The Impact of Good Wages Policy on Employees’ Performance in an Educational Organization


Salaries and wages are major strategies organizations, such as schools implore to attract qualified employees. It is one of the largest operating costs for large organizations. The long-term success of an educational organization depends on the capacity of the school administrator in managing the staff to reach educational goals.

Wages and salaries, no doubt, represent a substantial part of the total costs of running an educational organization.

The employee’s position on wages and salaries structure is generally different in important respects from that of the educational organization as it is one of the key compensation problems in many organizations. Even when the pay programme is sound, well administered, and effectively communicated, difficulties can arise if employee aspirations are out of phase with company objectives or if the employee’s concept of a fair and equitable programme is different from that of the company.

To some extent, there are always some conflicts between employees aspiration and company need. For instance, employees always want more; but employers need to control wages costs or at least administer the pay programme within the restraints of their financial capacity. These criteria of course are not totally at odds.

As cost of living rises and as pay levels in the labour market increase in an inflationary economic the company must increase its employee’s pay in order to attract and retain the number of people necessary to run the business. The conflict of view is one of degree; .an employee aspiration typically exceeds company needs for granting increases (Obikoya, 1996).

An employee’s definition of “fair” wages and salaries will depend upon their perception of their role and relative importance within the organization compared to other people for most people, the pay cheque or salary cheque represents their main source of income and is required to maintain a certain standard of living. Inflation and using expectations mean that employees will constantly seek to increase the amount they are paid. Also, most people see their payment arrangements as part of the reorganization of their contribution towards the success of the organization. This, trade union might argue that employees have a ‘right’ to a share of the wealth of the organization that they have helped to create in order to boast their profits.

The objectives of a compensation plan is to motivate employees to function at higher level of performance and to attract and keep employees in the company. If the plan is to accomplish these objectives, employee must perceive it as equitable. Thus, the inability of non-equitable or employee been under paid has a negative impact on the performance of employees. Employees compare their rewards with others who perform essentially the same kind of task, either in the company or in competitor forms. The primary basis of comparison is money (wages or salary).

Equity is evaluated in terms of the effort put into a task and the rewards received for that efforts if the rewards are perceived as equitable, employees will likely stay and be productive. However, if they perceive their rewards are not favourable the employees will not be effective and efficiency in their output.

Hence, an employee who feels underpaid feels undervalued and is likely to react by withdrawing, or looking for another job. Absenteeism, carelessness and similar difficulties ma result. Therefore, there is need for a study of this nature, since pay being about motivation in order for organizations to make optimum use of their human resources to achieve their desire goals and objectives. []

 The difficult economic situation in transition and welfare states in the 1990-s has brought up the role of the state managing socio-economic policy, including educational policy. The need to reform the system of Estonian higher education and decide the division of state funded university places has arisen. The aspects of economic efficiency as well as social justice must be taken into consideration when determining the role of the state in the field of education. State funded university places are instruments of regional policy.

Taking into consideration the concentration of employment to Tallinn and due to that particular concentration of purchase power of education also to Tallinn, the majority of state funded places should be directed outside the capital. The basic idea of public sector management in welfare economies is to implement market mechanisms in producing product for the public sector (public goods) and in formalising the corresponding tasks in state structures.

Restoring market mechanisms for public goods with existing competition has brought about a quick development, presuming at the same time application of effective regulation mechanisms to neutralise accompanying negative influences of market forces (Sepp, 1999: 286).

Effective mechanisms must be developed in order to regulate the market of higher education. This should be considered in the context of integration into European Union and keeping in mind the national interests. The policy of higher education in the public sector is being developed and that has brought about the need to systematize the education given by private and public higher educational institutions.

This way, an attempt is made to improve the organisation and division of work in the public sector and also in the provision of higher education. The above-mentioned 8 Wage Policy and Performance Management in Estonian issue has become one of the most important and extensive topics of discussion in recent years.

The aim of the present article is to discuss wage policy in Estonian higher educational establishments, based on current theories of performance management and work compensation. Due to intensification of competition in European markets, jobs have become unstable and the employees’ work guarantees have diminished.

