Six Dangerous Myth About Pay

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Six Dangerous Myth About pay

Introduction: The assisnment is on the “Six Dangerous Myth About Pay” article by Jefferey Pfeffer. He has described six myths about pay that managers believe to be true. The myths and reality given are results of author’s research. But do we agree to the myths or reality written or we have any other opinions. My opinions about the myths are described below.

Myth No.01: Labour Rates and Labour Costs are the same thing:

Labor rates and labor cost are considered to be the same but there is a differentiation. Labor rate is actually the wages worker get for working. We can say total salary divided by time worked is labor rate. Job categories lead to different labor rates because of classification of jobs like executive to hourly paid employees. On the other hand labor cost is calculated through productivity. Suppose in Shajalal manufacturing plant pays Tk10/hour to 100 employees for producing (#) of units of readymade garments 50 hours. So there labor rate is [(100*100*50)/50 hours] Tk 1000 per hour and labor cost is Tk 50,000. On the other hand Madina manufacturing plant pays Tk15/hour to 100 employees for producing (#) of units of same readymade garments 30 hours. So there labor rate is [(15*100*30)/50 hours] Tk 1500 per hour and their labor cost is Tk.45,000. Although labor rate of Madina is Tk. 1,500/hour is higher than Shajalal but still Labor cost at Madina is lower than Shajalal.

Myth #2: You can lower your labor cost by cutting labor rate

In today’s globalization market where competition is everywhere I could not agree with this myth. Organization’s always make sure while hiring employee that they hire the best possible. The reason is that a skilled, experienced labor/s rate may be high but their productivity is higher than unskilled or inexperience labor. By doing so, they make sure their productivity is higher than average and as a result stay competitive in the market. For example if a software company wants to...
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