Wage and Salary Administration

Wage and salary administration can be defined as the establishment and implementation of sound policies of employee compensation It covers the following areas Job evaluation Survey of wages and salaries Development & Implementation of wage structure

Wage and Salary

Wage is referred to as remuneration to workers particularly, hourly-rated payment.

Salary refers to as remuneration paid to white-collar employees including managerial personnel

Definition

"Wage and salary administration refers to the establishment and implementation of sound policies and practices of employee compensation. It includes such areas as job evaluation, surveys of wages and salaries, analysis of relevant organizational problems, development and maintenance of wage structure, establishing rules for administering wages, wage payments, incentives, profit sharing, wage changes and adjustments, supplementary payments, control of compensation costs and other related items"

Objectives of wage and salary administration

Towards the employees: To pay the employees according to their skills thereby eliminating inequalities Favoritism minimised Job sequences and lines of promotion are established Gains employees confidence because the wage structure can be explained to the employees

Objectives of wage and salary administration

Towards the employers: Dealing with the trade union is made easy Systematically plan for control of labour cost Less grievance over wage inequities Attracts and retains qualified employees

Major purpose of wage and salary administration

Recruitment and selection Control payroll costs Satisfy people Reduce grievance, quitting etc. Motivate people

Wage Determination Process

Job Analysis Wage Surveys Organisational Problems Preparation of Wage Structure Wage Administration Rules

Factors influencing Wage and Salary Administration

Organisations ability to pay Supply and demand of labour Prevailing market rate, government laws, trade unions demand, attract quality talent Cost of living(escalation clause) Living wage Productivity Trade unions bargaining power Job requirement Managerial attitudes Skill levels available in the market

Principles of wage and salary administration

Definite plan In line with the prevailing market Equitable process Clearly established procedure Prompt payments Scope for revision Informed to all concerned

Wages
Statutory Minimum Wage(minimum wages act of 1948) Basic minimum wages(fixed by tribunals) Minimum wage sustenance as well as preservance of efficiency of the worker Living Wage Fair wage-above the minimum but below the living wage

Minimum Wage

Minimum wage is the wage which must provide not only for the bare sustenance of life, but for the preservation of the efficiency of the workers. For this purpose, minimum wage must provide some measure of education, medical requirements and amenities.

Living Wage

"A living wage is one which should enable the earner to provide for himself and his family not only the bare essentials of food, clothing and shelter but a measure of frugal comfort including education for his children, protection against ill-health, requirements of essential social needs and a measure of insurance against the more important misfortunes including old age. "

Fair Wage

"Fair wage is the wage which is above the minimum wage but below the living wage. The lower limit of the fair wage is obviously the minimum wage: the upper limit is to be set by the capacity of the industry to pay. "

Types of wages
Time rate Piece rate Balance method

Factors affecting Wages

Demand for and supply of labor Labor unions Cost of living Prevailing wage rates Ability to pay Job requirements State regulation Increment system

Wage differentials
Occupational(skills, qualification, responsibility) Inter-firm(Quality of labour, equipment etc.) Regional(geographical differences) Inter-industry(different industry) Differential based on sex(gender)

Wage & Salary Administration Process

Establishing Pay Structures

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Remuneration & Its Components

Remuneration
Financial
Fringe Benefits Incentives Individual Plans P.F, Gratuity, Medical Care, Accident Relief, Health and Group insurance

Non Financial Perquisites

Company Car, Club Membership, Paid Holidays, Furnished House, Stock option scheme, etc Indirect

Hourly and monthly Rated Wages and Salaries

Job Content
Challenging job, Responsibilities, Recognition, Growth prospects, Supervision, Working conditions, Job sharing, etc.
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Group Plans

Direct

Types of Reward

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Reward

People do what they do to satisfy some need and they look for a payoff or reward. The most obvious reward is pay, but there are many others, including:
promotions desirable work assignments peer recognition work freedom

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Types of Reward
Intrinsic versus Extrinsic Rewards Intrinsic rewards (personal satisfactions) come from the job itself, such as:
pride in ones work feelings of accomplishment being part of a work team

Extrinsic rewards come from a source outside the job

include rewards offered mainly by

management Money Promotions Benefits

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Types of Reward
Financial versus Non-financial Rewards Financial rewards include:

wages bonuses profit sharing pension plans paid leaves purchase discounts

Non-financial rewards emphasize making life on the job more attractive; employees vary greatly on what types they find desirable.

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Types of Reward
Performance-based versus MembershipBased Rewards Performance-based rewards are tied to specific job performance criteria.

commissions piecework pay plans incentive systems group bonuses merit pay

Membership-based rewards such as cost-ofliving increases, benefits, and salary increases are offered to all employees.
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Incentives

Incentives: Incentives are the additional payment to employees besides the payment of wages and salaries. Often these are linked with productivity, either in terms of higher production or cost saving or both. These incentives may be given on individual basis or group basis.

Merits of Incentives

Higher output Greater profits No problem of idle time Supervision does not pose any problem Efficient workers are able to earn more Possible to identify inefficient and dull workers Rate of labor turnover is bound to be low Reduction in complaints and grievances

Limitations of Incentives
Quality of work may suffer Inter-personnel relationships may suffer Wear and tear of machines may be more Health of the workers may get affected Increase in accidents Increase in paper work

Features of a Sound Incentives Plan

Trust and confidence Consensus required Assured minimum wage No scope for bias or favoritism Simple to operate Beneficial to both the workers and the management Sound system of evaluation Redressing grievances Review

Fringe Benefits

Fringe Benefits: Fringe benefits include such benefits which are provided to the employees either having long-term impact like provident fund, gratuity, pension; or occurrence of certain events like medical benefits, accident relief, health and life insurance; or facilitation in performance of job like uniforms, Canteens, recreation, etc.

Objectives of Fringe Benefits

To create and improve sound industrial relations To boost up employee morale. To motivate the employees by identifying and satisfying their unsatisfied needs. To provide qualitative work environment and work life. To provide security to the employees against social risks like old age benefits and maternity benefits. To protect the health of the employees and to provide safety to the employees against accidents. To promote employees welfare by providing welfare measures like recreation facilities. To create a sense of belongingness among employees and to retain them. Hence, fringe benefits are called golden handcuffs. To meet requirements of various legislations relating to fringe benefits.

Perquisites

Perquisites: These are normally provided to managerial personnel either to facilitate their job performance or to retain them in the organization. Such perquisites include company car, club membership, free residential accommodation, paid holiday trips, stock options, etc.

Institutional Mechanism for Wage Determination

1. Unilateral Pay Fixation 2. Collective Bargaining Sectoral bargaining at national level Regional level bargaining Organisational level bargaining 3. Pay Commissions 4. Wage Boards 5. Adjudication