Salaries and Other Rewards

White-collar workers − and a few manual workers − receive salaries, which are based on an annual, not an hourly, rate of pay. Payment is made monthly by cheque or electronically into an employee's bank account.

In some of the public sector, there is still an incremental pay scale with a minimum and a maximum rate of pay for each kind of job. This means that an employee gets an automatic pay rise each year until the maximum salary is reached.

These pay scales are negotiated nationally by trade unions and employers. Public sector employees may also receive an annual cost-of-living increase. Independent pay review bodies recommend what the increase should be for some employees, such as teachers and health workers. The government, however, makes the final decision.

Some salaries in the private sector are also decided by national agreement between unions and management. There are national incremental pay scales for various grades of jobs, with extra cost-of-living allowances for employees in particularly expensive areas, such as London.

However, incremental pay scales have drawbacks. Employers are forced to give a pay rise each year whether an employee deserves it or not. Employees may lose motivation when they reach the top of their pay scale.

As a result, most employees in the private sector now have some form of performance-related pay. Increases in pay are given only for better work. Performance is often rated against a list of achievements which have been agreed between an employee and his or her line manager, or immediate boss.

Many salaried employees do not receive overtime payments, but their pay may be increased in other ways:

• Commission is paid to sales people for the goods they sell.

• Annual bonuses are paid in many service industries.

• Profit-sharing or profit-related pay is becoming increasingly common.

In small firms, pay is often negotiated by the individual. The salary is decided at the interview. Employees may be given pay rises for good work or long service; if not, they have to ask for them.

The majority of employees receive some fringe benefits in addition to their wages or salaries. These goods or services have one great advantage for employees: either they are not taxed at all or they are taxed at a reduced rate, according to the estimated money value of the benefit. If the employees were given a pay rise instead, they would have to pay more tax.

Most manual workers receive some fringe benefits. Many big firms provide pension and sick-pay schemes, and some also provide private health insurance. In addition, employees may receive free uniforms, discounts on shopping, free travel to work, subsidized meals, free sports facilities and day trips abroad. Fringe benefits for managers include company cars, private healthcare, cheap loans and mortgages, relocation, or moving expenses, holidays abroad, company flats, big expense accounts, golden handshakes and hellos (sums of money given on leaving or joining a company), share option schemes, payment of school fees. The higher you rise in a firm, the more fringe benefits you are likely to receive.

1. What is a fringe benefit? State two which a manual worker might receive and three that a manager might get.

2. What is the main advantage of a fringe benefit for an employee?

3. What is an incremental pay scale? Give three examples of employees who would be paid in that way.

4. Explain how salaries are deter­mined in the private sector.

5. What are the main advantages and disadvantages of each method for a firm?

6. What extra payments do some salaried employees receive?

Text 4

Read the text and see if the waiter’s ideas are the same as yours. Be ready to answer the questions given below.