In labour economics, the techniques used to manage pay is of great significance in the conduct of workplace affairs. The payment of labour is fundamental in moulding the relationship between employers and employee (Lipsey & Chrystal, 2007, p. 217). Indeed, it is the most visible focal point of all concerns related to labour. It is against this back drop that employers have devised various value propositions in fixing pay for their employees. The pay-fixing strategies have undergone notable transformations in the latter years (Lipsey & Chrystal, 2007, p. 576). Needless to say, this has fairly weakened the influence of labour unions bearing in mind that competitive pressures have become intense and globalised. Nonetheless, it is imperative to mention that the cost of labour is pay and consequently it would cover wider terrains of market force that than the influence brought about by a unit employer (Lipsey & Chrystal, 2007, p. 9). To be precise, pay can be described as the primary compensation for labour done within a given period of time. From the background of conventional economic theory, there is a conspicuous denial that employers do not have any defined role in setting up pay standards. However, it is commonplace for similar firms operating within the same geographical environment and market conditions to offer varying wages to their employees, which can only be explained by the fact there are other factors that determine pay other than the internal mechanics of a firm (Baumol & Blinder, 2007, p.165). This paper explores the extent at which the labour market determines pay with cross reference to organisational behaviour patterns within a firm as well as the impact of state regulation on wage standards. Labour remains as one of the most fundamental factors of production (Lipsey & Chrystal, 2007, p.208). In labour economics, it is perceived to be a derived demand in the sense that it is critically required in the process of production, not just an intermediary component. In any case, revenue generation and profitability of a business organisation is largely dependent on labour input. Moreover, the Marginal Revenue Product will quite often determine the need for surplus labour whenever required by a firm (Lipsey & Chrystal, 2007, p. 638). In addition, the marginal cost of an employee is yet another determinant whether additional labour will be required by a firm or not (White, 2002). For example, a firm can only retain a certain number of workers above which it will cease to be profitable. In order to obtain the right computation of the Marginal Revenue Product, the product between the cost price of the either good or service at the end of production and the Marginal Physical product of the employee is calculated (Baumol & Blinder, 2007, p.165). If the firm’s Marginal Cost is less than the Marginal Revenue Product, then the business enterprise will be at liberty to hire an additional worker since it will boost profitability. Nevertheless, hiring of additional labour force can be effected by the firm up to a mark when the two margins are congruent to each other (Baumol & Blinder, 2007, p.167). Hence, according to economic theory, the labour market will be considered saturated when the