T.Latha Chakravarthi 8/26/2015

 Pay is a statement of an employee’s worth by an employer.  Pay is a perception of worth by an employee. 8/26/2015

The basic nature of wage and salary administration is to establish and maintain an equitable wage and salary structure. Steven Kerr says, “People do what they do to satisfy some need. Before they do anything, they look for a reward or pay-off.” 8/26/2015

Motivate & Retain Staff Attract talent Contribution based Remuneration Administratively Efficient Reward Valued Behavior Effective Compensation Ensure Equity Institutionalized Processes Legal Compliance

1. Employees are paid according to requirements of their jobs. 2. Favouritism is minimized 3. Job sequences, lines of promotion are established 4. Employees morale and motivation are increased - wage programme can be explained & based on facts 5. Employers can control the labour costs 6. Dealing with trade unions is easier 7. Attracts qualified employees 8/26/2015

 Wage – ILO defines, “the remuneration paid by the employer for the services of hourly, daily, weekly and fortnightly employees”  Salary – it is the remuneration paid to the clerical and managerial personnel employed on monthly or annual basis  Earnings – it is the total amount of remuneration received by an employee during a given period. (pay + DA+HRA+CCA+other allowances+overtime payment)  Nominal Wage – it is the wage paid or received in monetary terms  Real Wage – it is the amount of wage arrived after discounting nominal wage by the living cost.  The Living Wage – According to the committee on fair wages, the living wage is the higher amount of remuneration (needed for a modern civilized society)  Take home Salary 8/26/2015

 Minimum Wage – it is the amount of remuneration which could meet the “normal needs of the average employee regarded as a human being living in a civilised society”  Statutory Minimum Wage – it is the amount of remuneration fixed according to the provisions of the Minimum Wages Act,  The Fair Wages –  Incentive Wage  Wage Rate – it is an amount of remuneration for a unit of time excluding incentives, overtime pay etc  Standard Wage Rate – it is the amount of wage fixed for a unit of time fixed on the basis of job evaluation standards 8/26/2015

Total Compensation DirectDirectIndirectIndirectBonusesBonuses GainsharingGainsharing Security Plans Pensions Security Plans Pensions Employee Services Educational assistance Recreational programs Employee Services Educational assistance Recreational programs CommissionsCommissions Wages / Salaries Insurance Plans Medical Medical Dental Dental Life Life Insurance Plans Medical Medical Dental Dental Life Life Time Not Worked Vacations Vacations Breaks Breaks Holidays Holidays Time Not Worked Vacations Vacations Breaks Breaks Holidays Holidays Presentation Slide 9–1

Salary is structured, fixed, adjusted on the basis of several systems 1. Wage Theories i. The Just Wage Theory ii. Subsistence Theory iii. Standard of Living Theory 8/26/2015

iv. The Wage Fund Theory : According to J.S.Mill, Wage = Amount of fund allocated for wage payment Number of workers v. Residual Claimant Theory : According to Walker, The amount of wages = Production value – (Rent + Profits + interest) v. Marginal Productivity Theory : basis of marginal contributions of the worker to the production vi. The Bargaining Theory of wages : relative bargaining strength of the two parties, (Employer and Employees) vii. Contribution of behavioural scientists to the wage theories – based on size, nature, prestige of organisation, strength of union, social norms, traditions, customs, job authority, responsibility & status, job satisfaction, morale, employee behaviour and level of performance 8/26/2015

2. Job Evaluation 3. Wage/Salary Survey 4. Factors affecting Wage/Salary Levels 5. Wage Fixation Institutions in India 8/26/2015

WAGEFixation Labor Market Conditions Area Wage Rates Cost of Living Collective Bargaining Legal Requirements Compensation Strategy of the Organization Worth of the Job Employee’s Relative Worth Employer’s Ability to Pay

8/26/2015 Wage survey & analysis of relevant organizational problems Job Evaluation Job Analysis Job Description & Specification Performance Standards Differential Employee Appraisal Wage Payments Rules of Administration Wage Structure Wage Legislation

Wages are fixed by the following institutions in India. They are: 1. Collective Bargaining & Adjudication 2. Wage Boards 3. Pay Commissions 8/26/2015

 The Executive Pay Package ◦ Base salary ◦ Short-term incentives or bonuses ◦ Long-term incentives or stock plans ◦ Perquisites (perks) Copyright © 2004 South-Western. All rights reserved. 10 – 15

Stock Price Appreciation Plans Stock Options Stock Appreciation Rights (SARS) Stock Purchase Phantom Stock Restricted Stock/Cash Plans Restricted Stock Restricted Cash Performance-Based Plans Performance Units Performance Shares Formula-value Grants Dividend Units

Copyright © 2004 South-Western. All rights reserved. 10 – 17 Figure 10.3b

 Incentives are most useful when: ◦ Focused on key performance targets that produce employee and organizational gains. ◦ Variable costs of payouts are linked to the achievement of competitively important results. ◦ Directly relating payouts to achieving operating performance objectives (quantity and/or quality). ◦ Teamwork and unit cohesiveness are fostered by basing payments to individuals on team results. ◦ Used to distribute success among those responsible for producing that success. Copyright © 2004 South-Western. All rights reserved. 10 – 21 Figure 10.1 Presentation Slide 10–1

INDIVIDUALGROUPENTERPRISE PieceworkTeam compensationProfit sharing Standard hour planScanlon PlanStock options BonusesRucker PlanEmployee stock Merit pay Improshare ownership plans Lump-sum merit payEarnings-at-risk plans (ESOPs) Sales incentives Incentives for professional employees Executive compensation