In several countries, inc luding Germany and Sweden which are well known for their strong social policy, the question of liberalisation of making employees redundant and granting bigger rights to employers dealing with employment questions has become (Martin, 1996: 11-13). European employment policy is no longer able to keep up with the fast economic development, intensification of competition, economic difficulties and increasing unemployment.

At least 10% of all jobs in the European Union change totally during one year, demanding more universal skills and better retraining from employees. Therefore, the new employment system is gradually being developed. Implementation of a new system places major obligations on the state. State officials have to create better schooling and retraining conditions for employees that could and must be used actively.

The state has to improve the policy of higher education in order to meet the needs of a new century and integration to Europe. The paper consists of five sections. The first section discusses employment and compensation policy in Estonia. Additionally it provides several examples of compensation policy in the USA, Canada and Europe. In the second and third section of the paper, a theoretical approach of performance management and compensation in universities and colleges is presented. The two remaining sections of the paper present the main empirical results of the research.

The fourth section is a survey of salaries of academic staff in Estonian higher educational institutions, and the fifth section provides the system and results of performance appraisal and compensation in the university of Tartu. The Kulno Türk 9 latter section offers ideas for those seeking to improve teaching, research and publications performance in universities. []

From an economic perspective, wages not only reflect the value placed on individual work but also impact consumer spending patterns, which drive economic growth.

When workers receive higher wages, they tend to accumulate more disposable income, which leads to increased spending on goods and services. Wages have a big impact on how productive workers are. When employees feel like they’re being paid fairly, they tend to be more motivated and have better morale.

Wages are intertwined with social factors such as inequality – low-wage workers may struggle financially while high-wage earners enjoy greater financial stability. This disparity can impact societal well-being through its effects on crime rates, health outcomes, and overall social cohesion. []


Wage refers to an employer’s payment to an employee in exchange for their labor. It is typically calculated based on the number of hours worked or the completion of a specific task.

For example, someone working at a grocery store might earn an hourly wage for each hour they work. This compensation can also be referred to as salary, particularly when it’s paid regularly, regardless of the number of hours worked.

Significance of Wage

The significance of wages cannot be overstated. It plays an essential role in both individual livelihoods and the broader economy. For individuals, wages are essential for meeting basic needs such as food, shelter, and clothing. They also contribute significantly to one’s quality of life by allowing access to education, healthcare, and leisure activities.

The term wage policy refers to legislation or government action undertaken to regulate the level or structure of wage, or both, for the purpose of achieving specific objectives of social and economic policy. It involves all systematic efforts of the government in relation to a national wage and salary system, legislations, and so on to regulate the levels or structures of wages and salaries with a view to achieving economic and social objectives of the government.

The first step towards the evolution of wage policy was the enactment of the payment of Wages Act, 1936. The main objective of the Act is to prohibit any delay or withholding of wages legitimately due to the employees. The next step was the passing of the Industrial Disputes Act, 1947, authorizing all the State governments to set up industrial tribunals that would look into disputes relating to remuneration.

Another notable development that led to the evolution of wage policy was the enactment of the Minimum Wages Act, 1948. The purpose of the Act is the fixation of minimum rates of wages to workers in sweated industries such as woolen, carpet making, flour mills, tobacco manufacturing, oil mills, plantations, quarrying, mica, agriculture, and the like.

The Act was amended several times to make it applicable to more and more Industries. Then the Equal Remuneration Act, 1976, which prohibits discrimination in matters relating to remuneration on the basis of religion, region or sex was enacted. The Constitution of India committed the government to evolve a wage policy. Successive five-year plans have also devoted necessary attention to the need for a wage policy.

Following the recommendations of the First and Second Plans, the Government of India constituted wage boards for important industries in the country. A wage board is a tripartite body comprising representations from the government, owners, and employees. Technically speaking, a wage board can only make recommendations, and wage policies are normally implemented through persuasion. []

Generally, the wage rate is determined by the applicable collective agreement or the agreement between the worker and the employer. There is no preset criterion to determine the minimum wage.

What is the minimum wage policy in Nigeria?

The current minimum wage in Nigeria is NGN65,000.00 per month in 2023. It became valid on September 1, 2023. The amounts are in Nigerian Naira. [www.wageindicator .org]

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