On Pay Differentials

This is the month of April. Many employees will eagerly await their compensation revision. The pleasure and pain both come because of one simple act: Pay differential. High performers are paid more, others relatively less.

In the organisations this may be a big emotive issue, the difference in increment is not very substantial. It pales before what I am going to write about.

Take a medium size organisation. Here is what typically people get paid.

Contract worker Rs 6500 pm

Permanent worker Rs. 30,000 pm

Management Trainee Rs. 1,25,000 pm

Managing Director Rs. 50,00,000 pm.

So the MD draws 167 times a permanent workers salary. He draws 40 times the salary of a management trainee. And he draws a whopping 769 times the salary of a contract worker who is paid the minimum wage.

We may wonder what should be the right multiple. Is there any norm? I did some study and here is the result. The table tells us what according to various people was the right differential. This reflects the ratio between the salary of the lowest paid worker and the highest paid executive.

Please think what the appropriate multiple should be. Do leave a comment.

Pay Differential standard suggested by
Pay Differential
Remarks
George Orwell
10

John Pierpoint Morgan
20

Peter Drucker
20

Switzerland Proposal
12
The proposal was rejected
Sixth Pay Commission
11
Based on hearsay, Needs confirmation
Bhoothalingam Committee
16

Plato
4

David R Francis about major US Corporations
379 in 2007 ACTUAL
His article in Christian Science Monitor
David R Francis about major US Corporations
42 in 1980 ACTUAL
His article in Christian Science Monitor

Vivek








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