The policy of incomes and payment for labor

     This means the transitions from extensive to intensive farming methods. This increase of production efficiency, increasing the profits are achieved not by increasing the volume of production with the involvement of additional resources and the effective use of all available resources and reduce overall production costs. Financial stimulation in the modern conditions used mostly in combination with organizational and technical measures.

     According to the Law of Ukraine “About the payment for labor” wage – is the remuneration which is calculated, usually in monetary terms, which by labor contract owner or his authorized agency pays the employee for the his work. Wage rate depends on the difficulty and conditions of work, vocational and business skills of employee, the results of his work and business enterprise.

     As an important socio-economic category wage in a market economy have to perform the following functions:

• reproductive - playing as a source of labor and a means to attract people to work;
• stimulating - establish the level of wage depends on the number, quality and results of labor;
• regulatory - as a means of distribution and redistribution of personnel to regions, sectors of the economy with taking into consideration market conjuncture;
• Social – providing the social justice, the same remuneration for equal work.

     However, in modern market conditions in Ukraine wage can not perform these functions. It provides a level of no more than 21% of reproduction of the labor force that does not even cover the direct costs of labor and not provide the interest in reorientation of labor on the priority areas of activity.

     The share of wage in the gross domestic product is insignificant (41%). The structure of the cost of production wage in 2001 was approximately 11%, in industry - 9%.

     Today wage performs other functions, namely:

• saving of employment, preventing unemployment by the cost of underestimation of wages;
• provision of social guarantees;
• preserve the previous status, associated with previous jobs;
• retrain of inflation (through the delay of payment of wages);
• re-distribution in sectors of the economy;
• expansion of illegal activity and secondary employment;
• Enhance of labor mobility.

     There are nominal and real wages. Nominal wage (money) - is the amount of money that workers receive for the performance of the work according to the quantity and quality spent labor, results of labor. Due to the fact that the things of consumption coming to workers through the exchange of wage on goods, wage has monetary form.

     In market conditions at any times and in different areas of the country the prices of different products are different, so the same wage, you can buy a variety of goods. More precise characteristic of the income of workers is real wage. It reflects the totality of material and cultural goods and services that may be purchased at nominal worker's wage. Size of real wage depends on the size of the nominal wage and price level for consumption and services. This dependence can be expressed in formula:

                                   I_RW = I_NW/ I_P       (2.1)

     Where I_RW – index of real wage

     I_NW – index of nominal wage

     I_P – price index

     If prices rise faster than nominal wages, the real wage decreases. Increasing the real wage and providing stable rates of growth, and therefore increasing the purchasing power of population can be achieved only by two ways:

• significant increase of nominal wages;
• Curb rising of prices for consumer goods and services, introduction of effective indexation of wages to maintain its purchasing power and income and savings by citizens.

     According to its structure wage is heterogeneous, each item is characteristic of its function of material incentives and has economic independence for a necessary interconnection and all its parts.

     Wages of workers consists of primary (constant) and additional (variable), as well as incentive payments.

     According to the Law of Ukraine «On wages» basic salary - a reward for their work in accordance with established labor standards (standards-time production and maintenance duties). It’s set a tariff rate (salary) and travel fees for workers and salaries for professionals and employees. Additional wages - a compensation for work over established norms for the labor and ingenuity and success for special working conditions. It includes bonuses, allowances, guarantees and compensation payments under the law; premium associated with the execution of production tasks and functions. [9]

     Other rewards and compensation payments - a reward for the work for the year awards for the special systems and regulations, compensation and other monetary and material benefits, that are not provided by current legislation or implemented over these established norms.  
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

     2.2 Minimum wage

     Special place in the system of payment the minimum wage, which is a legally established wage for simple, unskilled labor, below which it can not pay for the employee monthly, hour rule of labor (the work). Minimum wage also include bonuses, allowances, premiums. To the additional payment it’s not included: payment for work in over time period, in difficult or hazardous conditions, with special geographical and geological conditions and increased risk of health conditions, etc.. These funds must be paid over the minimum. Minimum wage is a state social security, mandatory in all areas for enterprises of all forms of ownership and management.

     Size of minimum wage usually determined on the basis of the living minimum which is calculated for the standards that satisfied the minimum needs for goods and services, including price, and should meet it. If it’s no such correspondence, it indicates a gap of economic development or the imperfection of the existing distribution system, since the minimum wage - one of the constituent states of minimum guarantees.

