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Introduction

UK unemployment has reached its top during the last decade. Young people who have just graduated cannot find a suitable job and face a problem of many companies not needing young employees without experience. On the one hand, one can understand a company’s demand for qualified and experienced employees. However, if companies do not change their attitude to young people in the nearest future, the country may face social, economic and political issues caused by the high unemployment rate.

Thus, this paper aims at determining the rates of the youth unemployment in the UK, its causes and consequences, as well as the phenomenon of incentive pay as a means of raising the employees’ productivity and the notion of ‘compensating differential.’ Besides the high percentage of young people who cannot find a job, this paper observes some other issues. One of them is the increasing of employees’ performance by providing incentive pay methods.

A company may directly influence the quality of individual performance as well as the entire group of employees by the application of the incentive pay. The latter is introduced via various methods to affect certain types of employees. Besides the monetary way of employees’ motivation, this paper also discusses a compensating differential. Under this term, one understands the amount of money that a company pays to an employee to make him/her perform particular functions that are viewed as undesirable or risky. According to this fact, a company needs to find a way that will make an unpleasant work more desirable for potential employees.

All the issues discussed above have a direct connection with the employment and work conditions; they also demonstrate how a company may use specific tools and approaches to achieve better results and provide a higher level of satisfaction among its employees.

 

High Youth Unemployment in the UK

The youth unemployment in the UK is one of the most important problems since 2005 (Jacobsen & Skillman 2008). During the last decade, the level of youth unemployment has dramatically raised. As a result, the country has a large number of fresh graduates who cannot find a job. The causes of high unemployment rates among young people are different. First and probably the most challenging issue is that employers require experienced employees (Jacobsen & Skillman 2008). A young person who has just graduated does not possess such experience, though he/she is full of enthusiasm to work. However, when he/she receives numerous rejections from employers, it leads to the negative consequences both on the personal as well as social levels. If a person cannot get a job in the young age, his/her chances to find it in the future decrease (Lawless, Martin & Hardy 2004). The young and inexperienced see a low demand in the labour market, but mature and inexperienced are not required at all.

Another cause of high unemployment rate is the gaps between education and employment (Lawless, Martin & Hardy 2004). The real-life approach differs from the one that students learn about in schools, colleges and universities. They have different expectations of their future jobs, which often have nothing in common with real employment. Thus, when young people graduate, they believe that they have become qualified professionals and will have a good position in a large company with a high salary. Unfortunately, the half of graduates cannot find even a simple job with their diplomas, and the rest part has to work hard at a small company as managers, performing simple obligations with mere chances for career growth (Mclaughlin 2013).

The low demand in the employment of young people is also caused by the rise in retirement age (Mclaughlin 2013). In other words, those people who should have been retired five years ago continue to work while young people cannot get employed since the potential positions are captured by the elder generation. As a result, old people who should be retired continue working, and young people become a non-demand since there are no vacant positions for them.

The consequences of high unemployment rate among young people are dramatic not only for the society but also for the UK economy, in general (Loudon, McPhail & Wilkinson 2013). For instance, the cost of youth unemployment was estimated at 30 billion pounds over the last decade (Dunn 2014). The high level of unemployment also means a potentially lost generation. The recovering economy will have a large pool of inexperienced and unskilful workers in the future who will have to fix the economy of the country, though they will have neither experience nor desire or skills necessary to do it. Young people who cannot find a job though having obtained a good education feel rejected by their society and the government that do not need them (Loudon, McPhail & Wilkinson 2013). Hence, this situation may lead to social instability and the increasing of poverty and, as a result, the worsening of the crime situation in the country. People who are forgotten by their country pay very little concern for the wellbeing of the society where they live. Hence, it will lead to the increasing of mental health problems, as well as cultural and social isolation. Finally, not providing the needed support to the young generation of workers means losing talented employees and managers and leads to lost opportunities for innovations and economic growth.

