8. LABOUR AND WAGES
LABOUR
• is one of the factors of production
• is a human activity carried out to earn money
• are all manual and intellectual activities in
production
• is a specific kind of good
• can be sold and bought on the labour market
• is where the demand for labour meets supply
• Households offer labour
– a labourer sells their labour as a factor of production and asks wages
for it
• A firm can offer wages
– labour demand
• is a nationwide set of directions which governs the
relations between employers and employees
• Some parts:
– Employment start, duration and end
– Working hours, working overtime
– Wages and sick pay
– Working conditions
– Job disputes
• is a work reward which depends on the
contribution to an organisation
• has different forms:
– Wages – payment by result, work-measured scheme
– Salaries – time pay, depends on working time, usually agreed as
a fixed monthly remuneration (officers, doctors, teachers)
– Bonuses – remuneration for extra work, good results, higher
profit share
consists of:
• Basic rate scheme – job-based, grade structure
• Incentive scheme
– Bonuses
– Commissions on sales
– Profit share
• Additional payments
– Non-contributory pension scheme
– Benefits such as cars, life insurance, refunds
GROSS AND NET PAY
• Gross pay is made up of
– Basic pay
– Incentive money
– Additional payments
• Net pay = gross pay with deductions
– Health insurance
– Income tax
– Payments into state pension scheme
EMPLOYEES AND ENTREPRENEUERS
• Employees are paid within the system mentioned
above
• Entrepreneurs’ pay
– Depends on their economic results
– Health and social insurance is deducted
– Basic payments are strictly done regardless of
income
REAL AND NOMINAL PAY
• Real pay is monetary income in relation to inflation
and price changes
• Nominal pay represents monetary income regardless
of inflation and price changes, it is the amount of
money people receive as a salary or business profit
CONTRACT OF EMPLOYMENT
• is a written statement of employment
• can be changed upon agreement between both
parties
• Compulsory parts:
– Job title
– Place of work
– Rate of pay or reference to other document such as Collective
Agreement
– Probationary period
– Fixed-term or open-ended contract
– Working hours