     Correspondence of the minimum wage to the consumer minimum is possible only under stable economic situation and a certain high level of production. In conditions of crisis economy minimum wages and other social payments are determined based on actual economic conditions.

     As economic stabilization of the minimum wage should be close to the level of living minimum.

     Minimum wage is the basis for determining tariffs in the state of wages, pensions, scholarships, assistance and other social benefits.

     It’s important the establishing of hour minimum wage - a guaranteed minimum compensation, calculated in monetary terms, which the owner or the authority pays to the employee for the hours of normal. Given that the monthly minimum wage can not be less than the amount set by legislation, hour minimum wage is not a derivative monthly salary. 

3. State regulation of wages

     In a market economy the development of wages is further differentiation and individualization in the full allowance as a result of individual work and personal business skills, including skills, responsibility, creative initiative, quality work, perfect solutions. Market wages, especially for those whose demand for labor decreases, and for workers with low-impact activities should flatten State interference in social processes. However, as the experience of foreign countries, this intervention should be indirect, socially-oriented nature.

     According to the Law of Ukraine «On wages» State regulation provides salaries of employees of all forms of ownership and management through the setting of minimum wages, other state rules and safeguards, conditions and sizes of wages among the institutions and organizations financed from the budget, government enterprises, and through taxation of income of workers.

     The State also should provide scientific and methodological justification wage rate conditions, development of norms of labor costs for mass manufacturing processes, research and study of foreign and domestic experience in matters of wages, etc. State regulation of wages is primarily in determining and revising the minimum wages and conditions that affect its value.

     The minimum wage is determined by the:

• cost value of the minimum consumer budget with the gradual rapprochement of these indicators in the measure of the stabilization and development of the country's economy;
• overall level of average wage;
• productivity of the labor, employment and other economic conditions.

     State regulation of wages aims to determine the lowest level of wages, «start»  positions of the participants of collective negotiations below of which level agreements are not possible.

     The minimum wage is set by the Verkhovna Rada of Ukraine by the Cabinet of Ministers presentation, usually once a year during the approval of the State Budget of Ukraine in the light of proposals made during negotiations, representatives of trade unions, owners or their authorized bodies that merged to collective for bargaining and conclusion of the agreement. The minimum wage is revised depending on the growth indices of prices for consumer goods and tariffs for services by agreement of the parties of collective negotiations.

     Installed by the state minimum wage is a state guarantee for all categories of employees and not liable to reduction at the level of industry and enterprise.

     State defines the norms and guarantees in payment for labor of workers under 18 years reduced the duration of their daily work, etc., guarantees for workers to pay annual holidays; at the time of the government responsibilities; for those who are sent for training, at a medical examination in institutions; transferred because of health to the easier, more law payment work; transferred temporarily to another job due to industrial necessity; for pregnant women and women with children under three years, transferred to easier work during training of different forms, re-training or other specialties, for donors and so on. Guarantees and compensation of employees in the event of a job relocation to another area, business trips, work in the field, etc.. These standards and guarantees are a minimum state guarantee. 
 
 
 
 
 
 
 
 
 
 
 

3. Tariff system and its purpose
1. Tariff rate of employee

     Tariff regulation of wages as a component of salaries is realized through the tariff system. It is a combination of fixed payments for the work within the norms of labor (labor duties), as well as norms of pay for working over than norm of work.

     Tariff system is used for differentiation of wage of workers regardless of their qualifications, responsibilities, working conditions (ie, its harmfulness, complexity, intensity, appeal, etc.), the number and results. With the tariff system established correlation between low and high paid categories of workers.

     Tariff system reflects the division of workers in professions, specialties and qualifications.

     Profession characterizes labor activity and employment of the worker accordingly to receive training, the acquired theoretical knowledge and practical skills (eg, turner, mechanic, and miner).

     Specialty shows interior professional division of labor. This term more close is compared with the notion of «profession». Therefore, specialty requires deep knowledge and provides practical skills to particular range work.

     Qualification - a set of production knowledge, skills, some practical skills. It expresses the degree of employee training to perform professional functions resulting complexity. Since it is the number of relevant qualifications or specialty, and the ratio of wages of different categories of workers.

     Tariff system is the basis for establishing the correct ratio between the growth of labor productivity and average wage of workers.

