The World of Pay and
Compensation

Seventy percent (70%) of all jobs in the USA are
in the service sector.

Service-sector jobs tend to be labor intense.

Service-sector companies typically spend 40 to
80 cents of each revenue dollar on employee
compensation.

Wage competition in service-sector companies
tends to be more intense.
1
The Compensation Program

Base Wages and Salaries
After-tax amount on the paycheck

Wage and Salary Add-ons
Premiums an Differentials

Incentive Payments
Payment for specified outputs

Benefits and Services
Retirement, Savings, Medical, (39% of payroll)
2
Reasons for the Differences in Pay and
Compensation for Different Employees
Factors That Determine Rates of Pay

Kinds and Levels of
Required Skills

Philosophy of
Management

Kind of Business


Union and Nonunion
Status
Total
Compensation
Package

Capital Vs. Labor
Intense Industries

Geographic
Location

Size of Business
3
Average Hourly Earnings
November 1995
Specified Production Workers
Lowest Paid










Eating and Drinking Places
Apparel and Accessory Stores
General Merchandise Stores
Apparel and Other Textile Products
Food Stores
Leather and Leather Products
Misc. Retail Establishments
Amusement and Recreation
Building Materials and Garden
Textile Mill Products
$5.65
7.54
7.60
7.77
8.25
8.26
8.52
9.02
9.26
9.49
4
Average Hourly Earnings
November 1995
Specified Production Workers
Highest Paid

PIPELINE except NATURAL GAS
$20.26

PETROLEUM and COAL PRODUCTS
19.68

TOBACCO PRODUCTS
18.49

COAL MINING
18.43

ELECTRIC, GAS, and SANITARY SERVICES
18.04

METAL MINING
16.94

TRANSPORTATION EQUIPMENT
16.65

LEGAL SERVICES
16.37

COMMUNICATIONS
15.90

CHEMICAL and ALLIED PRODUCTS
15.85
Hourly Rates (1994) for Production
Workers
Five Highest
1) Michigan
Five Lowest
$ 16.40
50) S.Dakota
$ 9.51
2) Ohio
14.53
49) Mississippi
3) Delaware
14.08
48) S.Carolina 10.21
4) Indiana
13.90
47) Arkansas
5) Connecticut
13.82
46) N.Carolina 10.67
9.90
10.23
6
Reasons For The Differences In Pay And
Compensation For Different Employees
Other Factors
That Determine
Rates Of Pay

Supply and Demand of Labor

Profitability of the Firm

Employment Stability

Gender Difference

Employee Tenure and
Performance
7
A World in Transition

More Intense Global Competition

Slower Growth

More Rapid Change

Reordering of Traditional Businesses

Organizational Restructuring

Deregulation, Takeovers, and Mergers

Wage Depression and Revenue Escalation
8
Global Variations In Compensation
Practices

Direct Compensation

Tax System

Social Security

Benefit Entitlements

Regulatory Environment

Employment Law
9