Salary Administration in accordance with the Labour Act
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Salary administration and its impact on both labour and management have reached its teething point, and any organisation which fails to acknowledge the importance of the extent to which salary and related issues can serve as both good tonic for growth in the business and the promotion of good labour relationship may be heading for doom. The purpose of this piece is to address some of the salient issues and key highlights in salary administration and its impacts on organisations.

Broadly, there may be a number of styles adopted when dealing with salary administration but two key styles that have been prominent over the years are:

(1)The notches salary structure and

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(2) The broadband salary structure.

In this 21st century where complexities at the workplace cannot be underestimated it is appropriate to adopt the best method, which without doubt, will be one that is performance based.

In Ghana, for instance, we are fortunate to have a labour law in Labour Act, 2003 (Act 651), which contains a comprehensive approach to salary administration but unfortunately for lack of knowledge, understanding and the required skill to operationalise the law has so far eluded many organisations, both in the public and the private sectors in the efficient handling of salary administration.

For example, under Section 8 (b) of Act 651 employers are enjoined by law to have a written policy regarding the management of people and how to administer them, which includes setting targets for working people in any establishment not just to obey but to act upon.

From observation, many have either no written salary administration policy or have a loose write-up, which is not owned by the workers in the organisation, and therefore, implementation appears unwholesome to the organisation.

Articles 10, 11, 24 and 36 of the 1992 Constitution of Ghana enjoin employers to embrace the participation of working people, formation of unions. The constitution also stipulates equal pay for equal work without discrimination. This will demand that a comprehensive job inauguration is always undertaken by any organisation at all times, and subject to review after every five years because of the rapidly changing technology.

Sec 11 of Act 651 further enjoins workers to enhance the productivity of the employer and to work conscientiously on their lawfully chosen occupation. Section 98(g) of the same Act also enjoins employers to match the remuneration (both pay and all related salary allowances) to productivity; however, the challenge most organisations face is that they fail to administer salary regime in the spirit of this law.

This principle of matching remuneration to pay is the basis for a well thought out performance management policy and therefore imposes on the employer to ensure that they put in place structures that promote effective appraisals system. The absence of these two systems erodes confidence in the Human Resource Management, and organisations will always be faced with disputes and grievances from unions and workers.

The best approach to salary administration in tune with Act 651 is the introduction of the broadband salary structure with full adherence to the principles of performance management and appraisal systems. The broadband salary structure has three levels (the beginning point, mid-point and maximum point) for workers earnings. It is structured in such a way that a worker is recruited into an already existing structure which has an entry point with the opportunity to upscale his/her income based on his/her performance as stipulated in Section 98(g) of Act 651. With the proper appraisal systems in place, the HR manager can track the worker and provide incentives in line with performance, giving the hardworking worker the prospect to migrate to the midpoint earlier than the non-performing worker.

In line with this, the law also makes provision that an organisation after having conducted proper appraisal must make provision to train and retrain workers who are not contributing to the growth of the business (non-performing worker). This is to ensure that their skills are well in place for the task assigned them, but if after taking all these measures the performance of the worker is still not up to what is required of him/her, the employer reserves the right under article 62 of Act 651 to terminate the workers appointment for non-performance.

Even though recent trends of Human Resource Management demands the use of a broadband salary structure for its full benefit on increased performance and productivity,  a few organisations still adopt the use of the notches structure because they believe it serves two purposes. The notches as we are abreast with serves as the master dashboard for the Human Resource office to see the progress of workers as opposed to the broadband structure which they think is opaque along the line.  For instance in the notches structure, promote an across board salary increment based on the various notches workers fall in, irrespective of their contribution to the organisation, whereas in the broadband structure, workers are appraised on a scale of 1-5, and the percentage of incentives/ increment is based on your performance level with just a token spread across board for the rest of the workers.

This across board salary adjustment, in my opinion, is not based on merit and in the end, encourages a lazy and unproductive workforce as the hard working worker is demotivated and does not find any incentive to continue working harder as that does not influence his/her salary increment. But the fact is that if people are paid based on productivity, the organisation becomes productive with an active and competitive workforce who will be innovative and work hard to progress on their salary scale.

So in actual sense, a  collaborative and effective salary administration will include a performance-based pay system derived human resource management policies comprising of a good performance management system, an appraisal management system and a disciplinary policy which is understood by the working people.

However, the way forward is for employers to adhere to the labour laws and set up a performance-based salary structure which will allure the benefits of increased productivity and actualisation of their organisational objectives while at the same time promoting a vibrant work environment where workers and unions have absolute trust in management devoid of perceptions of mistrust and favoritism.

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ADR Daily is a specialized news portal with a focus on providing authentic news, information and research analysis on Appropriate Dispute Resolution (ADR), Human Resource Management (HRM) and Industrial Relations Management (IRM) in Ghana and beyond. This platform serves as an information resource base for the progress of the ADR, HRM and IRM industries, and seeks to promote professionalism in ADR practice by supporting a network of ADR professionals within and across nations and continents. ADR Daily keenly encourages the mass adoption of ADR mechanisms, particularly negotiation, mediation and arbitration for the resolution of disputes in all spheres, through the publication of industry news and information, as well as by deploying innovative awareness creation engagements.