Is the process of setting rates of pay, including increases in pay. Pay determination can be classified in a number of different ways, in terms of those involved in the process and the factors taken into account in deciding what pay should be. An important distinction can be drawn between three systems of pay determination: those that rely on unilateral decisions by managers; those that involve employees through collective bargaining; and those that rest on statutory mechanisms and involve government ministers and officials. The system of Pay Review Bodies and the National Minimum Wage are examples of statutory forms of pay determination, in which boards and commissions recommend pay increases that are adopted by the government. In setting rates of pay managers and others can take into account a wide range of influences and pressures. Some of these may be internal to the organization, such as the level of profit, productivity, and the need to secure employee cooperation with change. Others may be external, including the state of the labour market for particular occupations, the rate of inflation, and movements in earnings in both comparable organizations and across the economy. In recent years, the system of pay determination in the UK has altered. There has been a decline of joint systems of pay determination based on collective bargaining and an increase in unilateral decision-making by employers, supplemented by increased statutory regulation. According to some, there has also been a shift to reliance on internal principles of pay determination, with ability to pay taking precedence over fair comparisons and the need to maintain the real value of earnings by matching pay rates to the rate of inflation.
Subjects: Human Resource Management.