The wage rate definition is the rate of compensation for a worker. It is one of the central themes of the study of human resources. It is determined by 2 factors: productivity at work or number of production hours.
This study is known as wage rate economics. It is an important factor to economics because the wages of the average worker form an important factor in both microeconomics and macroeconomics. That is, it effects both buyer behavior and governmental policy.
Wage rate, explained as the compensation plan for any employee or set of employees, establishes the cost as well as income of human resources. Explained simply, wage rates are based on the amount produced or the number of hours worked. Sales staff, for example, are given a commission based on the number of sales they make. Conversely, hourly employees are paid a certain amount for each hour they spend at work.
Additional compensation methods exist for employees. Health benefits, medical benefits, bonus’, promotions, and even cafeteria plans amount with the above wages to result in the total wage rate for staff. Fringe benefits, like a company car or free products, are not technically considered part of the wage rate which a worker takes.
Many nations require a minimum amount of income per worker. For wage rate, us government calls this the “minimum wage”. the law requires businesses to pay employees at least this much money in order to continue operations.
Let’s look at the following wage rate example. Hank is a worker at a major oil company. Hank, a father of 5, works to support his family. He must make a certain amount of income every day to make sure that he can provide for the necessities which his family needs.
Derek, on the other hand, works for the same oil company. As a young and successful man, Derek is looking to optimize his benefit. Derek is looking for a compensation plan that grows with his productivity. As a result, Derek is willing to risk something if the gain for success is higher.
Both men are sales staff of the same oil company. Luckily, the company has a “choose-your-own” wage rate determination. They can offer this because of the years of study of their employees and work habits. While one is paid an hourly wage, the other is paid mostly through commissions. This allows each to have the work environment that they want. It proves to be a successful plan: both men achieve the same level of productivity. If meeting with a manager, both men will say that they enjoy their work. It is because of the flexible wage rate decision that each can create the plan that best suits their lifestyle.
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