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2/21/2016 Chapter7WageandSalaryAdministration(HumanResourceManagement)

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Chapter7WageandSalary
Administration(HumanResource
Management)
ADRIANANTAZO TUESDAY,29SEPTEMBER2015

WageandSalaryAdministration

Objectives:

Afterthislesson,youshouldbeableto:

1.Enumeratethedifferenttheoriesofwages

2.Explainthesignificanceofwagetotheworkers,laborandlaborrelations,tothenational
economyandsociety

3.Discusstheproceduresofawageandsalarysurvey

4.Comparetheproceduresofawageandsalarysurveyand

5.Deducetheadvantageofwageandsalarystructure.

TheroleofHRinthePaymentofsalaries

OneofthemostimportantfunctionofHRisthepaymentofpropersalariesandwagestoall
employees.Thepaythattheemployeesreceivefromtheemployeristheveryreasonfortheir
beinginthejob.Thepayprovidesthemwithstrongincentivetodotheirjobswellandthe
rateofpayindicatestheirstatusinthecompany.

TheoriesofWages Search

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Thewagetheoriesdealwiththepaymentoflaboremployedincompetitiveenterprise.Wage
representsthepaymentofonefactorofproductionthatismanpower.

1.ClassicWagetheoryitisbaseduponthefundamentalconceptthatlaborisacommodity
andwehavetopaythepriceaccordingtosupplyanddemand.Thegreaterthesupply,the
lowertheprice.Andthegreaterthedemandthehighertheprice.

2.ThejustwagetheoryofSt.ThomasAquinasajustwageisdescribedasawagewhich
permitstherecipientworkertoliveinamannerinkeepingwithhispositiontosociety.This
doctrineisrelatedtosocialorganizationbasedonthestatusoftheindividualinthesocial
organization.

MinimumwagelawThejustwagetheoryofSt.ThomasAquinasisthebasisinthe
implementationofthislaw.Whileitcouldnotbeconsistentwiththeminimumrequirements
ofdecentlivinginthesocialorganization,itrespondstothebasicrequirementsfor
subsistenceliving.

3.TheWagefundtheorythistheoryholdstheideathattheworkingcapitalofthenation
providesafundfromwhichwagescanbepaid.Thefundistobedividedbyalltheworkers
proportionately.ThistheorywasexpoundedbyJohnStuartMillandhisfollowersisbasedon
theMalthusiantheoryofpopulationandthelawordiminishingmarginalreturns.

4.BargainingtheoryofJohnDavidsonitproposesthatlaborisacommoditylikeanything
thatcouldbeboughtatapricebytheuser.

5.Themarginalproductivitytheoryitoffersthebestexplanationofthewagesinmodern
industry.Thesupplylaborinanygiveneconomyonthewholedependsuponthetotal
numberofindividualswhowanttoworkandareavailableforwork.

6.Thepurchasingpowertheoryittriestoestablishtherelationshipbetweenwagesandthe
levelofeconomicactivities.Thelevelofeconomicgrowthisdependentuponthesavings
generatedbecausetheincreaseinwagecreatesasurplusthatpropelsgrowth.

7.LabortheoryofValueKarlMarxpropoundsthistheoryoflabor.Thisgivescredenceto
thevalueoflabor.Itemphasizesthatlaboristhesourceofallproductsandthatwithoutthis
importantcomponent,therecouldbenogoodsforhumanconsumption.Everygoodthatis
producedcouldbetrackbacktotheparticipationoftheworkerandtherefore,labormustget
greatershareoftheprofit.Thisisthephilosophyofsomeorganizedlaborgroupswhoare
moreactiveinthegreatershareoftheprofitsofcompanyoperations.Theselaborunions
havethenotionthatprofitsarethesurplusesoftheotherfactorsofproduction,andare
pocketedbycapitalistbusinessmanmakingthemamasswealth.

8.ThestandardoflivingTheoryofwagearecentdevelopmentinthelabormarketisthe
saidtheorythatmeansthatthewagesshouldbebasedonthecostofliving.Thecostofliving
isdependentupontheeconomicneedsofthefamilyforbasicnecessitiesoflifeforfood,
clothingandshelter.

