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WAGES
They are defined as the aggregate earnings of an

WAGE AND SALARY

ADMINISTRATION

employee for a given period of time such as a day or a

week or a month.
They are basically the price paid for the services of
labor in the process of production.
wages

Basic wage

Other allowances

salary
It is the compensation to an employee for personal

services rendered on a weekly ,monthly or annual

basis.
It
is
usually
associated
with
office
staff,supervisors,managers etc whose performance cant
be measured directly.

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DEVELOPMENT OF A PAY SYSTEM

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WAGE DETERMINATION
THEORIES

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SUBSISTENCE THEORY

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WAGE FUND THEORY

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WAGE FUND THEORY

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CRITICISM TO WAGE FUND

THEORY

SURPLUS VALUE THEORY

It is not clear from where the wage

fund will come.

No emphasis on efficiency
productivity.
No light on wage differentials.

and

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MARGINAL PRODUCTIVITY
THEORY

CRITICISM
Labor is treated as a commodity.
Price can not be determined by labor

time.
No emphasis on productivity.
Not applicable in organized sector.

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MARGINAL PRODUCTIVITY
THEORY

CRITICISM
In practice ,the employer offer wages less

than the marginal productivity of labour.

This theory is based on perfect competition
in the market which is seldom found in
practice.
It is wrong to assume that more labour could
be used without increasing the supply of
production facilities.
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RESIDUAL CLAIMANT THEORY

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BARGAINING THEORY OF WAGES

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BEHAVIOURAL THEORY OF
WAGES

FACTORS AFFECTING WAGES

Many sociologists have found that wages are

Government legislation

determined by such factors as:

size and prestige of the company
strength of the union
the employers concern to maintain the
workers
contribution by different kinds of workers
Wage differentials are also explained by social
norms , traditions, customs prevalent in the
organization.

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Supply and demand

Ability to pay
Labour unions
Cost of living
Productivity
Personal perception of wage

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VARIOUS KINDS OF WAGE

DIFFERENTIALS

WAGE DIFFERENTIALS
They refer to the differences in the wage rates due to the

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Occupational wage differentials

location of the company , hours of work , working

conditions , type of product manufactured , or other
factors.
It may be the difference in wages between the workers with
different skills working in the same industry or workers
with similar skills working in different industries or
regions.
Employees in MNCs are paid higher
Different industries have different wage structures resulting
in disparities in remuneration for identical works.
Wide gaps exist in the wages of the employees of organized
and un organized sector.

Inter industry differentials

Personal wage differentials
Inter area differentials

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OBJECTIVES OF WAGE AND

SALARY ADMINISTRATION
Control of costs
Establishment of fair and equitable remuneration
Utilization of wage and salary as an incentive to

greater employee productivity

Maintenance of a satisfactory public relations
image

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PURPOSE OF WAGE
DIFFERENTIALS
To induce employees to change jobs
To get employees to learn and acquire new skills

COMPENSATION

To shift employees from declining industries to

new industries
To get employees to accept more responsible
positions

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COMPENSATION

OBJECTIVE

It refers to a wide range of financial and non

Capable employees are attracted towards

the organization.

the employees are motivated for better

performance
The employees do not leave the employer
frequently.

financial rewards to employees for their services

rendered to the organization.
It is paid in the form of wages , salaries and
employee benefits such as paid leave , insurance,
maternity leave , free travel facility , retirement
benefits etc.

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SUPPLEMENTARY
COMPENSATION
Are used over and above base compensation to

compensation

retain the employees on long term basis.

It involves fringe benefits offered through several

Basic compensation

wages

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salary

employee services and benefits such as housing ,

subsidised food , medical aid , creche etc.

Supplementary
compensation

Fringe benefits

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PURPOSE
To attract and maintain efficient human

JOB EVALUATION

resources with the organization.

To motivate the human resources.

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OBJECTIVE

JOB EVALUATION

The

A job

primary objective of wage and salary

administration programme is that each employee
should be equitably compensated for the services
rendered by him to the enterprise ,on the basis of:
Nature of job
The present worth of job
The effectiveness with which the individual
performs the job.

