Wages Differentials

ACKNOWLEDGEMENT
“Gratitude is the hardest of emotion to express and often does not find adequate ways to convey
the entire one feels.” So, we would like to thank ALLAH ALMIGHTY to have everything in
our life.

We would like to acknowledge the continuous guidance and dedicated support of our teacher
Ma’am MAHREEN ASHRAF, who gave us her opportunity to utilize her valuable
knowledge, support and feedback in order to complete our final project. Also that it made us
learn the practical implementation/know-how of HR Practice.

We would like to express our sincere thanks towards volunteer researchers who devoted their
time and knowledge in the implementation of her project.

Nevertheless, we express our gratitude toward our families and colleagues for their kind co-
operation and encouragement which help us in completion of her project.

Thanks.

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Wages Differentials

DESCRIPTION /
SUMMARY
The title of this project is “Wage Differentials - occupational vs. skills - an overview”. The
objective of the study is to analyze the Wages administration and its differentials between
occupational wise and skills wise in the company.

The study has been conducted to know the wages and salary structure provided by the company
to its employees.

In this project, I studied about the present wages and salary compensation of COCA-COLA
company Pvt. Ltd. along with the evaluation of the incentives, bonus, and allowances given to
the employees.

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Wages Differentials

INTRODUCTION
Wages
Wages refer to that reward which is received from the employer for the services rendered by
the labourer per week, per month, per fortnight or per unit It includes allowances also.

In the common language the term wages implies 'reward' to the labourers for the services
rendered by them. It may be paid daily, weekly, fortnightly, monthly, per hour or per unit.
Services rendered by the labourer include both physical and mental services.

Wages Classification
 Statutory Minimum Wages
 Basic Minimum Wages
 Minimum Wages
 Fair Wages
 Living Wages
 Need Based Wages

Wages Administration
Wage and salary administration is a collection of practices and procedures used for planning
and distributing company-wide compensation programs for employees.

These practices include employees at all levels and are usually handled by the accounting
department of a company.

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Wage Policy in Pakistan

 To obtain for the worker a just share of the fruits of economic development.
 To set minimum wages for worker’s whose bargaining position is weak
 To abolish malpractices and abuses in wages and salary payments.

Objective
The aim of this study/project is analyze, investigate and observe the ‘how the wages
differentails the important factor of organization or a company like its

 Control cost
 Productivity
 Present Employees
 Efficiency
 And its relationship between them.

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WAGES DIFFERENTIALS
Wage differential refers to differences in wage rates due to the location of company, hours of
work, working conditions, type of product manufactured, or other factors. It may be the
difference in wages between workers with different skills working in the same industry or
workers with similar skills working in different industries or regions.

For example, wage differentials may also be used to compare wages between genders, union
and non-union jobs, or wages of employees with and without college degrees.

Classifications of Wage Differentials

 Occupational Differential
 Inter-Firm Differential
 Inter-Area or Regional Differential
 Inter-Industry Differential
 Personal Wage Differential

PURPOSE
 “Fair Wage Committee” recommended that wage differential based on
1. Degree of skill required
2. The strain of work
3. Experience involved
4. Extent of training required
5. Levels of responsibilities
6. Mental and physical exertion
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7. Enabled full employment/utilization of resources.

8. Facilitate the economic growth.
9. Fatigue involved
 To induce employees to learn and acquire new skills
 To shift employees a new industry
 To motivate employees to accept more responsible jobs/positions
 To undertake economic and social welfare activities.
 To increase the pace of economic development

Factors
 Demand and supply position of workers in the labor market.
 Comparative wages paid by same industries in the same region.
 Difference in productivity of labor
 Ability of the firm to pay its workers.
 Government policies on minimum wages.

Causes
Ordinarily wage differentials may arise out of the following factors:

 Ignorance on the part of employers and employees as to the prevailing wage rates
 Due to different systems of payment.
 Due to payment of overtimes, vacations, statutory holidays.
 Relative bargaining powers of employers and employees.
 Due to different systems of payment.

Principles
Wage differential have a great social and economic significance as they are directly related to
allocation of economic resources of a country.

 Equality with nature of job (Age, Experience)

 Equal pay for equal work

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 Incentive for improving skills and efficiency.

 Wages to attract workers.

WAGES DIFFRENTIALS
(OCCUPATIONAL)
The occupational differentials based on custom convention and convince rather than on skills,
hazards and efficiency.

