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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 em-

ployers. Public sector employees may also receive an annual cost-of-liv-

ing increase. Independent pay review bodies recommend what the in-

crease should be for some employees, such as teachers and health work-

ers. The government, however, makes the final decision.

Some salaries in the private sector are also decided by national agree-

ment 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 for-

ced 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


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 advan-

tage 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, dis-

counts 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 ac-

counts, 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


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

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