitation is deliberately made very low because it is presumed that employees make extra income through corrupt practices. This presumption has not passed through any test for authentication. Therefore, it can as well be regarded as a sweeping generalization.

2.2.1 The Theory of Wages.

Propounded by David Ricado , a classical economist born in 1772 and lived to 1823. Graham (1988) defined wage as the payment made to manual workers while a salary is a fix periodical payment to a non-manual employee. It is usually expressed in annual terms implying a relatively permanent employment relationship, although normally paid at monthly intervals. He further explains that “salaried workers are usually termed „staff‟ while, wage earners are called „casual workers.

Wages are something received by a worker or paid by an employer for time on the job; money received or paid usually for work by the hour, day, or week, or month; a calculation or statement of money earned for a period of time from one hour (hourly wage) up to one year (annual wages). Now let us discuss about wage level.

What is a Wage Level?

May be defined as the money an average worker makes in a geographic area or within in an organization. It is only an average; specific markets or firms and individual wages can vary widely from the average.

How are Wage Levels are Set?

Wage levels are calculated using position importance and skill required as criteria. While there are adequate wage set by federal law for most jobs, But the actual wage paid is entirely between you and your prospective employee.

What is “Stagnated” Wage Levels?

This is a regressive wage system, which does not attach any value to employee number of service year, additional qualification, employee attitude or at large may be said to lack respect for workers dignity and right to good life. Workers spend their productive and energetic moments of life receiving a meager salary as total monthly emolument. This practice have been observed to be repugnant to natural justice, equity, good conscience and fairness. It adds to woes of the poor. The continuing stagnation of the income levels for the most disadvantaged inhibits growth of workers income and attainment of better human conditions of living. (Michael 2019)

What is a Wage Rate?

A wage is an amount of money paid to a worker for some specified quantity of labor. When expressed with respect to time, it is typically called the wage rate. The wage rate is the pretax amount of payment, usually monetary, paid per unit of labor. It is the main monetary item that the worker and the employer focus on.

Affirmatively, Wages mean any form of economic compensation paid by the employer under some contrast to his workers for the services rendered by them. Wages, therefore, may also include family or spouse allowance, relief pay, financial support and other benefits. But, in the narrower Sense wages are the price paid for the services of labour in the process of production and include only the performance wages or wages proper. Graham (1988) proposed those wages are of two parts - the basic wage and other allowances.

The basic wage is the remuneration, by way of basic salary and allowances, which is paid or payable to an employee in terms of his contract of employment for the work done by him.

Allowances-, are usually paid in addition to the basic wage to maintain the value of basic wages over a period of time. Such allowances may include Spouse allowance, holiday pay, overtime pay, bonus and social security benefits. These are usually not included in the definition of wages.

Labor and Wages

The type of job one does and the financial compensation he or she receives are very important in our society. Job type is linked to status as is wealth. While the type of job one performs is arguably more important status wise then wealth, both are important to Americans. In the past we used to use other descriptions to classify workers. The terms blue collar or white collar employees were used to describe the type of vocation.

Blue Collar - Manual laborers

White Collar - Officer workers

Pink Collar - Jobs associated with women like nursing, secretarial, etc. This being a rather sexist term is no longer used. Today we classify our work roles into three categories called labor grades. These labor grades are described below:

Skilled Labour

These are workers who have received specialized training to do their jobs. They have developed and honed a special skill and may or may not need to be licensed of certified by the state. Some examples of skilled labor are: carpenters, plumbers, electricians, business executives and managers, artisans, accountants, engineers, police, mechanics, etc. These may be blue or white collar workers.

Unskilled Labor

These are workers who have received no special training and have few specific skills. As our society has grown into an increasingly technological one, the members of this group have developed more and more skills. A mechanic, for example, used to be considered unskilled labor. Today that is no longer the case. Mechanics require a great deal of skill and training to work with today‟s modern engines. Examples of unskilled laborers are construction workers, sanitation and custodial workers, painters, factory assembly line workers, etc. These are blue collar workers.

Professionals

Arguably the elite of the labor grades, these are those workers who need an advanced degree to do their jobs. The three primary groups of professional are doctors, lawyers and teachers. These are white collar workers. These labor grades are often said to be non competing labor grades because workers rarely move from one grade to another and do not compete salary wise with each other. There are reasons why they do not compete with each other.