Occupations in an organization widely differ from one another in terms of skill requirement
and the extent of requirement and the extent of responsibility. Accordingly, wages vary
from occupation.

Such differences in occupations induce people/workers to undertake more challenging jobs,

encourage workers to develop their skills by way of education and training. It is varying skill
requirement for different occupational that shapes the manpower planning in an organization-
be it an industrial organization or educational institution.

Reason
The reasons for occupational wage differentials can be varying

 Requirements of skill
 Knowledge
 Demand supply situation
 Level of risk involved
 Degree of responsibilities etc.

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Functions
The basic functions of such differentials are

 To induce workers to undertake "more demanding," "more agreeable or dangerous"

jobs, or those involving "a great chance of unemployment, or wide uncertainty of
earnings."
 To provide an incentive to young person to incur the costs of training and education
and encourage workers to develop skills in anticipation of higher earnings in future.
 To perform a social function by way of determining the social status of workers

Average Earnings by Occupation

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WAGES DIFFRENTIALS
(Skills Based)
A wage differential refers to the difference in wages between people with similar skills within
differing localities or industries. It can also refer to the difference in wages between
employees who have dissimilar skills within the same industry.

Skilled worker on average earn more than unskilled workers. such differentials are necessary
to motivate large population in developing countries to acquire skills for industrialization and
economic growth.

Deceasing in Skill Differentials

With the advent of industrial trade unions which have a large membership of unskilled
workers, fixed increase in wages are sought for all members. this move is reducing the skills
differentials everywhere. Grant of uniform cost of living allowance is another factor to
narrow skills differentials.

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WAGES

DIFFERENTIALS
By

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Introduction
The Coca-Cola Company is a world’s largest beverage company with almost 500 brands
ranging from the actual Coca Cola to products such as Sprite, Fanta, Minute maid and many
more. The product was originally born in Atlanta, Georgia in 1886. Dr. John Smith
Pemberton, a local pharmacist invented the Coca Cola which today have spread in more than
200 countries giving job opportunities to 139,600 people worldwide.

Vision
 People: Be a great place to work where people are inspired to be the best they can be.
 Portfolio: Bring to the world a portfolio of quality beverage brands that anticipate
and satisfy people's desires and needs.
 Partners: Nurture a winning network of customers and suppliers, together we create
mutual, enduring value.

Mission
 To refresh the world.
 To inspire moments of optimism and happiness.
 To create value and make a difference.

Values
 Focus on the Market
 Work Smart
 Act Like Owners
 Be the Brand

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Company Profile
Type Soft drink
Manufacture The coca-cola company
Country of origin United States 1886
Introduced
Color Caramel E-150d
Flavor cola, cola cherry, cola vanilla, cola green tea, cola lemon, cola
orange, and colaRelated products Pepsi, RC cola, Cola turka,
zam zam cola, virgin cola, parsi cola, evoca cola, afri cola..,
Website www.coca-cola.com

Market share in Pakistan

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Organizational Structure
Organizational structures need to be designed to meet aims. They involve combining
flexibility of decision making, and the sharing of best ideas across the organization, with
appropriate levels of management and control from the center.

Modern organizations like The Coca-Cola Company, have built flexible structures which,
wherever possible, encourage teamwork. For example, at Coca-Cola Great Britain any new
product development (e.g. Coca- Cola Vanilla) brings together teams of employees with
different specialisms.

The Coca-Cola Company, have built flexible structures which, wherever possible, encourage
teamwork. For example, at Coca-Cola Great Britain any new product development (e.g.
Coca-Cola Vanilla) brings together teams of employees with different specialisms.

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Hierarchy

Human Resource System

Human Resource Management at Coca Cola Company has many advantages. It is the global
company and it is impossible to create certain policies or procedures applicable in all
divisions of the company, cultural and political differences need to be taken into account.

Performance Management includes annual appraisal of employee job performance and

procedures used to communicate job expectations and provide feedback on performance on
an ongoing basis and through a year-end performance rating. The performance rating is used
for compensation, promotion and other employment decisions.

Job Analysis and Designing

Coca cola company HR department has its own job description and job analysis in
which they get the information about employees work activities, human behavior,

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performance standard, job context and human requirements and also other
information related to this conduct.

Hr. department of coca cola use this information for recruiting, selection, compensation
performance appraisal, training and employee relationship.

