2 MEANINGWage and salary administration refers to the establishment and implementation of sound policies and practices of employee compensation. Thus, it is:-administration of employee compensation.systematic approach to provide monetary value to employees.establishment and maintenance of equitable as well as cost-effective wage structure.
3 DEFINITIONS“Wage and salary administration denotes the process of managing a company’s compensation programme.” - S.P. Robbins “ Wage and salary administration is essentially the application of a systematic approach to the problem of ensuring that employees are paid in a logical and fair manner." - Bewath & Reins
4 DefinitionsCOMPENSATION: Compensation may be defined by as money received in performance of work plus many kinds of services and benefits that organisation s provide to their employees.Compensation may be classified into (a) Base or primary compensation and (ii) Supplementary compensation. Primary compensation refers to basic pay in the form of wages and salaries. It is a fixed and non-incentive payment on the basis of time expended on the job.Supplementary compensation consists of incentive and variable payments, based on either individual output or output of the group as a whole.WAGE: Wage is a general term referring to direct monetary compensation. It is also used specifically to refer to payments to service workers on the basis of hourly rated production.
5 Definitions (contd.)SALARY: Salary refers to weekly or monthly rates paid to clerical, administrative and professional employees.WAGE LEVELS: The wage levels represent the money an average worker makes in a geographical area or in his organisation. It is only an average. Specific markets, firms and individual wage rates can vary widely from the average.WAGE STRUCTURE: The term ‘wage structure’ is used to describe wage relationships within a particular grouping. The grouping can be according to occupation or organisation such as wage structure of mechanics, carpenters etc.
6 PRINCIPLES OF WAGE AND SALARY ADMINISTRATION In view the interests of all concerned partiesShould be sufficiently flexibleShould be made on ensure that differences in pay for job are based on variations in job requirementsBe consistentBe in conformityShould be responsive the changing local national conditions.Should expedite and simplify administrative processBe associated, as far as possibleShould be developed compensation determination and administrativeClearly established procedure for hearing and adjusting wage complaintsReceive a guaranteed minimum wage to protect them conditions beyond their control.
7 CONCEPTS OF WAGESMinimum Wage: wage which must be pays whether the company earns profit or not.Fair Wage: Wage is the above the minimum wage but below the living wage.Living Wage: The living wage is the highest among the three. It must provide :Basic amenities of lifeEfficiency of workerSatisfy social needs of workers such as medical, education retirement etc.
8 Acquire competent personnel Retain present employeesProvide fair and equitable compensationEnsure desired behaviourKeep labour costs in controlKeep organization ability in mindImprove motivation and moraleProject good image of the organizationImpartial implementation
9 Factors influencing wagE and salary administration
10 PREVAILING MARKET RATES ABILITY TO PAYHigh profits : high wage rateLow profits : low wage rateDEMAND AND SUPPLYDemand > Supply : high wage rateSupply > Demand : lower wage ratePREVAILING MARKET RATESHigh market rates : high wage rate to retain good workers and vice – versa.COST OF LIVINGHigh cost of living : higher wagesLow cost of living : lower wages
11 GOVERNMENT REGULATIONS PRODUCTIVITYHigh productivity : higher wagesLow productivity : lower wagesGOVERNMENT REGULATIONSIt may pass legislation for fixing minimum wages. For example : In India Minimum Wages Act, 1948JOB REQUIREMENTSDifficult job : higher wagesEasy job : lower wagesLIVING WAGEAssociated with the maintenance of adequate standard of living
12 BARGAINING OF TRADE UNIONS Stronger trade unions : higher wagesWeak trade unions : lower wagesTECHNOLOGICAL DEVELOPMENTWorkers having updated knowledge : higher wages and vice – versaMANAGEMENT STRATEGYStrategy is to expand and grow : higher wagesStrategy is to maintain status quo : average wagesPSYCHOLOGICAL AND SOCIAL FACTORSFair wages : psychological and social satisfaction
14 3. Assigning Pay Grades to Job 1. Job AnalysisJob descriptionJob specificationGrading and ranking the jobsValue of a job is determinedAt last, the job is given a price2. Wage SurveysTo determine actual amount to be paidProvides information about differences in wage levelssurveys through telephone, questionnaire, personal interviews etc.3. Assigning Pay Grades to JobPay rates are assignedSimilar jobs are grouped togetherEach group is assigned grade
15 4. Preparing Wage Structure Pay scales of industryHigher payments or single gradeNumber and width of pay gradesJobs to be placed in each pay gradeActual money value to be assigned to various pay gradesDifferentials in pay grades5. Wage Administration RulesDetermine the basis of advancement, frequency of pay increases, controlover wage costs, rules of promotion from one grade to another
16 METHODS OF WAGE PAYMENTS TIME WAGE SYSTEM: Earnings = T*RT stands for time spent R rate of pay.SUITABILITY:Productivity cannot be measuredQuality is more important than quantityIndividual employees don't have control over production.MERITSSimplicitySecurityLess wastagesBeneficial for beginnersDEMERITSWastage of timeNo incentive for efficiency.Low production
17 PIECE WAGE SYSTEM: Wages= Output*Piece rate MERITSWages linked to effortsIncrease in productionBetter Utilization of equipmentDistinction between efficient and inefficientLess supervision requiredEffective cost controlBetter Planning and controllingDEMERITSNo guarantee of minimum wagesPoor quality of goodsNot suitable for beginnersCause of dissatisfactionOpposition from unionsDifficulty in fixing piece-rates
18 TYPES OF PIECE RATE SYSTEM Straight Piece RateIncreasing Piece RateDecreasing Piece RateTYPES OF PIECE RATE SYSTEM
19 WAGE POLICY IN INDIA Payment of Wages Act, 1936 Industrial Disputes Act, 1947Minimum Wages Act, 1948Equal Remuneration Act, 1976WAGE POLICY IN INDIA