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evaluation is a systematic way of

determining the value/worth of a job in relation to
other jobs in an organization. It tries to make a
systematic comparison between jobs to assess their
relative worth for the purpose of establishing a
rational pay structure.

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JOB EVALUATION v/s JOB

ANALYSIS

PURPOSE OF JOB EVALUATION

Job evaluation techniques are thus required to develop a suitable

Job analysis is a systematic way of gathering

information about a job. Every job evaluation
method requires at least some basic job analysis in
order to provide factual information about the jobs
concerned. Thus, job evaluation begins with job
analysis and ends at that point where the worth of a
job is ascertained for achieving pay equity between
jobs.

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compensation / remuneration plan based on the above mentioned

factors. Job evaluation is a process of determining the relative worth of
a job within an organisation.
Reducing inequalities in salary structure by bringing about external and
internal consistency in salary further motivating employees within an
organisation
Enabling structured approach to division of labour or specialisation by
defining specific jobs and salary levels
Helping in selecting employees by defining jobs and responsibilities
Developing harmonious relationship between employer and employees
to avoid any conflicts on salaries
Creating standardisation by determining salary differentials for
different jobs further helping to bring about uniformity into salary
structure
Generating relevance and relative value to new jobs

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BENEFITS OF JOB EVALUATION

It tries to link pay with the requirements of the job.
It offers a systematic procedure for determining the relative worth of

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jobs. Jobs are ranked on the basis of rational criteria such as

skill, education, experience, responsibilities, hazards, etc., and are
priced accordingly.
An equitable wage structure is a natural outcome of job evaluation. An
unbiased job evaluation tends to eliminate salary inequities by placing
jobs having similar requirements in the same salary range.
Employees as well as unions participate as members of job evaluation
committee while determining rate grades for different jobs. This helps
in solving wage related grievances quickly.
Job evaluation, when conducted properly and with care, helps in the
evaluation of new jobs.
It points out possibilities of more appropriate use of the plant's labour
force by indicating jobs that need more or less skilled workers than
those who are manning these jobs currently.

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WEAKNESS OF JOB EVALUATION

There is no standard list of factors to be

considered for job evaluation and all the factors

cant be measured accurately.
The wages fixed for a job on the basis of job
evaluation might not be able to retain the workers
who might get more money outside.
Apart from evaluating the job ,individual merit
should also be rewarded.

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RANKING METHOD

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MERITS AND DEMERITS OF

RANKING METHOD

CLASSIFICATION METHOD

MERITS
Simple to understand and best suited for small

organization
DEMERITS
Ranks are highly subjective in nature.
Ranks are difficult to develop in large , complex
organisations

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FACTOR COMPARISION METHOD

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POINT METHOD

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MOTIVATION
It is a Latin word , meaning to move".

MOTIVATION

Motivation is a process of creating

organizational conditions which will impel
employees to strive to attain company goals.
It represents an unsatisfied need which
creates a state of tension or disequilibrium
,causing the individual to move in a goal
directed pattern towards restoring a state of
equilibrium by satisfying the need.
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OBJECTIVE

MOTIVATION

The purpose of motivation is to create conditions

in which people are willing to work with zeal ,

initiative ,interest and enthusiasm with a high
personal and group moral satisfaction , with a
sense of responsibility ,loyalty and discipline.
It is said that You can buy a mans time, you can
buy a mans physical presence ,but you cant buy
enthusiasm, and you cant buy initiative

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TYPES OF MOTIVATION

TYPES OF MOTIVATION

MOTIVATION

MOTIVATION

POSITIVE/INCENTIVE
MOTIVATION

EXTRINSIC
MOTIVATION

NEGATIVE/FEAR
MOTIVATION

Pay, promotion,
retirement plans
Praise &credit for work
done

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Delegation of
responsibility

Is based on the use of

fear and force.

INTRINSIC
MOTIVATION

Status, fringe
benefits,

Feeling of having
accomplished
something
worthwhile

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