Businesses that hire employees to accomplish the goals of that business need to determine the best way to compensate those employees. Companies choose from several different pay structures, such as hourly pay, monthly salaries or commission based pay. The pay structure determines how the company compensates its employees. Some companies opt to use multiple pay structures to compensate different groups of employees.
Competitive Pay
Companies wish to remain competitive and attract the best employees to their firm. These companies usually compensate employees working in different professions based on the pay structure commonly used in that profession. These professions include engineering, accounting or general laborers. Some professions, such as general laborers or food preparation workers, typically receive hourly wages. Other professions, such as accountants or engineers, are paid salaries.
Work Requirements
Some companies require employees to be available 24 hours a day. Other employees in that same company might punch a clock and only be available for working during their scheduled work hours. Pay structures for these classes of employees often vary. The employees who must be available for company business at any time may be paid on a salaried pay structure. Employees only available during working hours may be paid on an hourly pay structure.
Reward Performance
Companies plan their pay structures to motivate their employee's performance. The performance requirements vary by job and may require the pay structure to vary by job. For some employees, their pay structure may be based on the number of components they assemble. The pay structure for employees who work a specific number of hours may be based on a flat rate per hour. Sales employees may be compensated from a pay structure which pays based on their sales volume.
Union Contracts
Some companies employ union workers to meet their needs. Union representatives and company management negotiate the terms of the union pay structure and sign a contract. The company is obligated to compensate union employees based on the terms of the union contract. The union pay structure may include premiums paid for working nonstandard hours or the type of bonuses awarded. Company management determines the pay structure offered to nonunion employees. Companies who employ both union and nonunion employees use multiple pay structures.
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