Meaning Of Salary and Wage Administration

Wage and Salary Administration is the group of activities involved in the development, implementation and maintenance of a pay system It can also be called the ongoing process of managing a wage and salary structure

Wage And Salary Administration

It is the process of managing a companys compensation (base compensation as well as supplementary) programme. Base compensation, here, refers to monetary payments to employees in the form of wages and salaries. It is a fixed, non-incentive kind of payment calculated on the basis of time spent by an employee on the job. Supplementary compensation signifies incentive payments based on the actual performance of an employee.

Difference between salary, wage and compensation

Wage: Paid to blue-collar workers-paid daily, weekly or monthly-paid for the jobs which can , to some extent, be measured in terms of moneys worth Salary: Paid to white collar workers-paid monthly-paid to employees whose contribution cannot be easily measured Compensation: a comparative term- includes wage and all other allowances and benefits like allowances, leave facilities, housing, travel and non-cost such as recognition, privileges and symbols of status

Compensation
Compensation is what employees receive in exchange for their contribution to the organization. Generally speaking, employees offer their services for three types of rewards
Base pay Variable pay Benefits

Total Compensation

Direct Wages / Salaries Commissions Bonuses Gainsharing

Indirect Time Not Worked

Vacations Breaks Holidays

Insurance Plans
Medical Dental Life

Security Plans
Pensions

Employee Services

Educational assistance Recreational programs

Objectives
To establish a fair and equitable remuneration To attract competent personnel To retain present employees To control labour cost To improve motivation and morale of employees To project a good image of the company

 Internal equity: where more difficult jobs are paid more External equity: where jobs are fairly compensated in comparison to similar jobs in labour market Individual equity: where equal pay is ensured for equal work

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Equity And Pay Rates

Equity in pay rates could be achieved through five steps

Ensuring equity in pay rates

Find the worth of each job through job evaluation Conduct a salary survey through the following methods Key job matching Key class matching

Occupational method
Job evaluation method Broad classification method

Group similar jobs into pay grades(pay grades are groups of jobs within a particular class that are paid the same rate

Price each pay grade by using wage curve(curve in a scatter diagram representing the relationship between relative worth of jobs and wage rates)
Fix a pay rage for each grade (like pay for officer category I, II, III etc)

Compensation Administration

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Components of Pay Structure

The two essential components of pay structure are; basic wages and dearness allowance .the basic wage rate is fixed taking the skill needs of the job, experience needed, difficulty of work, training required, responsibilities involved and the hazardous nature of the job. Dearness allowance it paid to employees in order to compensate them for the occasional or regular rise in the price of essential commodities.

Components of pay structure in India

Under the Workmen's Compensation Act Wages for leave period, holiday pay, overtime pay, bonus, attendance bonus and good conduct bonus Under the Payment of Wages Act Retrenchment compensation, payment in lieu of notice , gratuity payable on discharge

Compensation Administration

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Components of Pay Structure

The following, however, do not come under the term wages Bonus Payments made under a profit sharing scheme Value of house accommodation Medical allowances

Travelling allowances
Any other sum paid to defray special expenses incurred by the worker Contribution to pension, provident fund

Any amenity or service excluded from the computation of wages

Compensation Administration

Factors influencing the wages and salary

Wage policy of the company- The company may have a policy to fix the wages externally competitive and internally compatible, i.e. they pay according to the competition and maintain equity among various employees in the company. Sometimes the company may have a wage policy that it should be above the industry average or below it or comparable to it

Factors influencing the wages and salary

Prevailing wages in the region Financial position of the company Trade Unions pressure on the Management Government policy on wages and salaries Relative worth of job done Demand and supply of labour Economic conditions of the nation

Time-Rate and Piece Rate Wages

Employees prefer time-rate while employers prefer piece-rate Both have their own merits. In time-rate, quality can be maintained, but the expected level of production may not be delivered by the employees. In piece-rate, the quality may be compromised but the workers may get extra income that will motivate them If an employees production exceeds the standard production, he should be given incentives for the extra production

Time-Rate and Piece Rate Wages

When production is not amenable to measure the time taken to complete the job can be considered to fix the wage on time-rate basis. E.g. A person who takes only 60% of the standard time to complete a job can be paid incentive for the 40% time saved, since he spends that 40% time for doing another job Whether piece-rate or time-rate, the management should provide all facilities and keep the working conditions conducive for better production, otherwise the system will be a failure

Time-Rate and Piece Rate Wages

Taylors Differential Piece-wage system If the actual output exceeds or equals the standard output then the employee will be paid higher rate (as incentive). If the actual output is less than the standard output, then the employee will be paid lower rate (as disincentive)

Wage Policy In India

A wage policy offers certain guidelines for determining a wage structure. The term wage structure refers to various pay scales showing rages of pay within each grade.

Three important elements of wage policy in India need to be elaborated. They are:

Compensation Administration

Minimum Wages

Wage sufficient to sustain and preserve the efficiency of the worker and offer basic amenities of life by providing some measures of education, medical care, etc. Criteria: It must be calculated for a family of 4 units (numbers) It must be able to provide 2700 calories per adult per day It should be sufficient for 18 yards of cloth per unit per annum There should be a provision for reasonable house rent, light, fuel and miscellaneous items

Living Wages

This is the highest amount of wages proposed by the government, offering basic amenities of life and satisfying the social needs of worker i.e. comfort, protection against ill-health, decency,

Fair Wages

It is above the minimum wage but below the living wage. It is fixed, taking into account factors such as the productivity of labour, prevailing wage rates, level of national income and its distribution, the employers capacity to pay etc. It is in-between minimum wages and living wages, but below the living wage

Legal framework on Wages

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The Government has enacted various laws to regulate and govern the wages. They are: The payment of Wages Act 1936 The payment of Bonus Act 1965 The Equal Remuneration Act The Minimum Wages Act The Companies Act 1956