Nishant Singh(8360) Ameya Joshi(8156) · Theory of Wages Subsistence Theory The Surplus Value Theory of Wages ... Wage Level,The Internal Wage Structure,Wage & Salaries & Motivators.

By

Nishant Singh(8360)

Ameya Joshi(8156)

News in the views….� Corporate Affairs Minister Salman Khurshid, who

yesterday favoured trimming pay packets of India Inc CEOs,earnestly advised them to lead a simple life saying.

� Mukesh Ambani, Asia’s richest man, took a 66 percent pay cut to “set a personal example of moderation” after India’s government called for austerity in salaries of executives.

� Unhappy with pay hike, IIT-M faculty begin strike today

Concept of Wage and Salary

Administration

Concept of Wage and Salary

Administration

� Refers to the establishment & implementation of sound policies and practices of employee compensation

� Includes areas as Job Evaluation, Surveys of Wages & Salaries, Establishing rules for administering wages, Profit Sharing, Wage changes & adjustments, Supplementary payments, Control of compensation costs

Purpose� To establish & maintain an equitable wage & salary

structure and an equitable labour-cost structure.

Other objectives include:

� To recruit persons for a firm

� To control payroll costs

� To satisfy people, to reduce the incidence of quitting grievances, & fractions over pay, &

� To motivate people to perform better

Important Definitions� Compensation:

Money received in the performance of work , plus the many kinds of benefits and services that organisations provide their employees.

� Wages (or PAY)

The remuneration paid, for the service of labour in production, periodically to an employee

� Difference between Wages and Salary

Wages: Hourly/daily rate, blue collar workers

Salary: weekly/Monthly rates, white Collar workers

The Wage determination Process

The Wage Determination Process� Diagram

1) The Process of Job Analysis

2) Wage Surveys

3) Relevant Organisational Problems

4) Preparation of Wage Structure

5) Wage Administration Rules: (advancement will be based on Merit or length of service? Frequency of pay increases? Information to be given to employees? Employee appraisal, fixing of wages)

The Wage Line/ Wage Curve� The wage line

� The 6th Pay commission Report

Factors Influencing Wage & Salary

Structure & Administration� The Organization's ability to pay

� Supply & demand of labour

� The prevailing market rate

� The cost of living

� Living wage

� Productivity

� Trade Union’s Bargaining power

� Job requirements

Continued….� Managerial attitudes

� Psychological & Sociological factors

� Levels of Skills available in the market

Administration of Wages & Salaries

� The administration should be controlled by the Personnel manager or a Committee composed of high ranking executives.

� Major functions of such a Committee are:

1. Approval and/or recommendation to management on job evaluation methods & findings

2. Review & recommendation of basic wage & salary structure

3. Help in formulation of wage policies from time to time

4. Co-ordination & review of relative departmental rates to ensure conformity, and

5. Review of Budget estimates for wage & salary adjustments & increases

The Committee should be supported by information from other, technical staff.

Principles of Wage & Salary

Administration� Differences in pay should be based upon variations in JOB

REQUIREMENTS

� Wages should be in line with that prevailing in the labourmarket

� Equal pay for equal work

� There should be recognition of individual differences in ability and contribution

� There should be established structure for redressal of wage complaints

� Wages should ensure a reasonable standard of living for the worker and his family

� The wage structure should be flexible

� WAGE COMMITTEE should be appointed for revision of wages

Theory of Wages� Subsistence Theory

� The Surplus Value Theory of Wages

� Residual Claimant Theory

� Marginal Productivity Theory

� The Bargaining Theory of Wages

� Behavioural Theories: The Employee’s Acceptance of a Wage Level,The Internal Wage Structure,Wage & Salaries & Motivators

Minimum, Fair & Living Wage

Minimum, Fair & Living Wage� Statutory Minimum Wage

� Bare or Basic Minimum Wage

� A Minimum Wage

� Living Wage

� Fair Wage

� The Need-Based Minimum Wage

Types of Wages� Time Rate

� Piece Rate

� Balance or Debt Method

Wage Differentials

Why the salaries offered in Bangalore and

Pune are different in spite of the same job

profile?

� Occupational Differentials

� Inter-firm Differentials

� Inter-area or Regional Differentials

� Inter-Industry Differentials

� Personal Wage Differentials

Wage Differentials in

India� In the unorganized labour market, personal

differences tend to exist

� The tendency appears to be towards the elimination of wage differentials

� Wage differentials by sex are quite common

� There has been a tendency towards the elimination of inter-firm differentials

Executive Remuneration

EXECUTIVE RENUMERATIONUNIQUE FEATURES OF EXECUTIVE

RENUMERATION

1) Cannot be compared towage schemes of other employees

2) Cannot form unions

3) Secrecy

4) Not based on individual performance but on organizational performance

5) Subject to statutory ceilings

� Components of executive remuneration:

1) Salary: determined through evaluation and serves as the basis for other benefits

2) Bonus: Related to performance, at a certain percentage of profits

3) Incentives

4) Perquisites: medical care, free well furnished accommodation, conveyance, servants, company recreational area; mostly to make up for the taxation

Some generalizations related to executive compensation:

� Satisfaction with pay is a function of comparison with another’s pay

� A manager’s satisfaction with his current income and its motivational effect appear to be directly related to Anticipated pay raises

� The choice of merit, as opposed to seniority, as the basis for determining salary rates tends to increase with education and position

� The actual determinants of pay differentials seem to be job level supervisory experience and professional experience

� Managerial incentive compensation has tended to become flexible

THANK YOU!!