The cost of education and training may be a significant obstacle. They might lack the opportunity to make such a move and they might also have a lack of initiative.

Ricardo (1817) further opines that there are two key theories that explain why salaries are the way they are in a particular field. These two theories are:

1. Traditional Theory of Wage Determination

In this theory the law of supply and demand dictates salary. These days programmers are in short supply and are in great demand thus they will command a higher salary. Likewise doctors and lawyers whose specialized skills people need command a high wage. If you looked at the bill my electrician gave me you would know he is in demand!

1. Theory of Negotiated Wages

Those employees who work in unions where the union negotiates salary on behalf of all workers fit into this theory. Since I am a teacher my salary is set by collective bargaining with my union. I may be the best teacher in the world sought after by many students and parents but it wouldn’t matter.

However, different methods of wage payment are prevalent in different industries and in various countries. There may be payment by time or payment by results, including payment at piece rates. Wages are fixed mainly as a result of individual bargaining, collective bargaining or by public or State regulation. How wages are determined has been the subject of several theories of wages.

2.3 Relationship between effective wages administration and employees performance in organizations

The relationship between proper remuneration of workers and their efficiency is not far-fetched so also are effective leadership and productivity. In many occasions that workers representatives and the organization have had to negotiate wages and salary, in most cases, the executive arm of bank management both at the state and federal levels have always been represented by certain persons with the understanding that any decision reached in such engagements would be binding on all parties (Adeboy, 2004). This brings the issue of leadership into focus. Leadership essentially determines whether agreements would be implemented and sustained or not. As Tannebaun and Warren (1983) had noted, a leader is always in-charge of the affairs of his subjects. He does not only influence their behaviour but also ensures that the environment is conducive for the achievement of common goal. This, they noted further, is against the realities that restricts use of the leader’s authority, prestige or power to diminish the interest of the subordinates thereby exerting her influence.

Generally, incentives are regarded as variable payments made to employees or a group of employees on the basis of the amount of output or results achieved. Alternatively, it could be payments made with the aim of pushing employees’ performance towards higher targets (Banjoko, 2006). He noted further that effective incentive pay system is a necessary condition for individual employees and work teams to contribute effectively to the organization, not only in what they do but also in how well they do it. The implication of this is that the organization’s overall performance depends to a large degree on the productivity of individuals and groups within the organization. In the opinion of Martocchio (2006), to attract, retain and motivate highly productive workers and to be fair to all employees, an organization needs to reward employees on the basis of their relative productivity.

Therefore the link between employee’s attitude and good pay has been underscored by the above opinion. Reilly (2003) also lent substantial support to the above opinion when he noted that when workers are paid commensurable to their outputs, it does not only encourage them to do more but serves also as a stabilizing force within work environment thereby providing conducive atmosphere for higher productivity. In a related development, Lawal and Oluwatoyin (2011) observes that isolating a worker for reward in the banking sector may not be as easy as it could be in the private sector, but workers can be effectively motivated, collectively, through prompt implementation of general increase in wages and salaries such as adequate wage issue.

They concluded by noting that refusal to implement adequate wage by the state bank managements for any reason, often elicit serious negative workplace behaviours which include absenteeism, lateness to work, general poor performance by the workers among others. More often than not, it has led also to prolonged industrial dispute between labour and bank management.

2.4.1 Effect of Poor or Weak reward system on organizations

According to Michael(2019) Weak reward system connotes weak relationship with employees. He identified the following as effects of poor compensation system.

