Question

Describe the internal and external factors that can influence pay rates. Relate them to real work factors in your previous or current organization.

Answer 1

Internal fators:

Company's internal strengths, profit margin, financial capabilities, management’s human resource orientation, industry position, nature of work etc. can influence the paying capacity of the company. Pay rates will also depend upon the attitude, values and beliefs of the owner of the corporation. A generous attitude will give more focus on employee empowerment and hence increased pay rates at workplace.

For example: P&G, IBM, Apple, TCS etc. have employed policy to pay higher than their immediate competitors. It shows their internal policy and commitment to pay such higher packages.

External factors:

An organization will be influence from the external forces like political, environmental, legal, social and economical within a business environment. Competitors might have influence on pay rate s of an organization.

New government might increase the minimum wage and fringe benefits to the employees and hence companies will have to pay higher amount of wage or salary. Sometimes, a particular location will be quite tough to work far like hilly areas, armed forces etc. Then these sectors employer will have to pay higher amount.

In a growing economy, pay rates will be higher. For example: In developed economy like USA, Russia, Australia etc. pay rates are higher than Asian countries like India, China etc.

Legal forces also influence the pay rate like fair labor standard act, ILO’s regulations etc.

In my previous working organization where I was working as HR intern, I have seen employees were getting industry level salary and compensation. There are a no of benefits are also available to them based on merit and contribution (Internal factor). Company also increases salary from time to time as per the government’s regulation (External factor).