The following factors influence the determination of the wage rate:

1. Ability to Pay:

The ability of an industry to pay will influence the wage rate to be paid, if the concern is running into losses, then it may not be able to pay higher wage rates. A profitable enterprise may pay more to attract good workers. During the period of prosperity, workers are paid higher wages because management wants to share the profits with labor.

2. Demand and Supply:

The labor market conditions or demand and supply forces to operate at the national and local levels and determine the wage rates. When the demand for a particular type of skilled labor is more and the supply is less then the wages will be more. On the other hand, if supply is more demand, on the other hand, is less then persons will be available at lower wage rates also.

According to Mescon,” the supply and demand compensation criterion is very closely related to the prevailing pay comparable wage and ongoing wage concepts since, in essence to all these remuneration standards are determined by immediate market forces and factors.

3. Prevailing Market Rates:

No enterprise can ignore prevailing wage rates. The wage rates paid in the industry or other concerns at the same place will form a base for fixing wage rates. If a unit or concern pays low rates then workers leave their jobs whenever they get a job somewhere else. It will not be possible to retain good workers for long periods.

4. Cost of Living:

In many industries, wages are linked to enterprise cost of living which ensures fair wages to workers. The wage rates are directly influenced by the cost of living of a place. The workers will accept a wage which may ensure them a minimum standard of living.

Wages will also be adjusted according to price index number. The increase in price index will erode the purchasing power of workers and they will demand higher wages. When the prices are stable, then frequent wage increases may not be required

5. Bargaining of Trade Unions:

The wage rates are also influenced by the bargaining power of trade unions. The stronger the trade union, the higher will be the wage rates. The strength of a trade union is judged by its membership, financial position, and type of leadership.

6. Productivity:

Productivity is the contribution of the workers to increase output. It also measures the contribution of other factors of production like machines, materials, and management. Wage increase is sometimes associated with an increase in productivity. Workers may also be offered additional bonuses, etc., if productivity increases beyond a certain level. It is common practice to issue productivity bonuses in industrial units.

7. Government Regulations:

To improve the working conditions of workers, the government may pass legislation to fix the minimum wages of workers. This may ensure them, a minimum level of living. In underdeveloped countries bargaining power of labour is weak and employers try to exploit workers by paying them low wages. In India, the Minimum Wages Act, of 1948 was passed to empower the government to fix the minimum wages of workers. Similarly, many other important legislation passed by the government help to improve the wage structure.

8. Cost of Training:

In determining, the wages of the workers, in different occupations, allowances must be made for all the exercises incurred on training and time devoted for it.

Systems of payments

1. Paycheck

You might consider paying your employees by either writing or printing payroll checks. With paychecks, employees do not need to have bank accounts. Employees can use a check cashing service (for a fee) to receive their wages.

Some employees prefer to receive their wages via pay checks because they like having an actual check delivered to them. However, pay checks could get lost or stolen.

Time and cost of this payment option

With a written pay check, you need to handwrite a pay check for each employee. Writing out the checks each pay period takes time. For handwritten checks, you will need to purchase blank checks.

If you decide to print your employees’ paychecks, you can save considerable time from writing them all out. However, you will pay more in supplies to print the paychecks. For printing paychecks, you need check stock, ink, and a printer. You might even need a special MICR printer with magnetic ink to read, process, and print bank account and routing numbers on the checks.

2. Direct deposit

Direct deposit is the most common payment method used. Eighty-two percent of U.S. workers receive their wages via direct deposit. One of the biggest benefits of direct deposit is the convenience it offers for both you and your employees.

With direct deposit, you receive your employees’ banking information when you hire them and deposit their wages each pay period. Your employees do not need to be physically present at your business to receive payment each period. For example, if an employee is on vacation, they will still receive their wages on time.

3. Time and cost of this payment option

With direct deposit, you do not need to worry about filling out and distributing checks each period. If you have online payroll software, direct deposit might be incorporated at no added cost. Simply review your payroll before submitting it to be deposited in your employees’ bank accounts.

If you do not have payroll software, you will be responsible for paying direct deposit fees. You might need to pay set-up fees, monthly fees, and a small fee per pay period for each direct deposit. Set-up fees could range from $50-$150, and transaction fees might be $1.50 per transaction.