Standardizing pay for skills is good for the economy

Standardizing pay for skills is good for the economy

By Edwin Musonye

A neglected truism in some countries is that business is all about standards, and that good business is all about good standards. Whereas there are many unstandardized matters, let’s focus on the need to put value on skills. 

This has nothing to do with what the Salary and Remuneration Commission (SRC) does. National Pay Standardization here means creating pay brackets for all workforce regardless of whether they work in the public or the private sector. 

Divergent voices claim that we are in a free market and the forces of demand and supply must remain the only determinants for remuneration discovery. But nothing can be far from the truth, for an economy to develop faster and sustainably, standardization of all factors of production is crucial.

Observing countries that have normalized pay scales, and they are notably more prosperous than those that have not, two realities stand out. The first is that overall disparities are not too wide. This means in organizations (and in extension the entire economy) the highest earning personnel are not exaggeratedly rewarded than the lowest paid. 

The second is that there is a universal pyramid that ranks which professions deserve higher pay based on their contribution to offering the ‘most essential’ services to the society. However, there is room for each country to develop its own case.

Creates a level playing ground

When there exist preset salary ranges for all professions, businesses have a common foundation to base decisions on. This reduces the dimensions of competitions at play by leaving them to focus on core missions. Companies and employers thus thrive to improve aspects associated with their working environment such as cleaner, more equipped, or better corporate culture so as to attract top talent. Also, smaller companies do not have to go out of business trying to increase employee pay to compete with bigger corporations. 

Reduces guesswork

When remuneration is stable, it is easy for businesses to forecast more accurately and plan for strategic competitive advantages. The economy can also calculate redundancy through unemployment. For instance, by knowing how much a professional is worth, whenever that professional is out of work, the economy can report the loss truthfully. Moreover, training costs for the skills can be more accurately estimated. It will seem obviously unusual for a profession scoring a relatively lower remuneration rating to charge higher training charges for its students. 

Reduces embarrassment

This affects both employers and job seekers. Lack of having a standard pay range leave room for embarrassing situations such as an employer  posting a vacancy and requesting the applicants to state how much they hope they should be paid. This question is also sometimes delayed until the interview time. Most times, it gets the job seeker off guard. 

Again professionals and other high skilled workers do not fit well in industrial unrests that are led by trade unions. When their salaries are well spelt out in advance, skilled workers prefer to spend more of their treasured time delivering value than heckling on the streets.

Reduces exploitation 

When the wages for given professions are openly known, exploitation is reduced. Furthermore, people borrow money to go study, having an idea how soon they may pay their loans if they get the job. If for example the pay range for a graduate engineer is Sh80,000 – Sh200,000, any employers paying less (or even more) would have to explain why they are doing so. This also applies to proprietors of small businesses who in most instances underpay themselves since they cannot peg their pay on any known standard. The exploitation may not only be against the employee but also against the employer.

Reduces demoralization 

There should be no significant pay disparities in working in the public sector from the private sector; nor working in a small company and not a big one. A qualified Accountant working in a small company is not less professional than a qualified one working in a blue chip company. They should therefore, not be punished for not getting the job in the bigger outfit. This discrimination may cause demoralization to those feeling that they are less appreciated. However, exceptional talent is rewarded through bonuses and other incentive systems.

Increase efficiency

Increased efficiency is achieved through encouraging outsourcing. Once cost of labour is universally known and exploitation removed, firms will prefer to outsource professional services than pretend to have a large workforce that is being underpaid. Again, firms seeking the contracts will compete on value offered at cost effective rates therefore improving output and productivity

Promotes professional business

With arbitrary wage rates spreading through the economy, some companies resort to offering unrealistic salaries promises only to regret later. The best example is in Kenya’s media industry. The sector, due to severe competition, has lately been pushed into staff poaching based on high pay incentive. And without a national skill pay guide, they offered journalist extremely lucrative offers. The unsuspecting journalists left their stable employers to go work for the ‘rich’ speculative employers. Unfortunately, most of the golden jobs never lasted long. 

Empowers professional bodies and Associations

Professional bodies and Associations have a big role to play in setting the pay range for their specific trades. Despite the temptation to try to extend their value and demand more, there will be an acceptable equilibrium. Professional bodies are best suited to come up with estimates because they know their worth more than any amorphous body that may work through political correctness to survive. Such bodies can be left to consolidate and publicize the already determined pay brackets.

Removing pay determination from pure market forces and industrial negotiations improves workflow and allows the economy to identify the real productivity and reward them accordingly. Labour mobility is therefore, well informed and structured. The recognition that skills have an intrinsic monetary value that should not be subjected to whimsical appreciation promotes dignity, internal and external unanimity, accountability and fairness.

Finally it is important to note that the pay ranges are not rigid and are mainly used as guidelines. However, once adopted and published by the Ministry of Labour, they become an integral business and economic tool. (

The author is a Technical Communications Consultant

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