Question

Examine how laws, labor unions, and market factors impact companies' compensation strategies and practices.

Answer 1

The compensation or rewards given to the employees take the lionshare of the expenditure of most of the business enterprises. While setting compensation strategy, a business organization has to consider internal and external factors. The law of land, influence of labor unions and the market factors are some of the external factors which are to be considered while setting up the compensation strategy.

Laws, labor union, and market factors can impact the compensation strategy of a business in the following was:

Most countries have their own labor laws which prescribe the minimum wages, benefits, perks, retirement pension etc. A business organisation should have to strictly adhere to these rules. This may cause the company to pay compensation more than the amount they are willing to pay.

Many countries allow labor unions to function. Labor unions are formal organizations of employees of a business organization. Labor unions are powerful organisations which can even interfere in the day to day functioning of the company. The unions, time to time, demand for the hike in salary and compensation. If the company refuses to their demand, they demonstrate protests or strikes which would combell the company to accept the demands.  

Market factors are the external agent that affects the demand for or the price of goods or services. While the product of a company has got high demand, it would look to recruit more employees as soon as possible in order to produce more. So the company would give less importance to salary negotiations with candidates. They would be looking for skilled laborers. If the company has a good reputation in the market, the candidates will be expecting a good salary. This will also lead to an increase in salary.