AN EVALUATION OF WAGE AND SALARY POLICY IN THE PUBLIC SERVICE A CASE STUDY OF WAGE AND SALARY POLICY IN LAGOS STATE

CHAPTER ONE

BACKGROUND OF THE STUDY

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).

International Journal of Basic and Applied Science,Vol 01, No. 02, Oct 2012, pp. 257-268Agburu258 InsanAkademika Publications

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):

(a) Discrimination – the trends nowadays is to shift away from wage differentials based on sex or race.

(b) 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.

(c) 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.

International Journal of Basic and Applied Science,Vol 01, No. 02, Oct 2012, pp. 257-268

 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

STATEMENT OF THE PROBLEM

wages and salary has consistently been acontroversial 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.

REAEASCH QUESTIONS

what is the nature of wages and  salary

What is the nature of wage and salary policy in Nigeria

What are the determining factor for an equitable wage and salary policy in Nigeria

What is the nature of wage and salary policy in lagos state

OBJECTIVE OF THE RESEARCH

1     To determine the nature of wages and salary

To appraise the nature of wages and salary policy in public Nigeria

To determine the  factor for an equitable wage and salary  in the public service

To determine the wage and salary policy in lagos state.

 SIGNIFICANCE OF THE RESEARCH

1 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.

DEFINITION OF TERMS

Compensation: Definition

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. (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).

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.