     Due to the fact that the norms of the cost of labor are established by standardization tariff system is the link between standardization and system of wage.

     Organization of payment of labor according to internal tariff system can be realized:

• on the base of dividing a service of payment for workers on the one hand, and managers, professionals, employees, on the other;
• on the base of a common approach to charging for all employees tariff grid.

     3.2. Tariff rates of employee

     An important element of the tariff system is the tariff rate. Tariff rate determines the amount of earnings per hour, day or month of work. An important problem is the establishment of the size of tariff rates, which would guarantee the continued restoration and maintenance of physical strength and mental abilities of people, and ensuring constant renewal and improvement of labor skills, increase educational and professional level of employees. Tariff part of wages have to perform the function of motivating and challenging, because of it stimulates work of greater complexity, responsibility, intensity. Therefore, the share of the tariff should be the maximum.

     As experience shows, the tariff, which is a permanent part of salary, should be equal to 80% of earnings. If the variable part of wages (bonuses, various supplements) is half, and even more of total wages, it indicates the loss of a major simulative role of tariff in promoting of the implementation  more qualitative work, improving skills.

     Rate of the1-st level - a minimum wage of worker, as defined in the collective agreement, ie it reflects the legislatively set wage for a simple, unskilled labor, below which no payment can be made for the employee monthly, hour rule of labor (the work) .

     The establishing of tariff rate of 1-st level depends on the economic situation of the company, its financial capacity for the period of the collective agreement, the average wage prevailing in the company at the end of this year, state, industry and regional guarantees of minimum wages.

     Tariff rates of the next categories calculated by multiplying the tariff rates of 1-st level on the appropriate tariff rate:

     Tn = T1 • Kn,                        (3.1)

     where T1 - tariff rate of 1 level;

     Kn - tariff coefficient of given category

       Tariff rates on enterprises are differentiated by the complexity of labor, skilled of workers. Workers with higher category have the higher tariff rate. Tariff rates of workers can be hour, daily and monthly (salary). Hourly rates used in most industries (engineering, wood, light, food, etc..), Where the task to the worker sets a in the form of norms on per time of one product or operation. Based on the hourly rate payments it’s realized the additional payments to workers for labor at night, bonuses for extra norm  works and others. Therefore, in all industries, and those which set daily and monthly rates, you should calculate hourly rates also.

     Daily rates are established in those spheres where it’s calculated variable standards of production (coal, metallurgical, oil, etc.).

     Monthly rates are used for certain categories of support workers (storekeeper, lifters, electric drivers, distributors of instruments), and also workers who are occupied by exploitation of electric power plants.

     Average wage rate of workers (work) is defined as the average ariffmetic value from the tariff rates, weighted by the number of workers (labor), which have the same tariff rates:

     ,        (3.2)

     where - the general quantity of workers

       - the general sum of of tariff rates for all workers

• - the general labor capacity of work, norm-hours.

     Knowing the average tariff rate or the average tariff level, you can determine the average tariff rate:

    Тс = Т1 • Кс,         (3.3)

    Where T1 – tariff rate of 1-st level for given group of workers

    Кс  - the average tariff coefficient of given group of workers.

    Тс = Тм + (Тб – Тм) • (Рс – Рм),      (3.4)

    Where Тб, Тм – tariff rates, that are correspond to the grater and smaller from two adjacent categories of tariff network, between which there is the known average grade;

    Рс  – average tariff grade of workers;

    Рм  – the lee among two adjacent grades of tariff grid between which there is the known average tariff grade.

     Payment for labor to executives, professionals and technical staff is realized through salaries, the base of which is the minimum tariff rate.

     For establishing the base salary at the enterprises  widely use correlation coefficients of monthly salaries of managers and professionals, specialists to the minimum wage. Given the individual characteristics of employees and financial capacity of enterprise coefficients have the minimum and maximum limits for each position. It is necessary to observe the correct ratio of wages between skilled workers and specialists. Salaries of masters must be greater than salaries of workers with the highest skills employed on the site master.

     Minimum salaries for positions are established to employees who begin work in one or another area, are doing relatively narrow range of tasks within the regulated common tasks under the direct leadership of the head, and employees who meet the position that they hold, but they need to improve performance. The maximum salaries are established to employees who possess the necessary qualification for the given position, have the necessary experience, are independent of the operation within this feature, initiative and creative attitude to work.