Case Study- Seat of the pants
Gaurav cleaning centers doesn't have a formal wage structure nor does it have rate ranges or use compensable factors. Wage rates are based mostly on those prevailing in the surrounding community and tempered with an attempt on the part of Gaurav to maintain some semblance of equity between what workers with different responsibilities in the stores are paid.
Needless to say, Gaurav doesn't make any formal surveys when determining what his company should pay. He peruses the want ads almost everyday and conducts informal surveys among his friends in the local chapter of the laundry and cleaners trade association. While Gaurav has taken a "seat-of-the-pants" approach to paying the employees, his salary schedule has been guided by several basic pay policies while many of his colleagues adhere to a policy of paying absolutely minimum rates, Gaurav has always followed a policy of paying his employees about 10%above what he feels are the prevailing rates, a policy that he believes reduces turnover while fostering employee loyalty. Of somewhat more concern to Pragati is her father's informal policy of paying men about 20% more than women for the same job. Her father's explanation is," they are stronger and can work harder for longer hours and besides they all have families to support."
Questions
1. Is the company at the point where it should be setting up a formal salary structure based on a complete job evaluation? Why?
2. Gaurav policy of paying 10%more than the prevailing rates a sound one and how could that be determined?