Wages Policy
Coca-Cola is providing smart wages to its employees, which are competitive and really
satisfactory. With wages lot of facilities and amenities are provided according to the policy.
Structure of wages can be described as:

 Blue collar workers are offered wages along with commission, salesman are offered
wages plus commission pursuing certain criteria.
 White collar workers who are the officers and the executives draw a handsome
amount salary with incentives.

Compensation Policy
 Basic salary
 Bonus
 Medical facility
 Pick and drop
 Gratuity fund
 Social security

Salary

Salary is basically determined through job evaluation and serves as the basic for other types
of benefits, but in managerial compensation job evaluation plays only a part and not
represents the whole truth

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 A manager is paid for his capabilities and for the job he performs, rather than only
job demands. This is the reason why the norms of wages and salary fixation are
generally not observed while fixing the salary of the manager
 Salary of the managers varies by the type of job, size of organization, region of the
country and type of industry.
 Salary makes up of about 40 to 60 % of top managers annual compensation but it is
not significant, as it is subject to deduction at source and is also kept by government
regulation.

Long term incentives/stock options

If bonus are short term benefits, stock options are long term benefits offered to managers
Companies allow managers to purchase their shares at fixed position but Stock options are
valuable as long as price of the share keeps increasing.

Bonuses
Bonuses related to performance also aid to executive at a certain percentage of profit.

 The average bonuses may range from 30% -35% of salary.

 This increase the motivation level of executive.

Benefits

Special benefits for executives that are usually non-cash items.

For example: companies provide health club memberships with personal trainers, discounted
company products, automobiles and leases, executive health plans, personal car service;
personal computers and cell phones, financial planning assistance etc.

Insurance Policy
 Employee health insurance companies typically cover medical benefits for insured
(self), spouse, children and dependent parents
 Some health insurance providers cover pre- existing illness and maternity as well
 Employee health insurance offers cashless hospitalization at network hospitals
 Group health insurance can cover ancillary charges such as ambulance costs too.
 Some employee health insurance policies provide fee reimbursements of specialists
and other medical practitioners for follow checkups.

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CONCLUSION
In countries adopting a course of planned economic development, skill differentials play an
important role in manpower and employment programmers, for they considerably help in
bringing about an adequate supply of labor with skills corresponding to the requirements of

The wage differentials in Pakistan tend to be higher in rural as compared with urban areas,
and are higher among women than among men. The wage differential also tends to be higher
for low-skilled workers.

There is considerable evidence of an increase in the wage differential between 1997-99 and
2010-2015. Wage differentials are the result of occupational differentials, inter-firm
differentials, regional differentials, inter-industry differentials and personal differentials.

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Reference
1. WHATISHUMANRESOURCE/WAGES-DEFINITION
2. SMARTLEARNINGWAY.BLOGSPOT/2016/03/WAGE-DIFFERENTIALS
3. SLIDESHARE.NET/444/WAGE-POLICY
4. WAGE-DIFFERENTIALS-BETWEEN-OCCUPATIONS
5. HUMAN RESOURCE MANAGEMENT
BY S.S.KHANNA
S.CHAND & COMPANY LTD. (NEW DELHI)

6. HUMAN RESOURCE MANAGEMENT

BY DR. C.B.GUPTA
SULTAN CHAND & SONS

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Problem statement
In this project, we conduct a study and identify the company’s problems. these problems are
as follow:

 Managing Overtime
 Misclassified Employees
 Ineffective Time Records

Managing Overtime
The Fair Labor Standards Act requires companies to pay employees premium wages of at
least one and one-half their regular rate for any hours worked over 40 in a single workweek.
Not only do you have to monitor exactly how much overtime the employee worked.

Misclassified Employees
Companies often don’t realize that not everyone who works for them is actually considered
an employee. such as class, caste, discrimination, black and white etc.

Ineffective Time Records

Sometimes, payroll complications start with the actual recording of time—especially if
you’re using paper time cards.

Errors or improper interpretations during data entry can result in underpaying or overpaying
an employee.

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Recommendation
 Make sure your employees understand your company’s overtime policies and enforce
them as effectively as you can.
 Always be aware of all of your employees’ hours. When overtime happens, check
with your payroll processor to ensure that everything is being recorded accurately.
 Any time you’re hiring someone, make sure you understand exactly how they’ll work
within your organization.
 Make sure you’re recording your employees’ hours as accurately as possible. The
honor system may be a morale booster, but it creates large amounts of uncertainty.

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