Maslow distinguishes between five groups of motivational factors. These needs are

integrated into a hierarchical structure whose lowest level represents physiological

needs, and whose highest level represents self-realization needs. The hierarchy is

explained through the hypothesis that the elementary needs are met first; the content of

the next highest level up only gains meaning when the needs of the previous level are

met to a certain extent.

For operational practice, the following should be adhered to: remuneration serves the

purpose of satisfying needs on the lowest level of the pyramid. If income secures a

particular lifestyle, the meaning of intrinsic motives come to the forefront. Intrinsic

motives are directly within the work operation itself (e.g., attractiveness of the work

task), while extrinsic motives are not as closely linked to the work operation (e.g.,

remuneration).

According to Maslow's hierarchy of needs human motivational development has to be

considered within the context of need satisfaction. This implies, for example, that the

first three stages of the hierarchy of needs have to be covered before an individual

can reach the stage of self-realization. The stage of self-realization can never be fully

met and therefore is subject to continuous development.

By the time lower level needs are satisfied on a regular and long-lasting basis, higher

needs become more acute. However, even when the needs of the lower levels are

not fully satisfied, the individuum already focusses on desired higher categories while

still having the lower level needs in mind.

Based on theories of motivation, there are a number of work motifs considerably

relevant to employees. Since these work motives are not always clearly assignable and

may vary in their significance, it is desirable to select effective incentives with employee

involvement (participative).

The motivation of employees requires to know the individual needs and goals related to

their activities. However, there is no panacea (patent) for the selection of many

motivators. Undeniably is the fact, that leadership and remuneration play an important

role to any employee.

Intrinsic motives (from the work itself, job content) are fundamentally not saturable.

They include motives such as power, self-realization, degree of autonomy or the activity

itself and depent on the interessed of the individual employee.

Extrinsic motives, however, are set from outside and do not arise spontaneously. They

function as positive reinforcements after a desired behavior has been carried out.

Intrinsic and extrinsic motives are not mutually exclusive, but they are not easily

cumulated either. According to corruption theory (Korrumpierungstheorie), extrinsic

motives eliminate intrinsic motives in the long-run and negate their effectiveness.

Work remuneration = Collective term for all earnings from work and employment

relationships. Does not include earnings from “self-employed work“ or freelance work

or “capital income“.

A basic principle of operational wage structure is the guarantee of a wage related to

output. The human output is dependent on “what” a worker must do and “how” he/she

works.

What an employee performs is prescribed with the work task and can be influenced

only to a little degree by him/her.

The different levels of demand for different tasks are honored by varying basic wages.

The level of performance, i.e., how an employee performs the work (fast, slow,

precisely or lax) is influenced by him/her and affects the payment.

Job demands-related component:

• Securing of social status

• A result of job evaluation (workplace related)

Performance-related component:

• Performance promotion

• A result of performance evaluation (for the individual worker/ person related)

Extra-pay:

• Incentive for economically successful work action

• Compensation for extreme working conditions

• By law, collective bargaining, regulated individually by contract

The demand-based wage differentiation is performed with help of job evaluation. The

demands made by the work system and the work situation on the person are evaluated.

The demand-based wage differentiation realizes the principles of remuneration – piece

rate, premium wage, time wage and salary with or without efficiency bonus.

Job specifications: individual requirement characteristics must be acquired in

connection with their specifications (level of demand).

The job ranking method is built on paired comparisons between different

workplaces (limited to small amount, relative comparison).

The assignment of wage groups according to the ranking of demand level of

the workplace follows. The evaluation is usually based on evaluations of

abilities/proficiencies, mental and physical load, responsibility and work

conditions; each job is evaluated as a whole.

This procedure is easy to understand and implement by small and medium

sized businesses since the number of jobs should not be too large.

Disadvantages:

• Extensive managerial and execution effort for a large amount of positions.

• Subjective estimation of ranks.

Since there is no standard evaluation, new jobs are compared to existing

ones in order to create an adequate ranking. The complete process must be

performed for all positions in the creation of a new position.

From the beginning, wage levels are set and described according to the

extent of the qualifications they require. With these wage levels workplaces

are then compared.

Not a relative comparison between workplaces, rather a comparison in the

predefined wage levels. The table on the slide represents the wage groups of

the German public service as well as some job examples.

Work evaluation is based on specific demands that require an operation from a working

person. The “Geneva Scheme”, developed from international experiences in the year

1950 at a conference for job evaluation in Geneva, assumes six types of demand.

Know-how and load are part of the two upper groups. Both of these upper groups are

related to mental and physical demands. Responsibility and environmental influences

are additional demands.

This REFA evaluation table excerpt relates to mental load and is to help in

understanding the REFA constructed examples and evaluation tables. The tasks

contained in this evaluation table come from examples that are thoroughly explained

in REFA‘s own requirements questionnaires.

The job evaluators in a business have the possibility, with the help of example and the

evaluation table created for each type of demand, to compare each of the workplaces

and, depending on demand type, categorize them in the evaluation table. Over time, a

company-owned evaluation table for each type of demand develops.

The ranking procedure is an analytical method with which each job can be

divided into a specific number of factors, such as responsibility, mental load,

abilities, etc.