1. Employee turnover- When employees do not see a clear relationship between work and pay they become demoralized due to the poor compensation system and inequality within an enterprise. Performing employees feel cheated and tends to fall out to look for greener pastures. Some of these exits become entrepreneurs who directly compete with the business or end up becoming machineries of competitors who hire them to crush out their former employers.
2. Brain drain- Due to the grievance, rift and mistrust between the employee and employer, a demotivated employee will deliberately refuse to share any knowledge he has to other employees or may even withhold sensitive information that will amountto financial or reputational loss on the path of the employer.
3. De-motivated work force- when worker morale is low, it affects productivity of individual, groups and even the organization at large.
4. Increase in wastages- employee reaction to unfair labour practice may be passive. Passive reactions of employee are much more dangerous and have a disastrous effect on organizations at the long run. As reacting employees do not air out their grievances in voices or in writing nor through groups (formal or informal) that exist within an organization but reacts internally by exhibiting attitudes that runs contrary to organization objective. For example an employee technically alters a process or deliberately refuse to correct a process that leads to a chance of loss.
5. Increase in time offs- A demoralize sales personnel officer may decide to spend more time at home under the guise that he is in the field.
6. Negative attitude to work- poor attitude to work are synonymous with a demoralized worker. Lateness to work, carefree attitudes, frustration, anger, hatred form part of employee attitude at work. Non of these attitude are positive reinforcement to and at work.
7. Dwindling profits- the overall impact of having unproductive or demoralized workers must always reflect on profit. Once productivity is altered it directly impact on profits.
8. Increased competitors activity- as they buy your turned over employees so they possess your business secret. In extreme conditions, an aggrieved employee can do everything possible to bring an enterprise to its knees. An aggrieved soldier who was denied his right to fight for Sparta brought down ancient Sparta by leading the enemies through a mountain path that were never known to the enemies. Soon did a historic city in ancient Greece that have never been conquered in battle for many years brought to her knees within hours. it was an epic fall. The fall was the end of Sparta.
9. Eventual liquidation of organization- Prolonged and persistent decline in profit implies looming bankrupsy. Once an enterprise is bankrupt, it means it has ceased to exist.

The theory upon which this work was anchored is the Maslow’s Hierarchy of needs. It is a very widely applied theory in human resource management Human resource is the most dynamic of all productive resources in an organization. Essentially, this implies that organizations must as a matter of necessity recognizes the crucial nature and position human resource occupy in achieving organizational goals.

In literature, the first major attempt to explain the phenomenon of motivation followed systematic conceptual model of human motivation propounded in 1943 by Abraham Maslow. In his book “motivation and personality” published in 1954, Maslow observed that people are generally wanting beings who always possess innate grabbing instinct depending on what they already have. The three core propositions of the theory are:

• First, human beings have many needs that are different in nature, ranging from biological needs at the lower level to psychological needs at the upper extreme.
• Second, individuals are in constant state of motivation, never achieving a state of satisfaction except for a very short time; and
• Third, there needs are arranged in a Hierarchical order, so that the lowest level needs must be satisfied before higher level needs arise or motivate people (Maslow, 1970).

Following from this theoretical exposition, it becomes obvious that the unsatisfied needs can and do influence the behaviour of a person to act in a manner that does not promote the objective of his organization. The success of any organization depends largely on the efficiency and effectiveness of the employees. Motivation assures and propels workers to increase their productivity. wokers can be motivated by giving them enhanced salary package that can take care of their need as identified by Maslow in his work.

Even though Maslow’s Hierarchy of needs theory was criticized on many grounds by the likes of Alderfer (1972), Bass (1981) and Drucker (1974), it was found very suitable for analyzing the Phenomenon under investigation. The banking sector by its very nature is structured to pass through career progression and at each stage up the ladder, the level of need changes to a higher one in line with Maslow’s postulation. For instance, the need for a new entrant into the service is not the same as that of a director. When the workers needs are identified and attended to accordingly, the banking sector would try to be at their best in terms of performance.

2.6 Empirical Review

The results of past studies indicate that low productivity and inefficiency has characterized the public sector organizations in Nigeria since post independence era (Mbogu, 2001, Ezulike, 2001. Heriohanma, 2006); and findings from other studies have equally revealed that the low productivity and inefficiency associated with

Nigeria’s public servants could be removed if they are provided with some financial incentives, (Tongo, 2005). Perry, Mesch and Paarlberg (2006) under took a review of pay for performance research which was part of a study on motivation in the public sector. The study concluded that individual financial incentives are ineffective in the traditional public sector settings and joined prior reviews of pay for performance systems in concluding that the effectiveness of financial incentives is dependent or organizational conditions of service. Some researchers among who are Perry (2009) found that respondents perceived increase in wages as a form of confidence that management places on them, and therefore were motivated to improve on their performance. In a study commissioned and undertaken by Olaleye (2012) on the implications of non implementation of adequate wage in Ekiti State by the state bank management. It was found from the study that apart from the industrial action that often follow such actions and the productivity lose, employee turnover are sometimes observed if the dispute becomes a prolonged one. The study found also that financial resources with which to implement such increases have never been lacking as the bank management have always alleged rather the problem has been that of lack of will to implement the policy as well as stealing from public funds by those in custody of such funds.