WageandSalarySurvey

Oncetheworthofajobhasbeenestablished,usingoneofthejobratingsystems,theactual
salarytobepaidforeachjobmustbedetermined.Amajorfactorinmakingthe
determinationisthewagesurvey.Sincesalariespaidbytheothercompanieshaveaneffect

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onemployment,moraleandturnoverrate,closeattentionispaidtothesalarythatis
prevailinginthecommunityandindustryforspecificjobs.

TheDevelopmentofwagesalarystructure

WageandsalarystructureistheHierarchyofjobstowherethepayratesareattached.The
positionsareallocatedinpaygradesaccordingtothejobevaluationresultsanditsrelations
withthepaysystemderivedfromtheresultofthesalarysurvey.

Thefollowingaretheadvantageofthewagesalarystructure:

1.itaffectstheworkersearningandstandardofliving.

2.Iteasestherecruitmentandmaintenanceofaneffectivelaborforce.

3.Itdevelopsemployeemoraleandincreasesworkefficiency.

4.Itrepresentscostandcompetitiveadvantageintheindustry.

5.Ithelpsinpreparingbudgetaryallocationsandeasecomputationofsalaryadjustments
andasanaidinshorttermandlongrangeplans.

6.Iteliminatespaydistortionsandinequitiesinemployeecompensation.

7.Itestablishesanequitablesalaryrangeforvariousjobs.

MethodsofWagePayment

Themainpurposeofaformalwageandsalarymanagementplanistohaveasystematic
methodofpaymenttoensurethatemployeesreceiveafairwageandsalaryfortheworkthey
perform.

Therearetwomethodsofpayingsalaries:

1.Bythetimeworkedinthismethod,wagesarecomputedintermsofunitoftime,itis
commontopayworkersbythedayandthetermdayworkwasadopted.

HxR=W

Inwhich:H=HoursActuallyWorked

R=RateperhourinPesos

W=TotalWageearned

Paymentonthebasisoftimedworkedismoresatisfactoryunderthefollowingconditions:

1.Employeeshavelittleornocontroloverhowmuchworktheyproduce.

2.Thereisnoclearcutrelationshipbetweentheeffortmadetoproducetheworkandthe
amountofworkproduced.

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3.Workdelaysoccuroftenandarebeyondtheemployeescontrol.

4.Qualityofworkisveryimportant

5.Unitsofworkproducedcannotbedistinguishedandcannotbemeasured.

2.Bytheamountofworkproducedearningdependsonhowmuchworktheemployee
completesoronarelatedfactor,suchasthequalityofwork.Thismethodofpayingwagesis
calledanincentivewageplan.Themostcommonincentiveplaniscalledpiecework.
Pieceworksalariesaredeterminedbythenumberofpiecevaluethatiscalledpiecerate.

NxU=W

InwhichN=Numberofunitsproduced

U=RateperunitinPesos

W=Wagesearnedperdayorperweek

PaymentbyPieceworkissatisfactoryunderthefollowingconditions:

1.Whenaunitofcompletedworkcanbemeasuredeasily

2.Whenthereisaclearrelationshipbetweenaworkerseffortandtheresultofhiseffort

3.Whenthequalityofworkislessimportantthanquantity,orwhenqualitystandardsare
uniformandmeasurable

4.Whentheflowofworkisregular,breakdownsarefew,andjobsfollowastandard
procedurewithinterruptions.

OtherInformationRelatedtoWages

LaborandWages

BlueCollarManualLaborers

WhiteCollarOfficeWorkers

PinkCollarJobsassociatedwithwomenlikenursing,secretarial,etc.

LaborGrades

SkilledLabortheseareworkerswhohavereceivedspecializedtrainingtodotheirjobs.The
havedevelopedandhonedaspecialskillandmayormaynotneedlicensedorcertifiedbythe
state.

UnskilledLabortheseareworkerswhoreceivednospecialtrainingandhavefewspecific
skills.

Professionalsarguablytheeliteofthelaborgrades,thesearethoseworkerswhoneedan
advancedegreetodotheirjobs.

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