Incentive Methods of Payment

In order to increase the productivity of their employees, firms may adopt different methods of influence. Among them are motivation approaches, different leadership principles, training and education; however, the most effective among them is the improvement of pay system or implementation of incentive systems (Rosen 2007). Incentives are various rewards that firms pay to their employees depending on their performance. This method is highly effective, especially if an organization requires fresh ideas and an innovative approach. The money reward stimulates such activities and makes employees work harder and show better results. One of the oldest examples of incentive payment was provided by Napoleon, who offered 12,000 francs to a person who would find out the new way to preserve food for his army (Rosen 2007). Soon, the method was invented; Napoleon received a new method of food preservation, and a person who found out how to do it received 12,000 pounds (Rosen 2007).

Today, organizations may adopt a great number of possible incentive methods to encourage their employees (Antoni 2007). For instance, the piece rate system predetermines that an employer pays to employees for the amount of the performed work. This method is widespread among the sales staff since they become totally involved in the sale process. For example, if a company sells air-condition units, the role of the sale staff is to find and stimulate clients to buy these products. For every client buying an air-condition unit, an employee receives a certain percentage of the product price or a fixed amount of money. In this way, the more sales the staff makes, the more money they earn.

Another incentive method is the system of individual bonuses (Antoni 2007). This system will be suitable for the production workers who have to perform a certain amount of products within a limited period (Antoni 2007). Hence, an employee who will reach this goal or demonstrate a better result than the others will receive a reward. A profit sharing system is similar to the bonus method, but it predetermines that a company shares a certain percentage of its profit with all employees. However, this method is not very effective for individual employees because their ability to influence the company’s profit is very limited. Nevertheless, for the team members who work on a big project and may affect the company’s wellbeing, this perspective may be viewed as very attractive.

One more method that is more suitable for the executives, though it may be applied to stimulate other employees, is stock options (Antoni 2007). A company that chooses this option may provide an opportunity for its employees to buy the company’s shares. When an employee buys a share, he/she makes an investment. For instance, today the company’s share costs ten dollars, and in a few years, it will raise by 40 dollars. Hence, for every share, an employee will receive 30 dollars of a clear profit. This opportunity is often available only for the company’s employees. In this way, the company encourages its employees to participate in its development because the richer the company gets, the more valuable its shares become. This method is more suitable for the executives since they have a bigger influence on the company’s performance than the ordinary employees, and, as a rule, the amount of their shares is higher, too (Dunn 2014). Hence, they are interested in the opportunity to enlarge their investments in two, three or even ten times by leading a company to a new level of development.

Compensating Differential

The compensating differential is the additional wage that an employee receives if he/she has to perform some work that is unpleasant for him/her or might be risky (Verhaar & Jansma 2013).The compensating differential may be applied to jobs that need to be performed, but the common salary for such job will not attract the potential employees. For instance, the position of a gardener and a toilet cleaner predetermines almost equal obligations and the same level of difficulty, but the salary should be different because there are not many people who have a desire to clean toilets. However, there are jobs that require working with dangerous materials or in toxic areas. In this case, a compensating differential is not a matter of a pleasant work, but a company’s necessity to motivate people to perform tasks that endanger employees’ lives (Verhaar & Jansma 2013).

According to this fact, a compensating differential is a tool used by the companies when they need to motivate employees to work under unpleasant or undesirable conditions and can be applied for all categories of employees. Monetary stimulation plays a crucial role in this case, making people change their mind. 

Conclusion

This paper discussed several important issues connected with the unemployment and the approaches that the companies may use to motivate their employees perform their obligations better. The first issue being clarified raises a problem of high unemployment rate among the young people in the UK. The consequences of such phenomenon may have a negative impact on the country’s economy in the future. In addition, it leads to social problems connected with the increasing level of youth dissatisfaction that have become not required by the majority of the companies due to their inexperience and low skills. The causes of this phenomenon are different; some of them indicate a great gap between students’ expectations of their future career and the reality; others are the result of policies that a government and companies adopt; for instance, the increasing of retirement age and strict conditions of interviewing.

This paper also discusses how companies may use different methods of incentive pay to impact on their employees’ workability and increasing the employees’ involvement in the company’s prosperity and development. Each category of employees may be influenced in a different way; the right choice of insensitive pay method may bring both positive and negative results. Besides the insensitive pay, the phenomenon of a compensating differential has been discussed. Under this term, one understands the provision of additional bonuses or the increased wage for the performance of undesirable or risky work. All these issues have a direct connection with the employment conditions and the quality of work.

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