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Normally the salary-bonus system of labor remuneration should include the entire staff of an enterprise. But the way it is applied to staff members engaged in management activity should be different from the way it is applied to production perso
within this system production and support perso
management perso
A collective works in modern production. To control any collective activity means to distribute an individual personal responsibility for quality and timeliness of performing different fragments of the common work among staff members and making these fragments liable to an objective check according to «done — not done» index (in compliance with the standard).
In accordance with these specific features of modern production and its control which are of an objective nature what should be remunerated is a man’s ability to be responsible, to conscientiously perform actual assigned work and to come forward with initiatives while being responsible for the fragments of work assigned and for coordinating work on the whole. Additionally all the staff members of an enterprise should clearly see that the salary is paid for performing the functions of one’s post at a minimum standard and that bonuses are paid for conscientiously deviating from the minimum standard by exceeding it in the course of daily work in a collective with an atmosphere of comradeship and friendliness.
Modern production is of such a nature that controlling it requires to use the salary-bonus system of labor remuneration. But it can stimulate labor efficiently only if it is accompanied by a high standard of mutual trust and comradeship among subordinates and executives which exists in the collective and is proven by experience and if subordinates and executives are equally interested that they succeed in their common cause.
When this fact is understood the answer to the question on what the ratio of minimum and maximum income among an enterprise’s staff should be becomes clear. In every historic era, in every society there is an optimum «maximum income» / «minimum income» ratio within a collective which changes in the course of time. The «optimum» ratio of «maximum income» / «minimum income» involves a wage rates scale which encourages employees to improve their qualification and to acquire several professions. This should make the enterprise more efficient in production and ensure an increase in the «profit per employee» index.
If the ratio «available maximum» / «income actually received by staff» is small this means many employees regard making additional efforts for improving qualification and acquiring several professions as redundant troubles which do not improve their well-being and result in nothing but uselessly spent time and strength.
Besides, historic circumstances can lead to a lack of highly qualified professionals in certain trades (a lack compared to the demand). This allows people who have mastered these professions (which differ for every historic era) to demand exclusively high salaries for taking part in the society’s working unity. In the historic reality when labor resources are distributed among industries by means of free market regulation such opportunity is realized in exclusively high salaries of certain professional corporations. Their salaries sometimes exceed the amount, which provides for consumption in a morally healthy life-style (and paying for services which neutralize the damage to health caused by hazardous industry). In some cases the state’s social order supports the system of exclusively high salaries first of all in the management sphere and other «clean» activities. It is done through granting privileges in access to basic and professional education to certain social minorities and preventing the majority from getting such education.
This system is characterized by the majority’s ignorance which prevents production from improving its efficiency by denying any chance of developing new technologies and improving business organization. But besides that this macroeconomic factor curtails the options for encouraging conscientious labor in a collective (i.e. on the microeconomic level). Let us explain how this happens. The ratio of «income of highest-paid group of employees» / «minimum or average income» is large due to some groups of professionals being paid exclusively high salaries which results both from macroeconomic and non-economic factors. Also the income of the highest-paid part of the collective exceeds the level sufficient for an employee and his family to live a morally healthy life in the opinion of those whose income is about average (especially if average or below the average income is barely enough for satisfying the needs of a man and his family). Then the members of collective who have the highest income are regarded by the rest of staff as parasites who live on unearned income, i.e. from somebody else’s labor, reaping the fruits of work done by the rest of the collective.
This is just the same attitude that employees normally have towards capitalists (the owners of the enterprise) if they take no real part in the collective’s work. If they are merely parasites receiving their share of the enterprise’s income, and often a considerable one. And legislature of most countries permits it by tolerating private property of collectively used means of production and not obliging the proprietor to work by himself.
Therefore assigning levels of income among staff, i.e. arranging the wage rates scale, is a task having no single solution effective for any circumstances. Under normal macroeconomic conditions any salary should guarantee that a person’s needs can be provided for, including the ability to start a family life and use one’s income to take part in the family’s further development. This circumstance determines the minimum, which it is practically necessary to pay.
The issue of maximum remuneration is a more complicated one as on the one hand the chance to reach a higher level on the wage rates scale must be an incentive to work in the collective efficiently, and on the other hand the income of highest-paid staff members (as well as the owners of the enterprise) should not be regarded as unearned income by the collective.
In other words the optimum ratio of high-paid and lower-paid workers’ income at any enterprise is determined by the level of technology and organization that it has reached, its future progress, equivalent indices of competitors, as well as by moral and ethic qualities of the collective and the society on the whole.
The role of an efficient incentive, which the salary-bonus system of labor remuneration plays, can be undermined or even totally invalidated by the three following circumstances. First, exclusively high salaries and bonuses. They are regarded by the collective as parasitism on the labor of others, which a certain “elite” of the enterprise indulges in. Second, when payment of bonuses does not result from conscientious labor actually making them a guaranteed part of income. Third, paying bonuses for labor achievement of some people to other people, chiefly to their superiors and their hangers-on.