Employees can be paid for the time they work, the output they produce, or a combination of these two factors. The great majority of employees are paid for time worked, in the form of wages or salaries. Pay surveys are used to establish competitive pay for the industry, and job evaluation is the principal method for setting time pay schedules. Then pay ranges, pay classifications, and similar tools are developed for individual pay determination, the final step in a time based pay system.
Typically, most employees are paid salaries, exceptions are blue collar and some clerical employees, who are paid hourly wages. One issue in the time pay system is whether everyone should be paid a salary. Would you rather be paid strictly by the hour and not know your income week to week, month to month, or be paid a salary so you could plan your life? In general, most blue color employees are given hourly pay, but there has been a movement to place all employees on salaries and given them the same benefits and working conditions others have. The advantage claimed for this move is that blue color workers become more integrated into the enterprise, and this improves the climate of employee relations. But if everyone goes on salaries, it is possible that the long run security of positions will be diminished. With hourly workers, if business is down it is relatively easy for an enterprise to reduce the hours worked daily or weekly, save the labor costs, and adjust to the realities of the marketplace. If everyone is on salary, management tends to look toward full layoffs or reduction in the labor force by attrition or terminations. Salaries for everyone changes labor costs from variable to fixed, and this can have serious employment security implications. The success of a total salaries program requires stable, mature, responsible employees, a cooperative union, willing supervisors, and a work load that allows continuous employment.
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