In the first step, the job is described. In the second step, points are awarded

for each factor according to a predetermined scale. The third and final step

involves the weighting according to the importance of the factor.

Step 4: Based on the total work value, the job is assigned to a relevant wage

group.

Current work requirements have changed significantly in comparison to the

criteria of tariff-based job evaluation according to the Geneva Scheme of 1950.

While physical demands play an important role in job evaluation along with

environment influences, the proportion of intellectual work continues to increase

in a high-wage country such as Germany. In particular, the tertiarization of the

economy alters many occupations. As a result, criteria such as flexibility and

service mentality become more important in the profile of jobs and job demands.

The constantly changing business environment then also increases the

necessity of life-long learning. Against this background, additional procedures

for job evaluation beyond the Geneva Scheme must be called on during the

current job evaluation.

The example shown of the rank value procedure is based on the evaluation procedure

according to ERA (remuneration framework agreement) and shows the “proficiency”

criterion.

The example shown of the rank value procedure is based on the evaluation procedure

according to ERA (remuneration framework agreement) and shows the “action and

decision making room for maneuver” criterion.

For “traditional” wage forms of piece wage, premium wage and time wage

with efficiency bonus and bonus wage, the actual output and the amount of

the output-dependent wage is determined after the completion of a work

order or at the end of an accounting period.

For the “newer” wage forms the amount of remuneration and thus an

performance-based portion are pre-set for a future period. The over or under

shooting of these expected outputs does not affect the performance-based

remuneration retroactively, but in later periods.

Aside from dispositive activities, the time wage should also be used for activities with

which different performances are necessary, and which are performed irregularly.

Some examples are unskilled labor, transport, repair and warehouse work and office

work.

Time wage is the only possible type of remuneration even in cases in which, at certain

times, only a few operations are needed and in which longer wait times occur in

between (in which only readiness to perform exists) ; e.g. salespeople, telephone

operators, doormen, information clerks, etc.

The remuneration principle of time wage with performance bonus is used for

employees, foremen and even carriers, among others.

For piece wages, a wage amount is agreed upon for each performance unit. Wage

amount and output quantity are part of a functional relationship.

In Germany, it is mainly the proportional piece wage that is common. A progressive

relationship between performance (a quantitative, not qualitative evaluation) and wage

amount create particularly high incentives.

Basic Structure of Premium Wage

Proportional process:

• Changes in the premium admeasurement follow proportionally to the

increase or decrease in efficiency.

• Incentive effects are the same on all levels of efficiency.

• Simple application, high level of comprehensibility.

Progressive process:

• The greatest achievements are greatly rewarded.

• The motivation for the services rendered on the other levels is weakened

(particularly in the central region).

• May be used as incentive for a targeted high level of operational resource

use.

Regressive process:

• Differences in premiums are higher with low levels of efficiency than with

high levels.

• Motivation for the contribution of great performance is weakened.

• An overload of human and operational resources is counteracted.

Tiered process:

• Motivation effect can be specifically steered by the height and width of the

levels.

• Greater variances in efficiency can be avoided.

• Employees attempt to reach the next level in at least a straight manner.

Incentives for long-term business-like behavior are given through a suitable choice of

remuneration. In addition, the risk portion of managerial wages is increased, meaning

that the fixed component is increasingly suppressed due to variable wage

components.

The more responsibility management carries, the higher should be the variable

portion of selected wage.

The most frequent arrangement possibilities of variable managerial remuneration are

the bonus models, which place operational goals in the foreground.

Bonuses can be paid out for various foundations of measurement. In practice, the

following bonuses are most commonly be encountered:

Performance bonus: basis for the payment is the achievement of specified individual,

operative or strategic goals.

Results bonus: payment is based on the achievement of a specific result in terms of

profit, cash-flow or other financial key indicators and balance sheet ratios.

Solidarity bonus: payment is based on collective attainment of goals by an executive

group. The solidarity bonus usually applies to the total result of a period.

Rate of return bonus: payment is based on the achievement of a specific ROE, ROI or

cash-flow.

Strategy bonus: payment is based on the increase in market value of the business, the

achievement of innovations or other long-term goals.

With the program wage, a work program with a production deadline is

predetermined. The wage consists of a basic wage (e.g., 80% of the program

wage) and a premium for compliance with the program time and set quality

(e.g., 20% of the program wage).

A collective group task cannot lead to an equal grouping of all group members

because the group task consists of individual task components with varying demands

composed according to the Geneva Scheme.

Group performance should be the focus. However, differentiation between various

individual performances should be possible.

Wage agreements are negotiated between employer‘s associations and trade unions

on the external level; these contracts can be valid for an entire branch, or at least for

the relevant area as defined in the wage agreement, such as the members of a union.

A wage agreement is legal valid in companies and can only be deviated from for the

benefit of the employee – and never to the employee‘s disadvantage.

The determination of remuneration on the organizational level occurs between the

employer and the employer‘s association, as a lobby of the employees. The room for

maneuver or minimum wage of these negotiations is given by the valid wage

agreement. Special payments or a general wage level are determined by individual

works agreements.

According to the Entgeltrahmenabkommen all employees receive an average

premium of about 10% depending on the company they work for. Therefore, the table

shows the 110% values.